Financial experts have allayed fears that bank loans to oil marketers may be at risk because of the global oil price slump.
The experts, who spoke at different fora, assured investors and the banking public that commercial banks are not in danger of bad loans as happened in 2009.
Guaranty Trust Bank Group Managing Director and Chief Executive Officer, Segun Agbaje, insisted that loans granted players in the oil sector will yield returns.
He told reporters after a meeting of the Bankers’ Committee in Lagos that commercial banks which became exposed to the oil and gas sector when the price of oil was above $100 per barrel (pb) have no reason to worry because they can extend the tenor of loans so long as there are reserves.
“I don’t think there is any cause for concern. I think some of these issues have been overblown,” Agbaje stressed.
He disclosed that the Central Bank of Nigeria (CBN) has done an extensive stress test and the books of banks are very decent, adding that the naira will not be allowed a free float as that may hurt the economy seriously.
“Today, oil prices are down; as a country we are trying to find what level the currency would settle at. No Central Bank around the world allows a free float of its currency, what they do is price discovery to find a rate at which you can live with.”
Afrinvest West Africa Managing Director and Chief Executive Officer, Ike Chioke, added that despite global oil price decline and fall in commodity prices, commercial banks might have gone for oil sector loan in order to be hedged.
He told TheNiche on the sidelines of a breakfast forum with the business community in Lagos – organised by the Nigeria Economic Summit Group (NESG) in conjunction with the CBN – that banks which raised dollars from the euro bond market could use the dollar earnings of oil companies to offset dollar liability, as naira asset does not match dollar liability.
His words: “So, what they do is create a dollar asset on the other side. To that extent if they lend to someone who is in the oil and gas upstream business, that may be generating between 10,000 and 50,000 barrels per day for a project.
“If the price is $100, most times they say ‘we are not going to lend you at the price of $100, we might discount it to $50 or $60 because market might come down to $50 or $60.’
“That is why when the dollar is coming down they settle that exposure. They still lend to oil and gas marketers but they do it in a more disciplined manner.
“It could turn out to be a benevolent time for banks to say ‘thank God we lent to that marketer because he is still the one that is earning dollars in this tight economy.’”
Chioke said before the reduction of fuel pump price from N97 to N87, most downstream operators could have made huge profit to put them in good stead.
