By Michael Eboh

ENERGY firms, comprising oil, gas and power companies, got a total of N3.799 trillion credits from banks as at March 31, 2016, according to data released by the Central Bank of Nigeria, CBN.

The CBN, in its Quarterly Statistical Bulletin for the First Quarter of 2016, disclosed that the amount represented a decline of 4.04 per cent when compared to the N3.959 trillion credits extended by the banks to the energy sector as at the end of February 2016.

Also, the amount as at the end of March 2016, represented a decline of 3.33 per cent, when compared to the N3.93 trillion loans extended to the sector at the end of December 2015.

Giving a breakdown of the figures in the sectoral credit utilisation for March 2016, the CBN noted that the banking sector’s total credit to the downstream, natural gas and crude oil refining sector stood atN2.238 trillion, dropping from N2.299 trillion in February 2016, while credit to the upstream and oil and gas services sector stood at N1.033 trillion, down from N1.133 trillion recorded in February.

Independent Power Plants

In the power sector, banks’ credit to Independent Power Plants, IPPs, and power generation companies stood at N357.588 billion, up from N357.474 billion recorded in February, while credit allocation to power transmission and distribution companies dipped slightly to N169.972 billion in March, from N169.988 billion recorded in February 2016.Last month, the CBN had warned that the rising Non-Performing Loans, NPLs, in the oil and gas sector poses serious threat to stability in the Nigerian banking system. The first casualty of the rising NPL was Skye Bank Plc, whose management was forced to resign by the CBN, while new individuals were appointed as Chairman and Managing Director of the bank.

The CBN, in its Financial Stability Report for December 2015, released recently, disclosed that the collapse of crude oil prices and its impact on government revenues and foreign reserves portend risks to banking system stability through increase in default rates, reduction in solvency levels and volatility in exchange rates.

According to the CBN, non-performing loans, in the period under review, rose by 3.36 per cent to N649.63 billion at end-December 2015, from N628.54 billion at end-June 2015, representing a 78.8 per cent increase from the N363.31 billion recorded at end-December 2014.

The NPL ratio, the CBN said, rose to 4.86 per cent from 4.65 per cent, adding that although the NPL ratio remained within the prudential ceiling of 5.0 per cent, it trended closer to the upper limit.

The CBN further disclosed that a few banks had non-performing loans’ ratio above the regulatory maximum limit of 5.0 per cent, noting, however, that this would not pose significant risks to the banking industry. The CBN’s view was corroborated by its Quarterly Statistical Bulletin for the Fourth Quarter, Q4, 2015, which was also released a few weeks ago.

The CBN, in the report, had stated that energy firms owe banks N3.93 trillion, representing a decline of 1.36 per cent or N54 billion against N3.985 trillion recorded at the end of November 2015.


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