Nigerian energy firms have borrowed about N503.674 billion from Diamond Bank Plc over the last two years between 2013 and 2014 to finance their operations. This, according to Diamond Bank’s ‘Consolidated and Separate financial statements for the year ended, 31 December 2014,’ comprises loans and advances of N264.941 billion and N238.733 billion for 2014 and 2013 respectively.

Breakdown of the figure showed that oil and gas firms borrowed N206.43 billion from the bank in 2014 while power firms got N58.51 billion in 2013. In 2013, the bank gave out N178.786 billion as loans to oil and gas firms, while power firms got N59.95 billion. Cumulatively, the bank gave out N791.095 billion loans and advances to its customers in 2014, compared to N712.065 billion in 2013, while its aggregate loans and advances stood at N1.845 trillion in 2014, compared to N1.656 trillion in 2013.

As a result, loans to the energy sector accounted for 33.5 per cent of total loans and advances to customers and 14.36 per cent of aggregate loans and advances in 2014. On the other hand, energy sector loans accounted for 33.53 per cent and 14.42 per cent of loans and advances to customers and total loans respectively in 2013.

In spite of the loans, the financial statement revealed that as at 2014, Diamond Bank had a 25 per cent stake in APL Electric Limited, valued at N426.587 million, unchanged from the figure in 2013, while it also has a 25 per cent stake in Geometrics Power Aba Limited, valued at N2.491 billion as at 2014, unchanged from 2013.

Commenting further, the bank’s financial statement noted that the Geometric loan was issued on November 14, 2011 and is to expire, January 20, 2026. The initial amount Diamond Bank gave out as loan to Geometric Power was N37.23 billion, while the power company has only been able to pay N2.204 billion from the total amount four years after, leaving an outstanding loan of N35.026 billion.

Despite the huge outstanding balance and the ability of Geometric to only repay 5.92 per cent of the total loan, Diamond Bank classified the facility as ‘performing’. The bank further described the facility as a “Mortgage debenture managed by First Trustee.”

Commenting further on the facility to Geometric, the bank said, “Subsequent to the end of the reporting period (17 February 2015), the Bank together with other creditors to Geometric Power Project (Aba IPP) entered into an agreement-in-principle with a potential buyer to restructure the total project debt of N73.99 billion in order to facilitate the buyer’s equity investment in Aba IPP.

“Under the terms and conditions of the proposed restructuring exercise, Diamond Bank will receive a total value of N45.312 billion.” Despite its loans to energy firms, Diamond Bank incurred N5.935 billion expenses on security and power in two years, 2013 and 2014. Specifically, the bank incurred security and power expenses of N3.17 billion in 2014 and N2.765 billion in 2013.

Regulatory infractions

In addition to these expenses, the bank was fined N8 million in 2014 by the Central Bank of Nigeria (CBN) for contravening certain sections of the CBN regulations.

The financial statement explained further that, “During the year, the Bank was penalised by the CBN for the following infractions; the Anti-Money Laundering, AML, and Combating the Financing of Terrorism, CFT, spot check as at March 31, 2014. The Bank was also penalised for having a staff whose grade is lower than a General Manager as Chief Compliance Officer.

“Penalty for the disbursement of N10 billion term loan to Zamfara State Government from September 20 to October 12, 2012. Fine imposed on the Bank because the credit printout did not comply with the requirements of section 3.8 for the prudential guidelines for Deposit Money Banks.”