Amidst the COVID-19 pandemic which has severely affected businesses, and an uncertain 2021, Nigerian Banks are already bracing up to provide for more bad loans as they approach the end of the financial year 2020.
Earlier in the year, banks cut a deal with the Central Bank of Nigeria as they were granted regulatory forbearance in the restructuring of loans. The deal meant over 33 per cent of industry loans were restructured as part of the deals signaling the spate of economic crunch that had hit the private sector.
Despite this, there is growing apprehension that some of the loans could crystallize as bad in 2021, especially if insecurity and social unrest continues to impact negatively on business operations across the country.
It was gathered that Nigerian banks have made provisions for about N211.2 billion alone in 2020 compared to N182.9 billion in 2019. This is still far lower than the N551.5 billion provided for by the banks in 2016 when Nigeria was in a recession, with the exchange rate in a tailspin. Things are even worse compared to 2016 due to the effects of Covid-19, lower oil prices, and insecurity.
Data from the National Bureau of Statistics shows that total banking sector credit to the economy stood at about N18.8 trillion in the second quarter of 2020 up from N17.1 trillion at the end of 2019. However, non-performing loans at the end of the second quarter of 2020 rose by 2.27 per cent to N1.2 trillion.
Based on NBS data, total oil and gas loans in Nigeria are estimated at about N4.94 trillion as of the second quarter of 2020, or a combined 26.2 per cent of total credit to the private sector.
The loan is further divided into Oil and Gas upstream with N3.6 trillion, and the balance N1.3 trillion for the downstream (oil services) sector. Oil and Gas also make up about N268.7 billion in non-performing loans or 22.1 per cent of the total.
One of the many tools the banks have to recover their loans is the use of the Global Standing Instructions introduced earlier in the year. However, it was learnt that some of the heavy obligors have found ways to beat the trap, and even when they do not, they do not have cash in their accounts that the banks can lay claim to.
This is why some of the banks have gone the route of court orders to seize the properties of defaulters.
Last week, Nigeria’s Access Bank obtained a court order that enabled it to seal the corporate head office of Seplat Petroleum Development Company
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