The combined bank lending to oil firms operating in the downstream and upstream subsectors of the Nigerian oil and gas industry was N6.62tn as of December 2022, according to data from the Central Bank of Nigeria.
While operators in the downstream, natural gas and crude oil refining subsector owed banks N4.71tn, operators in the upstream and services subsectors were indebted to banks to the tune of N1.91tn.
They observed that the total debt rose by 110.83 per cent from N3.14tn in 2016 to N6.62tn in 2022.
While the debt has increased significantly over the years, The PUNCH observed that the oil and gas sector is struggling to service its debt and defaulting on loans.
This has raised banks’ exposure to non-performing loans in 2022, according to an analysis of the financial statements of Guaranty Trust Bank, United Bank for Africa, Zenith Bank, Ecobank Nigeria, Fidelity, and WEMA Bank.
An NPL occurs when the borrower fails to make scheduled payments for a specified period.
The 2022 financial statements of the Guaranty Trust Bank showed that N21.6bn was recorded as NPLs from firms in the oil and gas sector (midstream and downstream).
GTB’s NPLs stood at 5.19 per cent of total loans disbursed. With a total sum of N1.92tn loaned in 2022, N102.3bn was recorded as NPL, with the oil and gas sector taking 21.21 per cent of the total.
While UBA did not state the value of its NPLs for 2022, it noted that 16 per cent of the total unpaid loans for the year was held by the oil and gas sector.
For Zenith Bank, the oil and gas sector had a share of 44.3 per cent of the NPLs, representing N78.66bn. The total NPLs for the bank stood at N177.3bn for the 2022 financial year.
In 2022, Ecobank Nigeria recorded $179.7m as NPLs, with the oil and gas sector accounting for 35 per cent of the total, equating to $62.8m.
A review of Fidelity Bank’s half-year financial statements shows that the oil and gas sector accounted for N4.82bn of the bank’s total NPLs or 8.9 per cent of its total NPL.
For WEMA Bank, the oil and gas industry accounted for N5.11bn of the total NPLs for a half-year period.
The rising debt and loan default occurred as the sector faced a number of challenges.
The Centre for the Promotion of Private Enterprise recently said that the incessant scarcity of Premium Motor Spirit, popularly called petrol, vandalism of pipelines, oil theft and several other menaces in the oil and gas sector were due to the gross mismanagement of the industry by the Federal Government and politicians,
CPPE described the management of the oil sector by politicians as a disaster, stressing that the government should reduce its hold on the industry and privatise some facilities in it, such as the four refineries being run by the Nigerian National Petroleum Company Limited.
“Let’s take the oil and gas sector, for instance, that sector has been a disaster, because it is fully in the hands of government officials and politicians,” the Director, CPPE, Muda Yusuf, told our correspondent, while speaking on the need to fully privatise the oil sector.
“Imagine if operators in that industry were private sector people, paying taxes and doing things efficiently, the sector would not be in the state it is now.
“It would have raked in a lot of investments, bringing in many foreign and domestic investors, more quality jobs would have been created, and our export earnings would have been fantastic. Our investments in gas and others would have gone far.”
Yusuf stressed that because the government was the one that was largely sitting on the affairs of the sector, it had become a platform for patronage, “which is why we are in the crisis that we face today.
It added, “Whereby every now and then we are plunged into a widespread scarcity of petroleum products, oil theft, pipeline vandalism, among others.”
The PUNCH recently reported that Nigeria lost an opportunity to produce and sell about 65,700,000 barrels of oil in the last one year due to issues bothering pipeline vandalism and the resultant oil theft.
This translates to about N2.3tn loss in oil revenue if the prevailing exchange rate and average oil price are used.
The Chairman of Shell Companies in Nigeria, Dr Osagie Okubor, said at the Nigerian International Energy Summit in March that the 180,000 barrels per day Trans Niger Pipeline had remained shut for more than one year- March 2022 to March 2023.
The loss from March last year to March this year brings the total loss to about 65,700,000 barrels. Brent crude price averaged about $83 per barrel from March 2022 to March 2023, meaning the country could have lost as much as N2.3tr to the menace.
The TNP, a Joint Venture operated by SPDC, is a major pipeline capable of transporting about 180,000 barrels of crude per day to the Bonny export terminal.
Speaking at the NIES, Okunbor said the TNP remained shut for one year due to the massive crude oil theft on the pipeline.
The pipeline, according to Shell, is part of the gas liquids evacuation infrastructure, critical for continued domestic power generation and liquefied gas exports.
He said, “What keeps me awake today as regards my onshore business in Shell is the fact that we cannot operate a pipeline, and that’s what is responsible for the 60 per cent capacity. I think today that is almost just how much gas we can supply,” he said.
“And this is because one of our key gas infrastructures — the TNP — was shut down for one year; we removed 460 illegal connections on that line. We just reopened that line. Today we are struggling to catch up with our first programme.”
Okunbor said the loss was often viewed as affecting Nigeria’s oil production quota to the Organisation of Petroleum Exporting Countries.
Okunbor advised the incoming administration to prioritised the security of oil infrastructure.
The Federal Government also said that most international oil companies that operate in Nigeria’s upstream sector redirected their capital investments worth about $21bn to other countries between 2014 and 2022.
It attributed this to regulatory uncertainty in Nigeria’s oil and gas sector prior to the enactment of the Petroleum Industry Act 2021, and the de-funding of fossil fuel development occasioned by the energy transition and COVID-19.
The government disclosed this through the Nigerian Upstream Petroleum Regulatory Commission.
The Chief Executive, NUPRC, Gbenga Komolafe, said the country’s yearly capital expenditure in the upstream arm of the oil sector decreased by over 70 per cent within a period of eight years.