Concern Intensifies over Banks’ Upstream Oil Sector Exposure – Thisday

Obinna Chima

Some banking sector analysts have expressed concern over banks’ exposure to the upstream oil and gas sector.

It was gathered that of the top five banks’ $4,882 million exposure to the upstream oil and gas sector, at least 15 per cent is exposed to the Trans Forcados pipeline (TFP).

The pipeline has been closed for four months due to attacks by the Niger Delta Avengers. The TFP links a number of oil fields and oil mining leases (OML) in the western Niger Delta with the Forcados terminal on the coast. Many of these OMLs were once owned by Shell Nigeria but were sold to indigenous Nigerian upstream companies, in many cases financed by Nigerian banks.

To this end, analysts at Lagos-based CSL Stockbrokers Limited, noted that since 15 per cent of upstream oil and gas lending equates to 2.2 per cent of total lending, it raises questions over cost of risk guidance which is generally under 1.5 per cent for 2016. It viewed this as a concentration of Nigerian upstream oil and gas bank risk in the basin served by the TFP.

It listed the banks involved in the deal as FBN Holdings, Zenith Bank, Access Bank, GTBank and the United Bank for Africa Plc.