By Michael Eboh

Despite its rising non-performing loans portfolio, Stanbic IBTC Bank Plc extended about N158.874 billion loans to energy firms in Nigeria in two years, in 2013 and 2014. This notwithstanding rising concerns by the Central Bank of Nigeria, CBN and other financial analysts, over rising Non-Performing Loans, NPL, in the banks due to their high level of exposure to energy firms.

The Central Bank of Nigeria head office in Abuja.

The bank, in its Annual Report and Financial Statements for 2014, extended a total of N136.089 billion to oil, gas and mining companies while electricity and other utilities companies received N22.785 billion in two years, in 2013 and 2014.

Specifically, the bank granted N55.569 billion and N80.52 billion loans to oil, gas and mining companies in 2013 and 2014 respectively. electricity and other utilities companies received N10.671 loans in 2013 and N12.112 billion in 2014.

The bank recorded total gross loans and advances of N819.74 billion in 2013 and 2014, broken down into N397.486 billion in 2013 and N422.254 billion in 2014. The increase in its gross loans and advances was in spite of the bank’s rising non-performing loans portfolio. The bank’s NPL rose by 33.9 per cent from N13.407 billion in 2013 to N17.951 billion in 2014.

The bank also recorded specific impairments of N8.972 billion in 2013, rising to N10.534 billion in 2014. Of the total NPLs, electricity, gas and water supply companies accounted for N3.214 billion or 17.9 per cent of the bank’s total NPL in 2014, while it accounted for 11.55 per cent or N1.217 billion of the bank’s specific impairment in 2014.

Financial infractions

In addition to the risk of losing a large chunk of the loans it granted energy firms, Stanbic IBTC was fined N28 million by the CBN for various infractions in the course of its operations in 2014, as indicated below:

l      Contravening regulation on the scope of Banking Activities and Ancillary Matters and Minimum Standards for Commercial Banking – N2 million.

l      Failure to obtain the CBN’s approval before employing two staff members at senior management level in 2009 – N8 million

l      Contravening regulation on the Assessment Criteria for Approved Person’s Regime for Financial Institutions – N8 million.

l      Under-reporting public sector deposits as at August 29, 2014 in contravention to official circulars – N10 million.

Over-exposure concerns

The CBN, bank executives and analysts had expressed worries over the ability of energy firms to repay their indebtedness to the banks, especially in the face of low oil price in the international market. Analysts argued that of the loans might be impaired as the oil firms might be unable to repay.

Former Managing Director, Access Bank Plc, Mr. AigbojieAig-Imoukhuede, had expressed concern over the viability of the recently privatised power sector. He had warned that a number of the banks that financed the acquisition of the privatised assets of the Power Holding Company of Nigeria, PHCN, risk losing their funds.

Aig-Imoukhuede noted that the banks failed to take into cognizance the apparent problems in the power sector, while a number of them chose to ignore the issues that appear to be stifling growth in the sector.