Energy
Energy firms owe Nigerian banks N1.54trn
……Sector’s non-performing loans stands at N32bn
LAGOS – Energy industry firms, including those operating in the power and oil and gas sectors owe banks in Nigeria over N1.544 trillion, about $10 billion, while the total bad debts profile of the firms stand at N31.65 billion.
Biztellers gathered the figures from the year end, December 31, 2011 financial statements of the banks released to investors and others stakeholders last year.
Although the 2012 financial statements of the banks are still being expected, but it is expected that banks will begin to release the results from the end of March, with analysts projecting that the figures will rise.
A breakdown of the total non-performing loans shows that the bad debts of oil and gas firms currently stands at over N29.214 billion, while those from the power sector stands at N2.44 billion.
These debts, recorded in the books of 10 of the commercial banks in Nigeria, were classified as Non-Performing Loans, NPL, and might see the banks transferring the loans to the Asset Management Corporation of Nigeria, AMCON.
Despite the high non-performing loans and the challenges faced by the banks in lending to firms in the energy sector in the last couple of years, the banks still gave out loans totaling N1.544 trillion to oil and gas and power firms during the period in review.
However, a number of banks refused to disclose their exposures in their reports. They are Access Bank Plc, Union Bank Nigeria Plc and Skye Bank Plc, which made no mention of loans extended to oil and gas firms in their 2011 financial statements, while the financial statements of Standard Chartered Bank and Citibank could not be accessed, as they are not listed on the Nigerian Stock Exchange.
Also, the financial statements of Keystone Bank, Mainstreet Bank and Enterprise Bank could not be accessed due to the fact that they are not public companies.
An analyst who spoke on the condition of anonymity, said Access Bank, Union Bank and Skye Bank inability to give out loans to energy firms in their 2011 financial year, may be as a result of fear and weak risk management structure.
The analyst is of the view that the banks, coming out from the crisis in the sector without been swallowed, might decide to tread cautiously in advancing loans, so as to avoid a repeat.
The analysts further stated that most of the banks are yet to put in place a strong and effective risk management structure, a factor which might affect their advancement of loans to certain high-risk sector of the economy.
AMCON bars banks from loaning to chronic debtors
The CBN and AMCON late last year ordered banks to stop giving out loans to individuals and organisations who are indebted to banks to the tune of N5 billion and above.
In the list released by the CBN and AMCON, 20 oil and gas firms were credited with N705.885 billion while five power firms owed N114.928 billion.
It is expected that a significant reduction will be recorded in the banks’ lending to oil firms, when their 2012 financial statements are released.
The impending reduction in local banks’ exposure to oil and gas, and power firms has raised concerns about how these firms will finance their operations.
Analysts are of the view that the oil firms might have to resort to offshore financial institutions or multilateral financial agencies to finance their operations, and if the issue is not addressed soon, Nigeria’s oil output and local supply of petroleum products will likely be affected negatively.
Already, the Nigerian Association of Petroleum Explorationists, NAPE, had declared that Nigeria’s potential of generating about 2.26 million metric tonnes of liquefied petroleum gas, LPG, annually will not be achieved, unless the country addressed the issue of infrastructure deficit and lack of access to finance by players in the oil and gas sector.
In a presentation by Mr. Mustapha Jibrin, at one of its conferences, NAPE maintained that financing is critical, especially as it is evident that the country’s Vision 20:2020 objective can only be achieved with a stable power supply, with gas production playing a critical role.
He stated that recent gas discoveries in other parts of Africa were already affecting Nigeria’s natural gas potential and its global competitiveness, adding that increased access to finance and infrastructure development will help reverse this trend.
He said, “The competitiveness of Nigeria’s natural gas and the numerous opportunities to monetise it would be impacted by recent discoveries of large reserves of gas in other parts of Africa, especially offshore East Africa, as well as huge exploitations of shale gas in different parts of the world.”
Also speaking, Mr. David Adonri, an economic expert, expressed concerns over the huge exposure of the banks to energy firms in their current financial statement.
He said the Nigerian petroleum industry is not viable, especially due to the delay in the deregulation of the sector and government control of the sector.
He added that financing power and oil and gas projects with bank loans is a mismatch, due to the long term nature of such projects and the short term nature of bank loans. “It is disturbing to hear that banks are still exposing themselves to the petroleum industry in such a manner that could threaten their existence.
