A Review of the Nigerian Energy Industry

FirstBank grants N1.47trn loans to oil firms

First Bank Nigeria Plc.
First Bank Nigeria Plc.

*Records N3bn NPLs, fined N.48bn for infractions

09 June 2015, Abuja – Despite concerns over rising Non-Performing Loans, NPL, First Bank Nigeria Plc gave out N1.465 trillion loans to oil and gas companies in two years, 2013 and 2014.

This is even as the bank was fined almost half a billion Naira for various infractions for the periods in review, making it one of the highest paid in the financial sector.

First Bank’s loan to the high risk oil and gas sector, according to information obtained from its Consolidated Financial Statements for the year ended 31 December 2014, accounted for 36.7 per cent of the bank’s N3.992 trillion total loans to customers for both years.

Specifically, in 2013, First Bank gave out N621.43 billion as loans to oil and gas companies, while the sum increased by 35.78 per cent to N843.767 billion in the 2014 financial year.

The bank’s total loans to customers stood at N1.798 trillion in 2013, rising by 22.04 per cent to N2.194 trillion in 2014.

The loan was in spite of the fact that the bank had burnt its fingers in a few loans it granted some oil and gas firms.
All the non-performing loans in its books, except for two other loans granted to Lister Flour Mills Nigeria Limited, were facilities granted to oil and gas firms.

In the bank’s 2014 financial statement, N3.198 billion credit facilities to oil gas firms were classified as non-performing loans.

Specifically, First Bank’s N2.607 billion loans to Seawolf Oilfield Services was impaired, with the bank classifying the facility as non-performing under related party transactions, direct credit assets to directors.

Also, the banks, N350.4 million and N241.07 million facilities to Le Global Oilfield Services Limited and Al-Fil Petroleum
Company Limited, respectively, were described as non-performing loans.

While the bank did not state the director involved in the Seawolf deal, it listed Mr. Remi Makanjuola, and Khadija Alao-Straub, a non-executive director of the bank, as parties in the Le Global Oilfield Services and Al-Fil Petroleum deals respectively.

In addition to the non-performing loans, First Bank, in different transactions, gave out a total N5.585 billion to a single firm, Honeywell Oil and Gas Limited. However, all the loans granted to Honeywell Oil and Gas were classified as performing.

Operational infractions
In addition to the poor loans record, FirstBank was also fined more than N486.6 million for various infractions in the 2013 and 2014 financial years, distributed at N98.3million and N388.3million respectively. These are:
…2014: failure to render suspicious transactions to NFIU within 72 hours of transaction – N2 million;
…Failure to conduct due diligence before opening a Politically Exposed Persons, PEPs, – N2 million;
…Issuing a single draft of N30.5 million – N2 million;
…Opening/closing 62 cash centres and 32 branches without stipulated approval from the CBN – N210 million; and,
…Misreporting public sector deposit – N74 million;
…2013: failure to address all observations and recommendations of external auditors – N2 million;
…Failure to address all observations and recommendations of external auditors for the period ended 30 September 2014 – N2 million;
…Delay on unapplied funds – N2.3 million;
…Contravening Section 25(2) of Banks and Other Financial Institutions Act LFN 2004 on rendition of statutory returns through FINA application to CBN and NDIC – N2 million;
…Inability to provide evidence on CBN’s no objection letter to promotions/appointments of 28 senior officers – N88 million; and,
…Failure to comply with the CBN directives on the issue of Eurobonds – N2 million.
*Micael Eboh – Vanguard

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