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Energy firms owe Nigerian banks N1.54trn

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……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.

Energy firms owe Nigerian banks N1.54trnDespite 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.

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Energy

BP, Trafigura, Vitol Lead Global Offtake Of Dangote’s Refined Products

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The Lagos based, 650,000-barrel-per-day Dangote Petroleum Refinery and Petrochemicals (DPRP) might be struggling for real acceptance in Nigeria’s domestic market, but the international markets appear to have embraced it with both hands.

As at Wednesday, November 6, 2024, three global oil dealers account for as much as 75 percent of refined products being lifted from the DPRP.

In a development touted as reshaping petroleum trading between Africa and Europe, Vitol Group, Trafigura Group, and BP Plc were listed by Bloomberg as the dominant buyers of fuels from the DPRP.

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Going by the data, it can be seen that the three global dealers accounted for the bulk of the plant’s shipments since flows began ratcheting up around the middle of 2024.

The report was backed by data from Precise Intelligence, a new oil-and-gas trading analytics firm based in Geneva.

The data showed refined products offtake from February 27 to October 10 with other customers, and indicated that the Nigerian market took 25 percent of total fuel purchases from the DPRP in the period under review.

Recall that the DPRP on starting operations, kick-started the production of diesel, aviation fuel, and LPG before subsequently progressing to the production of Premium Motor Spirit (PMS) (petrol).

The management of the DPRP has been consistent in expressing confidence that as soon as it becomes fully operational, it would peak at processing up to 650,000 barrels a day of crude into products including gasoline and diesel.

The implication is that at its peak, the DPRP would be the biggest single plant in Europe or Africa, conferring on it the capacity to reshape the regions’ oil and fuel trading.

Oil industry pundits note that the coming on stream of the DPRP has already trimmed a glut of Nigerian crude.

Analysis of the report showed that the refinery has loaded almost 6 million tons of fuel since starting up.

This is equivalent to almost 45 million barrels, loading rates averaged about 35,000 tonnes a day in October, its data showed.

The DPRP itself said late last month that the refinery had reached processing rates of about 420,000 barrels a day of crude.

Stakeholders are paying close attention, which sees the composition of fuel cargoes loading from the DPRP closely watched because it offers clues into where the refinery is at in terms of starting up different processing units.

On the products sold, the figures show that automotive gas oil — commonly known as diesel — is the largest cargo type being lifted, accounting for the highest proportion of shipments. This is followed by fuel oil, which ranks second in terms of volume.

Together, these two products make up more than 60 percent of the total output being collected from the plant.

Other significant fuel types being processed include gasoline, which is used for cars and other light vehicles, and jet fuel, primarily utilised by the aviation industry for aircraft.

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Energy

Minister of Power, Adelabu Champions Mini-Grids Amid Northern Power Crisis

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In the wake of a prolonged power crisis impacting Northern Nigeria, Minister of Power Adebayo Adelabu visited the Zawaciki 1MWp mini-grid project in Kano, underscoring the potential of decentralized renewable energy solutions to alleviate regional power shortages.

The project, operated by Bagaja Renewables, provides daytime electricity to the Gida Dubu community, offering a vital source of power as the region faces widespread blackouts.

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Sadiq Zakari, Managing Director of Bagaja Renewables, welcomed the Minister to the facility and highlighted the critical timing of the visit.

“Bagaja Renewables had the distinct honor of welcoming the Honorable Minister of Power to the Zawaciki 1MWp interconnected mini-grid,” Zakari said.

“This visit comes at a critical time, as Northern Nigeria endures a prolonged blackout, underscoring the urgent need for alternative power solutions.

The Zawaciki mini-grid has been instrumental during this crisis, providing at least 9 hours of daytime electricity to the Gida Dubu community, demonstrating the potential of renewable energy in addressing the region’s energy needs.”

Minister Adelabu praised the Zawaciki project as a model for interconnected mini-grids nationwide, noting its role as a sustainable solution for communities grappling with unreliable power supply.

“The Honorable Minister expressed admiration for the Zawaciki project, recognizing it as a viable proof of concept for interconnected mini-grids across Nigeria,” Zakari stated.

“He emphasized the importance of such initiatives and called on state governors and other key stakeholders to support efforts to decentralize and strengthen the nation’s power infrastructure.

By backing projects like Zawaciki, stakeholders can play an instrumental role in reducing reliance on the national grid and ensuring a more stable power supply for local communities.”

Zakari underscored the transformative potential of private-sector renewable energy projects in Nigeria’s power landscape.

He said, “As we have witnessed here at Zawaciki, private-sector-driven renewable energy solutions can transform Nigeria’s energy landscape. With the right policies and support, we can empower communities and enhance energy resilience, even in times of national power instability.”

In addition to the Zawaciki project, Bagaja Renewables is developing several renewable energy initiatives across Northern Nigeria. Among these are:

Barhim Estate, Katsina: A residential power initiative aimed at expanding energy access for households in the region.

Kura-Karfi Commercial Cluster, Kano: Focused on delivering clean and reliable power to commercial areas, this project aims to support local businesses and stimulate economic growth.

Kafin Hausa, Jigawa: With site fencing completed, Bagaja Renewables is preparing to begin technical design and engineering work for a mini-grid in Kafin Hausa, slated to start construction soon.

Zakari said, “These projects represent Bagaja Renewables’ unwavering commitment to building a resilient, decentralized, and renewable-powered energy future across Northern Nigeria.

“Bagaja Renewables is dedicated to collaborating with the government and stakeholders to scale up renewable energy solutions that will support communities, industries, and essential services.

“We believe that decentralized power generation is the future for Nigeria, and we are eager to contribute to a sustainable, reliable, and inclusive energy system for all.” he added

 

 

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Power Restored In Four Northern States After 10-Day Blackout

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Power has been restored across Plateau, Bauchi, Gombe, and Benue States, bringing relief to residents who endured a 10-day blackout.

The Jos Electricity Distribution Company confirmed that electricity was reinstated around 7:20 p.m. on Wednesday, prompting celebrations in Jos, the Plateau State capital, and other affected areas.

READ ALSO: JUST IN: Tinubu Appoints Major General Oluyede As Acting Chief of Army Staff

The prolonged outage was caused by the tripping of a major 330kV transmission line between Benue and Enugu states, leaving several northern states without power.

The blackout severely impacted daily life and economic activities, with residents expressing frustration over the disruption to businesses, healthcare services, and personal livelihoods.

In response, President Bola Tinubu took swift action, summoning Minister of Power Adebayo Adelabu and National Security Adviser Nuhu Ribadu to address the crisis.

Presidential Adviser Bayo Onanuga disclosed on Monday that President Tinubu directed the Ministry of Power and relevant agencies to expedite restoration efforts.

“President Tinubu is deeply concerned about the reports of vandalism and deliberate destruction of essential power infrastructure,” Onanuga said in a statement.

“The President has tasked TCN engineers with bringing immediate relief to the affected states and implementing a long-term solution to prevent future outages.”

 

 

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