FBN, GTB, Access, Zenith, UBA account for 79% industry exposure to oil & gas in 2017

Despite instability in the oil and gas sector typified by a slump in prices beginning 2015 and threat of renewable energy, Nigerian top five lenders exposure to the sector increased by 1.3 percent in 2017 to hit N2.8 trillion from 2.79 trilling in the prior year.

Cumulatively the five banks ac- count for N2.83 trillion out of the N3.58 trillion industry loans to the sector, representing 79 percent of total industry exposure to the oil and gas sector, which may see a rise in non- performing loans on inherent risks in the sector.

Analysis by business a.m. shows that of the five banks, First Bank Nigeria Limited, a subsidiary of quoted FBN Holdings had the highest exposure in the sector with N739.5 billion compared with N699.3 billion in 2016, an increase of 5.7 percent.

Zenith Bank Plc. and Access Bank Plc. recorded marginal growth while United Bank for Africa (UBA) and Guaranty Trust Bank (GTBank) reported a decline in exposure to the sector.

Zenith Bank’s gross loans and advances to customers in the sector rose by 0.8 percent to N660.24 billion in 2017 from N654.96 billion in 2016. On the other hand, Access Bank gross loans and advances to the sector amounted to N533 billion in the review period as against N498.68 billion in the preceding year.

The breakdown of Access Bank’s gross loans & advances to customers showed that the lender investment in the sector downstream segment dropped by 19.3 percent to N125.78 billion in 2017 from N155.88 billion recorded in 2016 while exposure to the services segment rose by 20.87 percent to N246.8 billion from N204.2 billion in 2016. However, it advances to the upstream sector rose 18.5 percent to N124.6 billion from N105.2 billion in 2016 while crude oil refining gained 7.8 percent to N36 billion from N33.39 billion reported in 2016.

On the flip side, United Bank for Africa’s credit concentration in the oil & gas sector dropped by 0.57 percent to N360.99 billion from N363.05 billion reported in 2016.

GTBank equally saw its expo- sure to the sector contracted by 7.22 percent to N535.2 billion in 2017 as against N576.8 billion in 2016.

Moses Ojo, a research analyst at Pan Africa Capitals Plc, the invest- ment banking arm of Pan-African Capital Group, said, “It is not only the five banks that increased their exposure to the sector,” adding that on the average total exposure to the sector actually increased to about N3.74 trillion.

He said the recent improve- ments seen in the prices and output of crude oil in the market may have been responsible for the spike in ex- posure by banks
“The average price forecast for this year is around $55 to $66 per barrel, which is quite better than last year and if you notice, from the middle of last year, there has been a significant improvement in the prices of crude oil,” he said.

Last week, Moody’s Investors Service said the outlook for the Nigerian banking system remains stable as banks’ foreign currency liquidity risks moderate due to rising oil prices and a more liberal foreign exchange policy.

“Operating conditions for Nigeria’s banks will continue to gradually improve over the next 12 to 18 months, but remain challenging,” said Akin Majekodunmi a Vice President and Senior Credit Officer, at Moody’s.

“Nigeria’s growth prospects remain vulnerable to global oil prices, as crude oil will remain the nation’s largest export commodity and its main generator of foreign currency for the foreseeable future.”

In 2017, oil price dropped to $30 but has increased to $70. Analysts believe banks exposure to the sector may increase with the recent rise.

The Nigerian oil and gas sector contributes over 70 percent of federal government revenue and 90 percent of all exports.