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.
Nigeria has mined over 4.6 billion barrels of crude oil from deep offshore assets worth over 5,000 tankers.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), revealed this on Tuesday Live on NTA hosted by Cyril Stober.
The Commission Chief Executive, Oritsemeyiwa Eyesan, represented by the Executive Commissioner, Development and Production of the NUPRC, Engineer Enorense Amadasu, asserted that the achievement was made possible by the Deep Offshore Oil and Gas Project Incentives (Tax Remission) Executive Order (EO) 2026 recently signed by President Bola Ahmed Tinubu.
She added that the EO has the potential not only to unlock $50bn in investments but can also create an additional one million barrels per day of crude oil and condensate from deep offshore fields.
Eyesan explained that the reform establishes a transparent, rules-based investment framework capable of supporting the next generation of deep offshore developments.
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She noted that presently, Nigeria produces about 1.7mbpd of crude oil and condensate but deep offshore accounts for just about 24 percent of total oil production and 19 percent of gas.
Eyesan pointed out that with Field Development Plans (FDPs) running into billions of dollars already approved by the NUPRC, the executive order will encourage IOCs to make quicker Final Investment Decisions (FIDs).
“So, where will these volumes be coming from? Nine of these projects have approved FDPs so the next step expected is the FID in the near to midterm.
The $10bn Bonga South will come in 2027 and within the next four to five years, we are expecting almost an additional one million barrels additional per day,” she stated.
According to Eyesan, the executive order also presents an opportunity for other sectors like the marine economy which will need to expand Nigeria’s logistics/marine base so the country can sustain the volume of deep offshore projects being expected.
“It aims to make Nigeria the regional hub for deep offshore projects,” Eyesan said.
Other benefits of the executive order as explained by CCE include: growth in reserves, technological/skills transfer and new jobs.
Brent crude closed above $90 per barrel on Monday as Iran threatened to launch a military offensive in the Strait of Hormuz if diplomatic efforts to end its war with the United States fail.
The benchmark Brent crude was quoted at $90.53 per barrel as of Monday evening, gaining $2.01, or 2.27 per cent, according to oilprice.com. US West Texas Intermediate crude also climbed to $84.25 per barrel, up $1.85, or 2.25 per cent.
According to Reuters, the rise followed renewed tensions around the strategic Strait of Hormuz after a senior Iranian official told the news agency that Tehran had shifted its policy from defensive to “fully offensive” because of a deadlock in efforts to secure a permanent end to the war.
The official said Iran was prepared to take military action in the Strait of Hormuz if diplomatic efforts failed. “Iranian entities must be prepared to escalate tensions in the Strait of Hormuz and wider region, as Iran will be ready to make decisions and take action on difficult decisions,” the official told Reuters.
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He added that Tehran would conduct a “timely and precise” military attack to break the United States naval blockade if diplomacy failed.
The development threatens to further disrupt tanker movements through Hormuz, a key global energy corridor, at a time when efforts to restore oil traffic through the waterway have stalled.
According to Reuters, progress towards peace talks and the resumption of oil tanker traffic through the Strait of Hormuz has ground to a halt, with neither side showing signs of moving towards an end to the conflict.
The latest escalation came on the day Iran and the United States were expected to reach a final agreement under a memorandum of understanding signed in June.
The June 17 memorandum provided a 60-day timeframe for Washington and Tehran to reach a broader agreement concerning Iran’s nuclear programme and US sanctions.
The interim agreement, which called for the “immediate and permanent termination of military operations on all fronts”, however, quickly collapsed over disagreements concerning control of the Strait of Hormuz.
The waterway, which is shared by Iran and Oman, is a major route for global energy supplies. It was reported that about a fifth of global oil and liquefied natural gas flowed through the strait before the war.
Tehran maintains that the June agreement gave it the right to manage the waterway, while Washington rejected that interpretation.
The dispute subsequently contributed to the resumption of hostilities, with Iran firing on vessels it said were attempting to sail through the strait using an unauthorised route.
