Zenith Bank, Stanbic IBTC, 4 others’ exposure in Oil & Gas sector hits N2.19trn

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Stories by Kayode Tokede

Leadings banks, Zenith Bank Plc, Stanbic IBTC Holdings Plc and four others exposure in the Oil & gas sector increased to N2.19 trillion in first six months of 2018, Nigerian NewsDirect has gathered.

The six banks exposure in the Oil & gas sector, stronghold of the nation’s economy in full year of 2017 was at N2.27 trillion as banks despite cautious investing in the sector.

The Organization for Petroleum Exporting Countries (OPEC) daily basket price closed last week at $80.88 a barrel as against $49.06 a barrel it was in September of 2017.

The current global oil price is above federal government 2018 budget benchmark price of $51.00 per barrel.

Nigeria’s production increasing to 2.3 million barrels per day this year as federal government

Analysts said the decline in fixed income securities and high cost of funding forced hike in banks investment in the oil & gas amid stability in the Niger Delta region of the country.

“Banks are Investing in the Oil & Gas sector because the price is lucrative but the risk involved is that when the price slumps, which might not be this year,” the Chief Executive Officer, Enterprises Stockbroker Limited, Mr. Rotimi Fakayejo said in a chat with Nigerian NewsDirect.

The breakdown by Nigerian NewsDirect revealed that Zenith bank exposure in the Oil & Gas rose by N631.97 billion in six months of this year from N613.48 billion.

Fidelity          Bank exposure in the Oil 7 gas rose by 11.8 per cent to N198.29 billion from N177.25 billion reported in 2017 full year as Guaranty Trust Bank Plc exposure in the Oil & gas sector dropped by 14.9 per cent to N440.5   billion in six months of 2018 from N517.29 billion reported in 12 months of 2017.

United Bank Africa Plc’s loans in the Oil & gas sector was at N321.89 in six months of 2018 as against N360.98 billion in 12 months of 2017.

Stanbic IBTC and Access bank loans 7 advances to customers in the Oil 7 gas sector was   N69 billion and N525.6 billion in six months of 2018 respectively.

Analysts at S&P Global Market Intelligence last week said Nigerian banks are nursing losses linked to a recent oil industry slump, and are looking to alternative sectors to boost lackluster loan growth and broaden their risk exposure.

They stated that performance of banks in the West African nation closely follows that of the country’s energy industry.

“About 30 per cent of the value of banks’ lending is to the oil and gas sector, which accounts for about 10per cent of Nigeria’s Gross Domestic Product (GDP), and a sustained oil price slump from mid-2014 triggered extensive defaults among energy firms.

“Oil production rose 7.6 per cent year on year to 1.54 million barrels per day in 2017 and has increased further this year, according to OPEC data, and Brent crude prices are up by more than a third over the past 12 months, easing pressure on banks.

“But lenders are now prioritizing recovering loans to oil and gas companies, rather than expanding lending to them. Banks are also now focusing a lot more on infrastructure, manufacturing and trade, which they believe will thrive in the latter part of 2018.”

The Monetary Policy Committee (MPC) members of the Central Bank of Nigeria (CBN) at the last meeting were concerned with the rising level of non-performing loans in the banking system, traced mainly to the oil sector and urged the Bank to closely monitor and address the situation.

The Committee chaired by CBN Governor, Mr. Godwin Emefiele also expressed concern over the weak intermediation by banks and its adverse impact on credit expansion and investment growth by the private sector.

A report by CSL Stockbrokers Limited had disclosed that despite the sustained increase in crude oil price seen this year, the banking sector remains heavily exposed to the oil and gas sector

The Lagos-based, research and financial advisory company, in its noted that the risk to the oil and gas upstream sector appears to be reducing, it pointed out that Nigeria’s power sector was still boded with high risk due to myriad of problems confronting the sector.

Although, the report did not specify the present value of banking sector exposure to the oil and gas sector, the CBN had revealed that it constituted about 40 per cent of banks’ loan portfolio.

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