A Review of the Nigerian Energy Industry

Trading, oil & gas sectors lead list of bnanks’ bad debtors

10 August 2015, Lagos – As commercial banks in the country continue to name and shame defaulting customers, THISDAY’s assessment of 16 banks which published their list of bad debtors last week, has shown that the total amount of non-performing loans (NPLs) in the banking sector stands at N238 billion.

South Kirinskoe floating station.

This, however, is expected to rise when Heritage Bank Limited publishes its list of bad debtors who have failed to either honour their obligations or meet with the banks to restructure their bad loans.

Unity Bank Plc, which published its list of loan defaulters a few months ago, Standard Chartered Bank Limited and Citibank – both foreign banks – are not expected to publish lists of delinquent debtors.

As foreign banks, the laws and regulations of their home countries bar Standard Chartered Bank and Citibank from disclosing the names of defaulting debtors, as this could expose them to law suits.

Nigerian banking regulations also bar banks from doing the same, as only a court of competent jurisdiction can order a bank to breach the confidentiality between a bank and its customer.

But the Central Bank of Nigeria (CBN), starting with the immediate past governor, Sanusi Lamido Sanusi, has ignored the regulation in a bid to force delinquent debtors to repay their loans.

It is suspected, however, that the list of bad loans published by the 16 commercial banks last week is a far cry from the actual NPLs in the banking sector, as loans granted to investors who acquired the power assets sold by the federal government in 2013 and others who acquired oil and gas assets from the oil majors between 2012 and 2013, barely featured on their lists.

In this regard, industry sources informed THISDAY that the directors of the said firms may have either promptly entered into negotiations with the banks to avoid featuring on the bad debtor lists or the banks are trying to conceal their actual exposure to the oil and gas and power sectors.

For instance, THISDAY learnt that one of Nigeria’s oldest and biggest commercial banks is over-exposed to companies in the oil and gas and firms owned by a major Lagos State contractor.

One industry source also wondered how banks, which lent over $2 billion in 2013 to investors in the power sector that have not been servicing their loans due to gas shortages and low transmission from the power grid, escaped the list.
The lists published released so far by the banks, nonetheless revealed the lending pattern of banks as well as the sectors that seem to have posed the greatest risk to depositors’ funds.

Based on THISDAY’s assessment of the publications, trading concerns and firms in the services sectors, which include micro small and medium scale enterprises (MSMEs), hotels, schools, logistics firms, recorded the highest amount of bad loans of N129 billion.

Regrettably, attempts by THISDAY to also find out the activities of some of the firms were unsuccessful, as they did not have functional websites.

Similarly, the publications showed that a total of N47.572 billion loans to the oil and gas sector were classified as bad loans.

The oil and gas sector was closely followed by the construction, engineering and real estate sector with firms defaulting to the tune of N15.303 billion, while politically exposed persons (PEPs) owed banks a total of N11.522 billion.

The surge in loans to PEPs is in contravention of subsisting CBN directive barring banks from lending to political office holders.

Also, in the telecommunication sector, a total of N8.813 NPLs were recorded, led by the defunct Starcomms Limited.

In addition, bank loans to some power firms that appeared not to be making any effort to pay back what they owe was put at N7.752 billion, just as the findings showed that debts owed by some state agencies, boards and LGAs totalled N2.090 billion.

In the same vein, the total amount owed by chronic debtors in the maritime sector stood at N1.631 billion.

Commenting on the delinquent loans, the acting Director, Banking Supervision, CBN, Mr. Kolawole Balogun, at the weekend reiterated that the central bank would impose market sanctions on the defaulting customers whose names had been published.

Although he did not specify the nature of sanctions, the bankers’ committee had revealed that delinquent debtors would be banned from participating in the foreign exchange market and accessing fresh loans in the industry.

Balogun, who expressed satisfaction with the publication of the debtors’ lists, said banks would release lists of more delinquent debtors in the coming weeks.
“We have seen good responses from the name and shame strategy of recovering delinquent facilities. This is not the end. There will be follow up actions in terms of market sanctions.

“We have been receiving responses as expected. Now, these publications were not at the instance of the central bank. It was at the instance of the Bankers’ Committee. Members of this committee agreed to do that.

“It doesn’t stop here, we are going to follow up on the directors of these companies to ensure that they pay up. The publication is ongoing. Some banks said they will be doing theirs on a monthly basis, while some said they will be publishing weekly. And we would keep updating it,” he added.

However, a report by the Chief Executive Officer, Financial Derivatives Companies Limited, Mr. Bismarck Rewane, showed that some of the debtors had started selling their properties to pay down their debts.

“The name and shame tactic by banks forced a huge sale of properties to pay down debts,” he revealed.

Also speaking in a telephone interview, he said the move would make bank debtors sit up.

“Delinquent debtors should not be encouraged. The only reason why banks had to publish the names was to send a message that you can no longer owe a bank and decide to default.

“By publishing their names, they have sent a message to other debtors not to default. It is an unorthodox method, but the banks had to take that option,” he added.

– This Day

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