EXCLUSIVE: Oil Sector gets N2.09trn credit from four banks

By Ayobami Adedinni
Owing to the stability in the global oil prices, credit to Oil and Gas sector from four banks in the top cadre of the industry has shot up by 20.4per cent, increasing to N2.09 trillion in 2017.
Global economy was lull from 2015 through early 2017 following the oil price plunge which like others, caused the Nigeria economy to shrink.
In 2016, credit from the four banks to the sector known as the mainstay of Nigerian economy was N1.74 trillion.
The four banks are Access bank Plc, Guaranty Trust Bank Plc, Zenith Bank Plc and United Bank for Africa Plc.
This development shows a “cautiously optimistic approach” on lending by the four to avoid a surge in Non-Performing Loans (NPL) despite a relatively stable outlook for the economy.
With the recent increase of Oil price to $70 per barrel, loans and advances to the sector is expected to increase this year according to a top official in one of the banks who confided in PETROLGAS REPORT that the Oil and Gas is the only sector with the capacity to repay credit with current economic realities.
“This explains why it is the destination for more banks’ credit” he said.
The Organization of Petroleum Exporting Countries (OPEC) daily basket price stood at $70.96 a barrel last week as ongoing OPEC-led supply cuts, as well as strong demand, gradually draw down excess supplies.
The Nigerian banking industry is heavily exposed to the oil and gas sector, which contributes over 70 per cent of federal government revenue and 90 per cent of all exports.
Of the four banks, two banks, United Bank for Africa and GTBank reported decline in exposure to the oil & gas sector while Zenith Bank and Access Bank recorded marginal growth.
From the banks’ 2017 audited result and accounts, United Bank for Africa credit concentration in the oil & gas sector dropped by 0.57 per cent to N360.99 billion from N363.05 billion reported in 2016.
Consequently, the Group’s credit exposure of GTBank to the Oil & Gas sector dropped by 7.22 per cent to N535.2 billion in 2017 as against N576.8 billion in 2016.
However, Zenith Bank’s Gross loans and advances to customers rose by 0.8 per cent to N660.24 billion in 2017 from N654.96 billion in 2016
Zenith Bank recorded N39.6 billion NPL in the Oil & Gas in 2017 from N10.8 billion recorded in 2016.
In addition, Access Bank Gross loans and advances to customers in the Oil & Gas sector hits N533 billion in 2017 as against N498.68 billion in 2016.
The breakdown of Access Bank’s Gross loans & advances to customers showed that the lender investment in the Oil & Gas-Downstream dropped by 19.3 per cent to N125.78 billion in 2017 from N155.88 billion recorded in 2016 while exposure to Oil & Gas-Services rose by 20.87 per cent to N246.8billion from N204.2 billion in 2016.
Furthermore, gross loans & advances to customers in the upstream sector gained 18.5 per cent to N124.6 billion from N105.2 billion in 2016 while Crude oil refining gained 7.8 per cent to N36 billion from N33.39 billion reported in 2016.
Analysts expressed that the economy outlook for this year is relatively stable post-recession, a cautiously optimistic approach has been adopted by commercial banks on lending to the Oil & Gas sector to avoid a surge in increased impairment as stipulated by the International Financial Reporting Standard (IFRS) 9 that commenced this year.
The introduction of IFRS 9, according to analysts, may lead to local banks cutting down the size of their credits to the Organized Private Sector (OPS) especially Oil & Gas as they struggle to protect their books from the impact of making provisions for bad and doubtful loans.
With a high level of exposure to the oil and gas sector, which unfortunately is facing a sustained period of low oil prices, non-performing loans in Nigerian banks have reached alarming proportions.