Deposit money banks in the country are said to be bleeding as acquisition loans advanced to power and oil companies have not been paid, The Punch reports.
Prior to the fall in crude oil prices from a peak of $115 per barrel in 2014, banks gave loans to local oil and gas companies for the acquisition of assets, mostly being divested by the IOCs. Also, during the privatisation of the nation’s power sector in 2013, many banks provided the financing required by investors to acquire the successor generation and distribution companies carved out of the defunct Power Holding Company of Nigeria.
As of the end of December 2016, loans to the oil and gas sector constituted 30.02% of the gross loan portfolio of the nation’s banking system as credit to that sector grew from N4.51tn to N4.89tn, according to the latest Financial Stability Report from the Central Bank of Nigeria. The report said loans to the power and energy sector accounted for 4.5% at N726.29bn as of December 2016.
A banking source indicated that many of the energy companies that borrowed money from banks had started looking for equity to put into their transactions. According to the source, foreign investors are more comfortable to do that now because oil prices are picking up and the militants issue seems to have been resolved.