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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

NCDMB, Starzs Gas, Upbeat About Industrialisation At Integrated CNG Project Groundbreaking Ceremony

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NCDMB Emerges Best MDA In Ease Of Doing Business Ranking

 

The Nigerian Content Development and Monitoring Board (NCDMB) and Starzs Gas Limited were upbeat about growth prospects of Nigeria’s gas subsector and the potential boost to industrialisation as the groundbreaking ceremony for a Compressed Natural Gas (CNG) Mother Station got underway in Iwhreken, Ughelli South, Delta State, on Thursday.

At the event, the Executive Secretary of the NCDMB, Engr. Felix Omatsola Ogbe, represented by the General Manager, Corporate Communications and Zonal Coordination, Barr. Esueme Dan Kikile, commended Starzs Investments Company Limited, parent company of Starzs Gas, for pushing industry boundaries with its expansion into the gas subsector.

Engr. Ogbe described Starzs Gas Limited, whose offerings cut across natural gas compression, CNG fueling and refueling stations, conversion workshops and training centres, motorised CNG tube skids for sale and distribution, as well as engineering, construction and procurement solutions, as a veritable vehicle “to drive industrialization and expand Nigeria’s economy.”

He was particularly elated that the multimillion-dollar Integrated CNG Project, which is slated for commissioning in the first quarter of 2026, has come at a time that the Federal Government’s Decade of Gas programme is going full steam, with the NCDMB itself acting as an enabler to numerous gas development and utilisation projects across Nigeria.

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On the Board’s performance in implementation of its core mandate, the ES disclosed that local content hit 56 per cent in the last quarter of 2023, up from five per cent in 2010, when the Nigerian Oil and Gas Industry Content Development (NOGICD) Act came into force, noting that more and more Nigerian assets and resources are being utilised in oil and gas operations in Nigeria.

Engr. Ogbe urged the host community, Iwhrekan, to cooperate with Starzs Gas Limited, so as to enjoy maximum benefits and also facilitate unhampered production activities at the company.

He said he was encouraged by the enthusiasm of the House of Representatives member for Ughelli North, Ughelli South, Udu Federal Constituency, Hon. Francis Waive, who was present at the ceremony, which could facilitate NCDMB’s sustainability programme for protection and security of the company’s facilities.

According to the Chairman and Chief Executive Officer of Starzs Investments Company Limited, Greg Ogbeifun, the establishment of Starzs Gas Limited signalled “a generational shift,” as the Starzs Group, a conglomerate with such leading companies as Starzs Marine and Engineering Services Limited, Starzs Shipyard Limited, and Starzs Investments Company Limited, had for decades focused largely on the maritime industry.

He said Starzs Gas Limited was the culmination of unrelenting pressure by his daughter, Miss Iroghama Ogbeifun, that the global clamour for elimination of gas flaring and reduced carbon footprint, which form the basis of President Bola Tinubu’s initiatives on gas utilisation, be considered as a challenge to entrepreneurship.

He noted that it yielded and provided the necessary material support for the new company, whose focus is on gas for industrial applications, gas-to-power, and gas as auto fuel.

The company is also engaged in engineering, procurement and construction (EPC) projects within the gas subsector.

The Starzs Group Chairman announced the immediate promotion of Iroghama Ogbeifun to the position of Vice Chairman of the conglomerate in appreciation of her exceptional capabilities in visioning and implementing the blueprint for the new business organisation and her energy and drive.

Earlier in a Welcome Address, Ogbeifun, Managing Director of Starzs Gas, expressed profound gratitude to guests among whom were top executives of the Nigerian National Petroleum Company Limited (NNPCL) and its subsidiaries, Chief Executive Officer, ND Western, Engr. Olanrewaju Kalejaiye, represented by the company’s Commercial Manager, Engr. Sunday Okunbor, Rt. Rev. Feb Idahosa, Hon. Waive, of the House of Representatives, the Council of Chiefs of the community, and President of the Nigerian Gas Association, Engr. Aka Nwokedi.

