COVID-19: Banks, Oil, Gas Companies Heading Towards Collapse – Expert

Indigenous oil and gas producers in the country as well as several Deposit Money Bank (DMB) operations may be heading towards a near collapse.

This follows the inability of the oil companies to meet their debt service obligations to the DMBs since the outbreak of the COVID-19 pandemic in the country.

The failure of the oil and gas companies to service their debt may not be far-fetched as prices there is a prevailing regime of low oil prices occasioned by the global pandemic.

Commercial and merchant banks loan exposure to the oil sector is estimated at about N1.6 trillion, according to a recent Central Bank of Nigeria (CBN) financial stability report.

Former President of the Nigerian Association of Petroleum Explorationists (NAPE), Abiodun Adesanya, while speaking in Lagos on Thursday, said the collapse of global oil prices was triggered by the Coronavirus pandemic which also accounts for the current problem faced by the indigenous players.

He said this has made repayment of loan obligations entered into before the current turmoil in the market nearly impossible.

Adesanya,an expert in the oil industry stressed that oil and gas companies will need to be rescued from the current situation by the direct intervention of the Federal Government through the Central Bank of Nigeria.

He explained that indigenous oil and gas operators exposure to banks represents approximately 25 percent of Nigerian banks’ overall bad loan portfolio, warning that without direct CBN intervention, this could lead to structural shocks within the Nigerian banking system, thereby, affecting depositors’ money and restricting banks’ ability to support vital economic sectors as Nigeria plans exit strategies from the economic crisis.

“If the current situation is left unchecked, it will threaten to wipe out this administration’s achievements and successive achievements in enforcing the Local Content Act that gave indigenous companies opportunity of playing significantly in the oil and gas sector,’’ he said.