• Power, energy sector loans reach N453.9bn
Nigeria’s oil and gas sector indebtedness to banks reached N3.58 trillion as at the fourth quarter of 2017.This is, however, higher than the N3.55 trillion, which the sector recorded during the third quarter of the same year.Besides, the country’s electricity sector loans from banks decreased from N459 billion in third quarter to N453.9 billion in the period under review.
The National Bureau of Statistics (NBS), which made this disclosure in its latest Banking Sector Data, put bank’s credit to the manufacturing sector at N2.17 trillion.The Bureau noted that the oil & gas and manufacturing sectors got credit allocation of N3.58 trillion and N2.17 trillion out of the N15.74 trillion loans available to the private sector, to record the highest credit allocation in the period under review.
Speaking on oil and gas exposure to Nigerian banks, First Vice President of the Chartered Institute of Bankers of Nigeria (CIBN), Dr. Uche Olowu, said that the unpaid subsidy arrears to oil marketers had created liquidity gap in the industry and had led to a negative impact on banks’ operational costs.According to him, the development has led to transactional velocity of money, which has impacted negatively on the economy.
“There should be transactional velocity of money. This means that if the money comes, the money will go to other traders who will continue to use the money. “Once this is in place, it will be able to broaden the market. However, this has not happened because of the gap created for not paying back the money.
“Therefore, the economy has witnessed the kind of activities that should not have happened in the first place if the money had been paid,’’ he said.
Olowu said that if the money had been refunded, it would have in return created jobs, businesses and even investments in the economy would thrive.The banker noted that the development had contracted the economy.
“The situation is critical and because activities are slow, it has affected the economy quickly. On the other hand, if the government says it does not have the money, it should have at least found an alternative means to ensure that the gap was not created.
“Sovereign risk in every other developed clime means when a government says it is going to pay, you can take the promise home.“For instance, government should have raised money either through bonds and fulfill its obligation,’’ he said. Olowu said that the government needed to inject back the liquidity in the financial system to prevent the industry from suffering.
He said that the situation could pose a run on banks and the industry could collapse.He called on government to ensure timely payment of the subsidy arrears to boost the confidence Nigerians have on the regime.
“It is a very important time that the government finds a possible means of settling those debts to create more liquidity in the system.“Without settling the debts, the banks will be running on huge loan losses.,” he added.Olowu insisted that if the financial system is not healthy and strong, there would be huge exchange rate gap created by devaluation.’’