US President Donald Trump subsequently declared on July 7 that the agreement was over.
The Iranian official told Reuters that Tehran had now given the United States only a short period to implement all the provisions of the agreement before further negotiations could take place.
“Within the short period of a few weeks set by Iran, all the agreement’s provisions must be implemented by the U.S. This is a precondition for further negotiations with the US,” the official said.
Mediators are expected to communicate Iran’s deadline to Washington and other regional countries. Iran is also separately negotiating with Oman over the management of the Strait of Hormuz, with Tehran saying the two countries are close to an agreement despite slow progress.
The situation was further complicated by Trump’s warning to Oman during a phone interview with Fox News on Monday. “If Oman gets in the way, we’ll bomb the shit out of them,” Trump said, according to Reuters.
Earlier, Trump said Iran should surrender, telling Fox News that Tehran “should put up the white flag of surrender”. The renewed threats have heightened concerns over the security of shipping through Hormuz and helped push crude prices higher on Monday.
The price movement also comes after oil had traded below the $80 mark earlier in the month amid expectations that tensions around the waterway could ease. Monday’s Brent price of $90.53 therefore represented a fresh rise above the $90 threshold, while WTI stood at $84.25 per barrel.
A call has been made for stronger collaboration among government, the private sector and other industry stakeholders to maximise the economic and industrial opportunities presented by compressed natural gas (CNG) in Nigeria.
The National Automotive Design and Development Council (NADDC) and the National CNG Forum (NCNG-F) made the call when a delegation of the National CNG Forum, led by its chairman, Faruk Abdullahi, visited the NADDC headquarters in Abuja on Wednesday, August 12, 2026.
The delegation was on a mission to discuss the future of CNG and its growing importance to the development and transformation of Nigeria’s automotive industry.
Speaking during the engagement, the Director-General/Chief Executive Officer of NADDC, Otunba Oluwemimo Joseph Osanipin, highlighted Nigeria’s abundant natural gas resources and the economic advantages of CNG as alternative fuel.
Osanipin noted that CNG is cheaper to maintain and more sustainable than Premium Motor Spirit (PMS), stressing that its wider adoption could significantly reduce the cost of mobility while delivering broader economic benefits to the country.
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According to the NADDC DG, Nigeria’s transition to CNG goes beyond changing the type of fuel used by vehicles, as it also presents an opportunity to stimulate industrial development, create jobs and strengthen the country’s automotive sector.
He said the potential benefits of CNG could only be fully realised through the collective efforts of government, the private sector, industry stakeholders and relevant organisations capable of bringing together the challenges, opportunities and practical solutions required to build a sustainable CNG ecosystem.
Osanipin therefore called for sustained collaboration among stakeholders to ensure that the CNG transition delivers cleaner and more affordable mobility while promoting local manufacturing, skills development, innovation and employment generation.
Earlier, the Chairman of the National CNG Forum, Faruk Abdullahi, expressed confidence in a fruitful partnership with the Council towards the successful implementation of Nigeria’s CNG policy.
Abdullahi identified technical standards and quality assurance, local content and indigenous manufacturing, skills development, and research and innovation as key areas where the NADDC and NCNG-F could collaborate.
He described the NADDC as a strategic partner in the development of Nigeria’s automotive and CNG ecosystem, stressing that the transition to CNG must go beyond a change of fuel and become a catalyst for automotive industrialisation, local content development, skills acquisition, innovation and job creation.
The NCNG-F Chairman added that the National CNG Forum was committed to bringing the practical experience and perspectives of industry stakeholders to the table while supporting the objectives of the Federal Government.
Abdullahi also emphasised the need for stronger cooperation between government agencies and the private sector to address existing challenges and maximise the opportunities created by CNG.
The engagement, therefore, underscored the shared commitment of both organisations to developing a robust CNG ecosystem capable of supporting Nigeria’s clean and affordable mobility goals while strengthening local automotive manufacturing and contributing to wider economic development.
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