The latest data obtained from the Central Bank of Nigeria on Monday revealed that operators in the downstream, natural gas and crude oil refining sectors of the Nigerian oil and gas industry borrowed N130 billion from Nigerian banks in February amid the significant rise in global crude oil prices.
The debt owed by the oil and gas companies therefore rose to N4.05tn in February from N3.92bn in January.
Operators in the upstream and services subsectors owed banks N1.26tn in February, down from N1.27tn a month earlier.
According to the sectoral analysis by the CBN of deposit money banks’ credit, the combined debt of N5.31tn owed by oil and gas operators as of February 2021 represents 25.29 per cent of the N21tn loans advanced to the private sector by the banks.
The slump in oil prices in 2020 as a result of the coronavirus pandemic hit many oil and gas companies hard, forcing them to slash their capital budgets and suspend some projects.
Peter Mushangwe, analyst at Moody’s Investors Service, said, “Nigerian banks’ loan quality will weaken in 2021 as coronavirus support measures implemented by the government and central bank last year, including the loan repayment holiday, are unwound,”
The rating agency estimated that between 40 per cent and 45 per cent of banking loans were restructured in 2020, easing pressure on borrowers following the outbreak of the pandemic.
Fitch Ratings, another global credit rating agency, had 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 had been particularly affected by low oil prices and production cuts.
The rating agency predicted that Nigerian bank asset quality would weaken over the next 12 to 18 months.