In light of the huge indebtedness of oil and gas firms and the rising inability of most of the oil firms to meet their debts obligations to the banks, uneasy calm and palpable fear currently pervade the Nigerian financial sector with the recent takeover of Skye Bank Plc by the Central Bank of Nigeria, CBN. Skye Bank’s Chairman, Managing Director and other key management staff were forced to resign, while the Board of the bank was reconstituted by the CBN.

Specifically, the CBN had in its Quarterly Statistical Bulletin for the Fourth Quarter, Q4, 2015, released few weeks ago, revealed that oil, gas and power firms owed banks in the country about N3.931 trillion as at the end of December 2015. Giving a breakdown of commercial banks’ sectoral credit allocation, the CBN explained that the downstream, natural gas and crude oil refining segments owed banks up to N2.273 trillion as at year end 2015, slightly higher than the N2.264 trillion recorded in November, while the upstream and oil and gas services sector owed N1.156 trillion against N1.192 trillion month on month.

In the power sector, the banks are owed N340.31 billion by Independent Power Plants, IPPs, and power generation companies, while power transmission and distribution companies owed N162.44 billion against N168.1 billion in the previous month. The Central Bank of Nigeria, CBN, PriceWaterhouse Coopers, PWC, and other analysts had in the wake of the declining crude oil price warned that financial institutions in Nigeria risked erosion of their capital. Also, the financial sector and the economy are at risk of being plunged into another crisis over banks’ exposure to the energy sector.

This prediction appears to have started to come to reality, as majority of the banks are faced with liquidity challenges. Few days ago, it was reported that banks’ borrowings from the CBN’s Standing Lending Facility, SLF, rose by 230.61 per cent to N929.52 billion, while the Standing Deposit Facility, SDF, declined by 61.76 per cent to N227.44 billion during the week, indicating that banks are also withdrawing heavily from their deposits in CBN as the liquidity pressure bites harder.

It was said that banks use the CBN’s SLF to support their liquidity shortfalls and meet trading obligations on short term basis, while keeping excess cash with the apex bank in the SDF also on short term basis. With all these disturbing statistics, Nigerians are concerned about the safety of their deposits and investments in the banking system, and the onus lies on the CBN to assure people that the banks are strong and are insulated from the volatility in the oil sector.

Read more at: http://www.vanguardngr.com/2016/07/skye-bank-uneasy-calm-banking-sector-oil-industry-exposure/ lalasticlala, dominique, Mynd44, davide470

Every sector is now experiencing this unwholesome economic bite. The Lord is our strength.

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