The oil and gas sector operators in Nigeria as at February2021 are owing the country’s financial institutions a combined debt of N5.31trillion.
This represents 25.29 per cent of the N21tn loans advanced to the private sector by the banks, according to the sectoral analysis by the CBN of deposit money banks’ credit.
A subsector by subsector analysis of the debt indicates that operators in the downstream sector of the Nigerian oil and gas industry borrowed N130bn from Nigerian financial institutions in February.
The debt owed by the oil and gas downstream companies rose to N4.05trillion in the month under review from N3.92bn in January. The operators in the upstream sector of the industry on the other hand, had their debts dropped to N1.26 trillion from N1.27trillion
All these are contained in the latest data obtained from the Central Bank of Nigeria (CBN)
Oil and gas firms received the biggest share of the credit from the deposit money banks to the private sector.
In 2020 oil prices fell significantly as a result of the coronavirus pandemic which hit many oil and gas companies hard, forcing them to slash their capital budgets and suspend some projects.
A global credit rating agency, Moody’s Investors Service, said last month that the outlook for Nigeria’s banking system remains negative, reflecting expectations of rising asset risk and weakening government support capacity over the next 12 to 18 months.
“Nigerian banks’ loan quality will weaken in 2021 as coronavirus support measures implemented by the government and central bank last year, including the loan repayment holiday, are unwound,” said Peter Mushangwe, analyst at Moody’s.
The rating agency estimated that between 40 per cent and 45 per cent of banking loans were restructured in 2020, easing pressure on borrowers following the outbreak of the pandemic.
Another global credit rating agency, Fitch Ratings, had noted in a December 8 report that Nigerian bank asset quality had historically fallen with oil prices, with the oil sector representing 28 per cent of loans at the end of the first half of 2020.
It said the upstream and midstream segments (nearly seven per cent of gross loans) had been particularly affected by low oil prices and production cuts.
“However, the sector has performed better than expected since the start of the crisis, limiting the rise in credit losses this year due to a combination of debt relief afforded to customers, a stabilisation in oil prices, the hedging of financial exposures and the widespread restructuring of loans to the sector following the 2015 crisis,” it said.
The rating agency predicted that Nigerian bank asset quality would weaken over the next 12 to 18 months.