FG’s refund of oil marketers’ N800bn to improve liquidity in Nigerian banks

Nigeria’s industrial base may be up for a return to operating at installed capacity through improved access to loan facilities from money deposit banks. The soon expected refund of money owed oil marketers is said to be capable of improving liquidity among banks.

Manufacturers especially those operating at medium and small scale levels have continued to lament poor access to loans from banks with many accusing the banks of tagging them high risk business ends in preference to investing in the perceived more secured government securities.

Government’s increasing appetite for domestic borrowings which see banks directing their money into government securities are said to be crowding shallow pocket borrowers out of bank vaults.

But the banks are quick to point at their high Non Performing Loans (NPL) as been responsible for their tight scrutiny of loan applications. Banks’ loan exposure to oil and telecommunication sectors is known to have culminated in low liquidity amidst high interbank rates.

Analysts said Friday that Federal Government’s yielding to request of oil marketers for a repayment of $2.5 billion, about N800 billion, owed the oil czars could stand the banks in good stead to play more interventionist roles in the economy.

Oil marketers said they are yet to repay the over $1.2bn that they borrowed from Nigerian banks to import fuel, adding that interest on the loans had accumulated over time because the government had failed to pay them.

Urum Kalu Eke Group Managing Director of FBN Holdings said Thursday that the group is aiming to achieve a single digit NPL before 2019 business year end. The first step to achieving the target, the bank said is to restructure its oil and gas loans which constituted 70 per cent of the structured portfolio in 2016.

Analyst who wants to remain anonymous argued Friday that refund of debts owed oil markets by the federal government will go a long way in increasing liquidity in the Nigerian banking industry thus releasing more funds to prospective borrowers.

Already, Nigeria’s foreign reserves from which major imports are financed is said to be at it three months low at $30.22 billion even though authorities of the Central Bank of Nigeria (CBN) said that they are comfortable with the level. The $30.22 billion reserve will sustain imports for four months it was gathered.