A whopping N270.97 billion of the loans advanced by Nigerian banks to power, oil and gas firms has gone bad.
The National Bureau of Statistics (NBS), which gave this hint in a report sighted by New Telegraph at the weekend, noted that the debt profile to the two sectors had now hit N5.83 trillion The bad loans recorded by banks in the power sector rose by 6.17 per cent to N32.71 billion from N30.81 billion, the document read.
“The amount of non-performing loans in the oil and gas sector declined by N30.53 billion to N238.26 billion in Q3 from N268.79 billion in Q2,” it added.
Meanwhile, the total debt owed by power and energy firms to the banks rose, according to NBS, to N732.68 billion in Q3 from N712.93 billion in the previous quarter.
“The debts owed by energy firms to Nigerian banks rose by N200 billion to N5.85 trillion in the third quarter of this year,” the document said further.
The N5.85 trillion represents 29.44 per cent of the N19.87 trillion loans advanced to the private sector as of the end of September.
Oil and gas firms, which received the biggest share of the credit from the banks, increased their debt by N180 billion to N5.12 trillion in Q3 from N4.94 trillion in Q2.
The total debt owed by power and energy firms to the banks rose to N732.68bn in Q3 from N712.93 billion in the previous quarter, the NBS data showed.
A global credit rating agency, Fitch Ratings noted in a December 8 report that Nigerian bank asset quality had historically fallen with oil prices, with the oil sector, representing 28 per cent of loans at the end of the first half of 2020.
It said the upstream and midstream segments (nearly seven per cent of gross loans) had been particularly affected by low oil prices and production cuts.
“However, the sector has performed better than expected since the start of the crisis, limiting the rise in credit losses this year due to a combination of debt relief afforded to customers, a stabilisation in oil prices, the hedging of financial exposures and the widespread restructuring of loans to the sector following the 2015 crisis,” it said.
The rating agency predicted that Nigerian bank asset quality would weaken over the next 12 to 18 months.
It said debt relief measures had prevented a material rise in impaired loans in 2020.
Fitch, however, forecasted that the average impaired loan ratio would range between 10 per cent and 12 per cent by the end of 2021 as these measures come to an end.
The Nigerian Electricity Regulatory Commission, in its latest quarterly report, said the financial viability and commercial performance of the Nigerian electricity supply industry continued to be a major challenge.
It said the liquidity challenge was partly due to the non-implementation of cost-reflective tariffs, high technical and commercial losses exacerbated by energy theft, and consumers’ apathy to payments under the widely prevailing practice of estimated billing.