A report by the Financial Times Thursday stated that most of Nigeria’s commercial banks have their fortunes tied to fluctuations in global oil prices considering that about a third of all credits they extend to the economy are directed to operations in the country’s oil and gas industry.
The report, titled ‘Investing in Nigeria,’ chronicled developments in Nigeria’s economy and politics ahead of the 2019 general elections. It explained, among other observations, that analysts estimate that about half of the loans of commercial banks in Nigeria were given for upstream, midstream, and downstream oil and gas operations and the supply chain, adding that rising levels of Non-Performing Loans (NPLs) of the banks were traced to the oil sector.
Describing the nexus between Nigerian banks and the vicissitude of oil prices, the report said while the rally in the price of oil over the past year, “is far from a universal benefit to Nigeria’s economy, which is dependent on crude oil revenue but cannot meet domestic fuel demands from its own supply,” it has been good for the banks.
“The rise has come as a welcome respite for the country’s banks, whose fortunes are tied to fluctuations in the oil market,” it said. The report added that the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) had in a recent communiqué said it was, “concerned with the rising level of NPLs in the banking system, traced mainly to the oil sector.”