She said the event of Thursday was “Not just groundbreaking… but setting the stage for cleaner energy and development for the host community,” pointing out that the NNPCL Gas Marketing Limited (NGML) has 15 percent equity in the project, and that her company would leverage the partnership and expertise of the NNPCL.

“We are embarking on a journey that will drive industrial development,” Ogbeifun assured the audience, adding that the Integrated Gas Project would significantly facilitate attainment of objectives in Federal Government’s Decade of Gas programme.

In a goodwill message, Hon. Francis Waive said Thursday (day of the groundbreaking ceremony) was a very important day for him, adding, “This is my place, my community, my constituency.”

He told the community, “Let us work with Starzs to achieve success,” noting that development was coming to them if the people would refrain from disruptive activities.

The Chief Executive Officer of ND Western, Engr. Kalejaiye, expressed happiness at the initiative of the Starzs Group, pointing out that “Gas is not just fuel but an enabler of economic prosperity.”

He described the project as most valuable as it broadens Nigeria’s energy mix, while calling for collaboration between policymakers, producers and other key stakeholders.

The President, Nigerian Gas Association, Engr. Nwokedi, said the project being undertaken would reduce carbon footprint and bring about other economic benefits.

He commended the partnership between the NNPCL Gas Marketing Limited and Starzs Gas as well as the focus and tenacity of the Minister of State for Petroleum Resources (Gas), Rt. Hon. Ekperikpe Ekpo, for developments in the subsector.

In a related goodwill message, the Managing Director of NNPC Gas Marketing Limited, His Royal Highness Justin Ezeala, described the Integrated Gas Project as a timely response to the Federal Government’s charge to the private sector to invest in gas infrastructure to promote resource development and utilisation.

HRH Ezeala, who spoke as representative of the Minister of State for Petroleum (Gas), Rt. Hon. Ekpo, and Group Chief Executive Officer of NNPCL, Mele Kolo Kyari, said the Federal Government “believes in the vision of Starzs” and that “It is reassuring that the National Assembly is making the right laws and Government is making the right policies.”

Starzs Gas Limited is building a CNG Compression Station adjacent to the gigantic NAZ 3 Gas Plant at Utorogu, Delta State. The Compression Station, by design, has an initial capacity of two million standard cubic feet per day (mmscfd), which is scalable to five mmscfd within 18 months. It is envisaged to expand from CNG to domestic LNG production.

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Energy

Shell Optimistic About Nigeria’s Deep-water Production

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There is a high possibility of Nigeria meeting her oil production targets and implementing ambitious development programmes from deep-water oil and gas operations.

The Managing Director, Shell Nigeria Exploration and Production Company Limited (SNEPCo), Ronald Adams in making the assertion, predicated it on Nigeria forging ahead with policies to encourage investments and boost output in the sector.

He said, “Deep water is a compelling consideration for Nigeria if the country must meet its oil production targets and implement ambitious development programmes.”

Adams shared his views at the 9th Sub-Saharan Africa International Petroleum Exhibition and Conference (SAIPEC) which began in Lagos on Tuesday.

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According to Adams, Nigeria’s deep-water fields are home to some of the world’s most promising associated and non-associated gas reserves, with vast untapped potential that could play a vital role in powering Nigeria’s future, supporting cleaner energy and contributing to global emissions reduction.

“This will require a favourable investment climate to attract capital and innovation to develop these gas resources responsibly and sustainably, ensuring long-term benefits for the country in meeting its energy and global sustainability goals,” he said.

Adams welcomed reforms by government to attract investments especially the signing of three executive orders in February last year on tax incentives, local content compliance requirements and reduction of petroleum sector contracting costs and timelines.

Tax credits were also announced for new investments in deep-water oil and gas.

