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N1trn oil industry debt threatens economic recovery

By Hector Igbikiowubo
LAGOS—NON-performing oil and gas industry loans in excess of one trillion naira incurred by the Nigerian National Petroleum Corporation, NNPC, and petroleum products importers appears to be a stumbling block in efforts by the Central Bank of Nigeria, CBN, to steer the economy out of the woods.

Last year, non-performing loans within the banking sector was determined to be in excess of N1.143 trillion, with the oil and gas sub-sector accounting for N487 billion.

Banks affected at the time included Union Bank Plc, Intercontinental Bank Plc, Afribank Plc, Oceanic Bank Plc and Finbank Plc.

However, other affected banks have since been identified with the latest figures showing that non-performing loans within the sector might have exceeded the N1 trillion mark.

Speaking on implications of the huge debt overhang and the need for it to be serviced, Mr. Mark Thurston, a United Kingdom based credit analyst noted that current attempts by the CBN to inject capital into troubled banks only served the short term goal of securing stability.

He said: “The growing inability of the Nigerian banks to lend is a direct fall out of the huge non-performing debt portfolio and unless the banks go ahead to execute the terms of collateralized non-performing loans, chances are that banks’ capacity to lend may remain impaired.”

Thurston also noted that the concentration of non-performing loans in the oil sector, especially among importers of petroleum products also underscored the country’s dependence on imported petroleum products.

He said that accelerated economic recovery can only be driven by a vibrant banking sector with capacity to provide long term facilities at affordable rates, adding: “The rates for short term facilities are usually prohibitive and can not drive sustainable growth within the real sector.”

Presidency shields debtor

Meanwhile indications are that the Presidency might have adopted double standards in its prosecution of the anti-corruption crusade – urging the anti-graft agencies including the Economic and Financial Crimes Commission, EFCC, and the Independent Corrupt Practices Commission, ICPC, to look into specific cases of corruption, while intervening on behalf of others to have cases preferred against them dropped.

Although Mr. Ima Niboro, the Press Secretary of Acting President Goodluck Jonathan had issued a statement denying his principal’s involvement in attempts to shield Mr. Femi Otedola of Zenon Oil from further prosecution, Vanguard reliably gathered that the pressure was still on to get the bank to drop the case preferred against him.

At press time, yesterday, it was learnt that even as the pressure continued, Mallam Sanusi Lamido Sanusi, Governor of the CBN had threatened to resign if the Managing Director of Bank PHB was not allowed to execute his mandate – turn the bank around and recover non-performing loans.

It was also gathered that the State Security Services, SSS, had invited the Managing Director of Bank PHB, Cyril Chukwuma, to report to their offices, but at press time, reasons for his invitation remained unclear.

It would be recalled that Bank PHB had dragged Mr. Femi Otedola, Zenon Petroleum and Gas Limited, AP Plc, Julius Berger Nigeria Plc, Afribank Registrars, Skye Bank Nigeria Plc and Zenith Bank Plc before a Lagos High Court, seeking an order of Mareva injunction.


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