“Those affected have failed to learn from the past. Any bank over-exposing itself to the petroleum industry does so at its peril because government’s control of that sector is a recipe for commercial failure.
“The petroleum sector can only become viable when it is completely deregulated and privatized If the balance sheet of any bank is damaged as a result of excessive risk taking, CBN and NDIC should liquidate it and the management made to pay for their recklessness.
“Considering the short maturity profile of banks’ deposit liabilities in Nigeria, it is inconceivable that they will venture into financing Electric Power projects which by nature are long term. The mismatch in financing will definitely result in bad debt. Electric Power infrastructure rehabilitation and development requires medium to long term funds which are obtainable from the Capital Market and Development Finance institutions.”
CBN’s intervention
The challenges faced by the banks between 2009 and 2011, when the CBN sacked the management of five banks and nationalized three of the banks were brought about by the inability of the oil firms to pay their debts following the crash in the prices of crude oil in the international market. This was in the wake of the global financial crisis and the credit crunch in the global economy.
The CBN said the troubled banks had huge portfolio of non-performing loans, far above the figures allowed by law, in addition to other irregularities recorded in the banks.
The industry regulator also said the banks had difficulties in meeting their obligations to customers and other stakeholders and were constantly on ‘life support’, continuously accessing the Expanded Discount Window, EDW, for funding.
When the CBN moved against the five banks, August 2009, it said the total loan portfolio of the five banks was N2.802 trillion. Margin loans amounted to N456.28 billion and exposure to Oil and Gas was N487.02 billion, while aggregate non-performing loans stood at Nl.143 trillion representing 40.81 per cent.
The CBN said from information at its disposal, it is evident that the five banks accounted for a disproportionate component of the total exposure to capital market and oil and gas, thus reflecting heavy concentration to high risk areas relative to other banks in the industry.
After the CBN’s efforts at sanitizing the banks and cleaning up their books, the banks have resumed lending to the energy sector, however, with extreme caution.
In line with its commitment to driving access to quality petroleum products, Asharami Synergy Limited, a leading Sahara Group downstream company, has said the public can now access exceptional fuelling solutions at its newly commissioned retail station in Omagwa, Rivers State.
Situated strategically along the Airport Road in Omagwa, the station, which features a storage capacity of 45,000 litres each for Automotive Gas Oil (AGO, also known as diesel) and Premium Motor Spirit (PMS, also known as petrol) is equipped with two pumps and four discharge nozzles for PMS and AGO.
The facility also has ample space for sundry services in a bid to ensure consumers get more “miles and smiles” as well as the energy to “go further” with Asharami’s world-class products.
“The Asharami Omagwa Retail Station is fully operational, offering a range of premium products and services. It’s a one-stop shop that also gives our esteemed customers eat-in and take-out restaurant services, shopping, as well as the Asha lubricants and Asha Service experience which will ensure premium care for all classes of automobiles and engines,” said Oladimeji Williams, Head, Government Relations and Business Development at Asharami Synergy.
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At the Commissioning, Willaims said the new station represents an important step in Asharami Synergy’s expansion plan aimed at reaching and serving more communities responsibly. “This station is strategically positioned close to the airport, serving as the gateway for powering socio-economic development in the community and those close to it, while enabling Asharami Synergy integrate all aspects of its downstream business towards ensuring efficiency and value for our customers,” he stated.
Williams commended the Federal Airport Authority of Nigeria (FAAN) and the Omagwa community leaders for their support and collaboration throughout the project’s duration, describing it as a “seamless and productive process that highlights Asharami’s corporate stewardship and social impact” in the community.
Similarly, Ifesinachi Ezike, Regional General Manager (South South), FAAN, emphasized the broader significance of the new station, stating, “This occasion marks a significant milestone not just for Asharami Synergy but for the airport and the entire community. It marks not just an opening of a new facility but the beginning of a renewed commitment to enhancing the travel experience of all our passengers and stakeholders”.
In a move that underscores its commitment to sustainability and community development, Asharami Synergy also commissioned a solar-powered borehole during the launch. The borehole is set to improve access to clean and reliable water for residents, marking a tangible contribution to the local community.
