Reports from the Central Bank of Nigeria (CBN), shows that bank loans to oil companies involved in the upstream and downstream sectors of the country’s oil and gas industry were N6.62 trillion as of December 2022.
Operators in the upstream and services subsectors owed banks N1.91tn, while those in the downstream, natural gas, and crude oil refining subsector owed banks N4.71tn.
The total debt increased by 110.83 percent, from N3.14 trillion in 2016 to N6.62 trillion in 2022. The debt has grown over time while the oil and gas industry have difficulties paying off the debt. This has led several Nigerian banks such as Guaranty Trust Bank, United Bank of Africa, Zenith Bank, among others to non-performing loans in 2022.
When a borrower misses their agreed-upon payments for a predetermined amount of time, an NPL develops. The oil and gas sector is a major contributor to NPLs for Nigerian banks.
Guaranty Trust Bank (GTB) reported N21.6 billion in NPLs from the oil and gas sector in 2022. UBA did not disclose the amount of its NPLs from the oil and gas sector, but it said that the sector held 16% of the year’s total outstanding loans.
According to Muda Yusuf, the Director of Center for the Promotion of Private Enterprise (CPPE), oil firm has been a disaster since it is totally in the hands of the governments.
He, however, suggested that the industry should be privatized to lessen the sway on the government. This will pave way for more employment and investments. The oil and gas industry can attract both local and international, whereas exports revenues would have been excellent, he added.
Yusuf emphasized that the government’s control over the sector’s activities had led to shortage of petroleum goods, oil theft, pipeline damage, among other things. This has cost Nigeria the chance to produce and sell roughly 65,700,000 barrels of oil in the previous year.
If the current exchange rate and average oil price are applied, this corresponds to a loss in oil income of around N2.3 trillion.
According to Dr. Osagie Okubor’s statement, the chairman of Shell Companies at the Nigerian International Energy Summit in March “180,000 barrels per day Trans Niger Pipeline had been shut down from March 2022 to March 2023.”
The cumulative loss from March last year to March this year is now over 65,700,000 barrels. Between March 2022 and March 2023, the price of Brent crude averaged roughly $83 per barrel, which means that the government might have lost up to N2.3tr to the threat.
A significant pipeline with a capacity of 180,000 barrels of crude per day to the Bonny export terminal is the TNP, a Joint Venture run by SPDC. The TNP was closed for a year as a result of the extensive crude oil theft on the pipeline, according to Okunbor, who was speaking at the NIES.
According to Shell, the pipeline is an essential component of the infrastructure for the evacuation of gas liquids, which is necessary for maintaining domestic power generation and liquefied gas exports. Okunbor stated that the loss has an impact on Nigeria’s OPEC oil output quota.
Okunbor recommended the new administration to give security of the oil infrastructure first PRIORITY. According to the Federal Government, foreign oil corporations diverted $21 billion in capital investments from Nigeria to other countries between 2014 and 2022.