The reforms, he noted, should be part of a renewed strategy to attract investments “through fiscal and regulatory policies that are fit-for-purpose, forward-looking and competitive.

He said that, for Nigeria to consistently reap the benefits from deep-water operations, it must address regulatory bottlenecks through streamlined and faster approval processes and consistent and fair policy enforcement.

Adams, who spoke on Shell’s vision for unlocking Nigeria’s deep-water potential, assured that the company would continue to leverage its expertise since it pioneered production at the Bonga field in 2005 which achieved 1 billion barrels export milestone in 2023.

Further developments include the FID on the $5-billion Bonga North deep-water project announced last year.

He pointed out that SNEPCo’s deep-water achievements have resulted in the payment of taxes and royalties to government, development of indigenous businesses through contract awards and implementation of social investments across the six geopolitical zones in Nigeria.

Adams added, “Shell has powered progress in Nigeria and our vision is to build on our support and help the country to achieve energy security and economic development. We will do this by continuing to take innovative approaches to deep-water development, reducing costs and ensuring better and quicker returns for all stakeholders.”

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Verheijen Clarifies Position On 65% Electricity Tariff Hike

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Special Adviser to President Bola Tinubu on Energy, Olu Verheijen, has refuted media reports suggesting an imminent 65 percent increase in electricity tariffs, stating that her comments were misrepresented.

Verheijen’s remarks, initially reported on January 30, were widely interpreted as advocating for a 66 percent rise in power prices to align with the actual cost of electricity supply.

However, in a statement released on Monday, she clarified that her comments were taken out of context.

READ MORE: Fraud Charges: Ex-NHIS Chief Pleads Not Guilty As Court Adjourns Bail Hearing

“It has become necessary to clarify media reports suggesting an imminent 65 percent increase in electricity tariffs,” Verheijen said.

“This is a misrepresentation of what I actually said in a recent press interview. I highlighted the fact that, following the increase in Band A tariffs in 2024, current tariffs now cover approximately 65 percent of the actual cost of supplying electricity, with the Federal Government continuing to subsidize the difference.”

She emphasized that while the government remains committed to fairer pricing in the long term, the immediate priority is to increase electricity supply, reduce outages, and protect vulnerable Nigerians.

Verheijen also outlined the Federal Government’s ongoing initiatives to improve the electricity sector:

Presidential Metering Initiative (PMI)

The Presidential Metering Initiative (PMI) aims to deploy 7 million prepaid meters nationwide this year.

According to her, the initiative is expected to end estimated billing, ensuring transparency in electricity charges and boost revenue collection, attracting the investment required to strengthen Nigeria’s power infrastructure.

Targeted Electricity Subsidies

The government currently spends over ₦200 billion per month on electricity subsidies. However, a significant portion of this support benefits the wealthiest 25 percent of Nigerians rather than low-income households.

To address this, the government is developing a targeted subsidy system to ensure the most vulnerable Nigerians receive the most support.

Settlement of Legacy Power Debt

A key challenge in the sector has been accumulated debts owed to power generation companies, which have hindered investments and service improvements.

The government is working to clear these debts, allowing power companies to reinvest in infrastructure and enhance electricity supply.

Reducing Costs for Alternative Power Generation

Recognizing the economic impact of high energy costs, the government has introduced fiscal incentives, including VAT and Customs Duty Waivers, to lower the cost of alternative power sources like Compressed Natural Gas (CNG) and Liquified Petroleum Gas (LPG).

Verheijen assured Nigerians that the Federal Government remains committed to addressing power sector challenges while ensuring that electricity remains affordable and accessible.

“Every policy is designed with the Nigerian people in mind—eliminating unfair estimated billing, ensuring that subsidies benefit the right people, and creating the conditions for stable, affordable electricity,” she said.

She added that these ongoing reforms are aimed at delivering better service, expanded access to electricity, and greater economic prosperity for all Nigerians.

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