“At Sahara, we are always making a difference—not just through our business operations; we are unwavering in our commitment to driving sustainable development and building partnerships that enhance the well-being of our host communities,” Williams added.
The Shell companies in Nigeria and staff won awards in recognition of their robust participation at the 42nd Annual International Conference and Exhibition of the National Association of Petroleum Explorationists (NAPE), held in Lagos.
At the closing dinner of the event, the Managing Director of Shell Nigeria Exploration and Production Company (SNEPCo), Ronald Adams pledged sustained efforts by the company to address “the Nigerian energy trilemma by powering progress towards energy security in a sustainable manner”.
On the awards, the Shell was declared Best Overall Exhibitor and Best Exhibiting Energy company (International) just as Geophysicist Somime Oguntola took home the Award of Excellence for Oral Paper (second place).
The icing on the cake was a Shell staff, Johnbosco Uche, being installed as the new President of the NAPE.
It was gathered that the Shell companies in Nigeria have supported NAPE since its founding in 1975, using the skills and expertise of the large pool of energy professionals in its employment to improve its activities especially educational and mentoring programmes.
In addition to being a major sponsor of the 2024 conference, Shell mounted a high-profile exhibition, featuring among other things, career counselling, engagements on Nigerian Content and Contractor development and panel sessions on Women in Industry and Sustainability Energy Challenge.
A highlight was the Shell medical stand which attended to more than more than 500 conference participants and members of the public over the four days of the annual event. The doctors and nurses offered a wide range of services including laboratory tests, deworming, medical consultation as well as ophthalmology checks and distribution of nearly 300 eyeglasses.
Adams referred to the operations of SNEPCo as an example of Shell’s contribution to energy security in Nigeria. “As a result of sustained production from Bonga, we have provided funds to finance development, created a new generation of Nigerian Deepwater professionals, empowered indigenous contractors and service providers, and implemented social investments that have touched lives in the six geo-political zones of the country,” he said.
Adams added, “SNEPCo and indeed Shell are in Nigeria for the long haul. Our commitment is reflected in both our current and growth plans, all of which are grounded in principles of safety, affordability, and competitive performance.”
Owing to the persistent power outage, which has crippled economic and social life in most parts of Akwa Ibom State and environs, Accugas Limited has washed its hands off the ugly situation.
This was contained in a statement under the signature of its Communications Manager, Okwudili Onyia, in which the company traced the anomaly to a “fault in the 132-KV Aba-Itu transmission line”.
To ameliorate the situation, the company maintained that “It is imperative that the restoration of the Aba-Itu line is completed as soon as possible.”
In addition, the company pledged thus, “Accugas will continue to partner with, and support, the government of Akwa Ibom State towards achieving the government’s agenda for economic development and prosperity of the state.”
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The statement reads, “Accugas Limited, a subsidiary of Savannah Energy, wishes to strongly deny the misinformation concerning its alleged involvement in the current power outage in Akwa Ibom State.
“The power cut in Akwa Ibom State is entirely due to the reported fault in the 132-KV Aba-Itu transmission line, which, unfortunately, is preventing power being transmitted from the National Grid into the State. It is imperative that the restoration of the Aba-Itu line is completed as soon as possible.
“Ibom Power Company (“IPC”) is one of 23 thermal power generation companies which channel power to the National Grid, which in turn disseminates all accumulated power to each State of the Federation through the electricity distribution companies (“Discos”). Indeed, Accugas supplies gas to enable c. 20% of Nigeria’s thermal generation capacity and, as such, is a critical enabler of the Nigerian economy.
“Within Akwa Ibom State, Accugas has been the sole supplier of gas to IPC since 2014 and, together with other Savannah subsidiaries, has invested over US$1.5 billion in gas development within the state. Furthermore, Savannah has recently invested c. US$45 million in a gas compression project at Accugas’ Uquo central processing facility at Esit Eket. Accugas’ commitments also extend to several social investment projects in the state. All the foregoing investments and projects, including other imminent investments Accugas intends to make in the State, demonstrate the Company’s long-term commitment to Akwa Ibom State and Nigeria.
“Accugas will continue to partner with, and support, the government of Akwa Ibom State towards achieving the government’s agenda for economic development and prosperity of the state.”
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