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Oil Companies And Bank Loans

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16 years ago

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Olusola Bello

The five banks which last weekend had their managing directors sacked by the apex bank are also known to have been involved in what is now called banks unusual romance with the oil and gas industry. The former bank bosses may have marched into the slippery terrain of the industry without first of all doing their home work on the vagaries of the sensitive sector. The bait which forced them to lower their guard was the fact that the oil firms continued to service their accounts a tendency which subsequently took the place of the good old collateral. Many analysis have faulted the banks’ failure to conduct due diligence on the sector before offering the companies jumbo loans that were not secured.
On their part, the oil firms selling the idea that the escalating price of crude oil would continue to point skywards, took advantage of the situation to churn out irresistible bankable proposals.
There was a sudden rise in the price of crude oil to about $140 per barrel while the price of products like Premium Motor Spirit (PMS) or petrol, Automotive Gas Oil (AGO) or diesel was sold at about N140 per litre. However, against the importers’ and their bankers’ expectations, prices started falling. Through this the importers incurred heavy losses.Again, the banks influenced by greed and their level of solvency threw so much money into the oil sector because they considered the sector as the honey pot that yielded quick and fantastic returns.
A source said that there are many factors that prompted the oil companies to also seek for loans, one of which was that some of them have no genuine intention to pay back the loans.
The loans, the source said were used for other purposes that were also hit by the economic recession and this has made it difficult for them to repay back the loans.
There have also been allegations of diversion of some of the loans by the oil companies to real estates. Unfortunately, the sector like other sectors of the economy also crashed, leaving their investments in danger.
Some of the oil companies were said to have taken loans to import products at higher prices only to sell at much lower prices in the bid to under-cut the established oil companies and gain popularity among consumers. While this was going on, the prices of the product plummeted and have not risen since that time. So, rather than make returns on their investments, the firms were recording loses.
Compounding the problems associated with the loans, was the steady upward movement of interest rates, exchange rate fluctuations and the devaluation of naira which some of the firms could hardly cope with because of their capital base.
For instance, the exchange rate was $1 to N117 as at the time the imports were made before they could arrive the country the exchange rate had risen to N150 to $1.
This situation made oil marketing companies to threaten to stop fuel importation into the country. They consequently gave conditions under which they would import products especially Premium Motor Spirit or petrol.
The private sector which imports at leat 50 per cent of the nation’s Premium Motor Spirit (PMS) requirements under the Petroleum Subsidy Fund (PSF) scheme while Nigerian National Petroleum Corporation (NNPC) delivered the balance were aggrieved that the government was not paying them what could cover their cost of importation.
The exchange rate was beyond what was provided for the Petroleum Product Pricing Regulatory Agency (PPPRA) import template. As a result, when the verified private sector subsidy claims for the third quarter of 2008 of $1,189,964,305.45 was paid in naira, on the 10th of January, 2009 at the rate of N117.91, the naira payment of N139,225,823,738.27, could only purchase $870,161,398.36 at the prevailing exchange rate thereby leaving a shortfall of $319,802,907.09, a sum equivalent to the nation’s cost of PMS import for a month.”
By virtue of the Clause 3.3 of the agreement between the PPPRA and importers on PSF, subsidy payment should be made monthly and within 15 days of submission of claim.
They argued that they were unable to recover these additional costs from the regulated pump price. The marketers had to fight for a foreign currency window to be made available for PMS importation, at current market trends. The private sector requires between $200m. $250m monthly for importation of petroleum products.
To ensure continuous supply of products, the marketers stated that they would require the following.
Immediate payment of all outstanding cost and exchange rate differential.
All payments for subsidy claims or contribution should be based on the prevailing exchange rate.
Interest on late payments of subsidy claims should be paid on past claims to enable importers recover cost of funding.
Current interest rate as a result of worldwide economic situation must be reflected in the template, PPPRA and Ministry of Finance must make payment within the period stipulated in the contract to avoid additional costs.
Foreign exchange availability is a precondition for guaranteed supply of petroleum products in some of the relatively new companies engaged in frivolous extravagance in their attempt to be heard and seen in places where ordinarily they should not be. A couple of them spend valuable time lobbying lawmakers and sponsoring government officials to international events and seminars without taking a look at the implications of the flamboyant lives on the business they are doing.
The government liberalisation of the sector which gave room to all manner of people coming into the sector with the hope of bringing in products and getting refunds through the Petroleum Support Fund (PSF) did not help matters. But this was not forthcoming on time as the government had to delay for a long while before paying up the difference between the landing cost of the products and the official price at the pump stations.
Lack of human capacity in the energy sector by most of the banks was a major snag in the way the banks transact their oil businesses. This has resulted in their inability to do due credit analysis on the various companies that were given the loans even as some of the companies that received credits did not have storage facilities. They are brokers or bulk purchasers who go about to beg fellow operators with depot to assist them with letters stating that they would be allowed to use their facility in order that federal government may give them licence to import products.
A particular company among the ones listed as owing some of the banks was alleged to have imported four ship loads of Automotive Gas Oil (AGO) without having any storage facilities. The ships were said to have stayed for 60 days on the Nigerian territorial waters without much success before they sailed back to Europe.
Culled from Business Day

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Ban On Satchet Alcoholic Drinks: FG To Loss  N2trillion, says FOBTOB

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6 days ago

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November 24, 2025

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Ahead the December 31 effective date for enforcement of the ban on alcoholic drinks and beverages in PET or glass bottles below 200ml, the Food, Beverage, and Tobacco Senior Staff Association (FOBTOB) has warned that Nigeria risks losing more than N2 trillion in investments.
The union urged the federal government to reverse the planned ban, cautioning that the Senate’s directive to the National Agency for Food and Drug Administration and Control (NAFDAC) would trigger severe socioeconomic consequences across the industry.
Speaking at a Press Conference, in Lagos, the President of FOBTOB, Jimoh Oyibo, said repealing the directive would prevent massive job losses and protect the country from economic disruption.
“Repealing the order would avert the grave repercussions that would most definitely follow the ban, especially by saving approximately 5.5 million jobs, both direct and indirect,” he said.
Oyibo appealed to the Senate to invite stakeholders to a public hearing, insisting that all parties must be allowed to present their positions before any decision is made.
“For a fair hearing and to demonstrate good faith, the Senate should invite relevant stakeholders to a Public Hearing to ‘hear the other side’ and be adequately informed to make an informed decision,” he said.
The union leader urged the Senate to carefully review and endorse the validated National Alcohol Policy, describing it as a multi-sectoral framework developed after last year’s public hearing, when the initial call for the ban was raised.
He urged the lawmakers to consider the entire value chain in the alcoholic beverage industry, including formal and informal workers and legitimate local manufacturers, before approving any enforcement.
Highlighting the economic implications, Oyibo said close to N2 trillion invested in machinery and raw materials could be wasted, while over 500,000 direct workers and an estimated five million indirect workers, including suppliers, distributors, marketers, and logistics operators, could lose their livelihoods.
He said “Nearly N2 trillion worth of investments in machinery and raw materials could be lost. Indigenous Nigerian manufacturers risk total collapse, discouraging future investments.
“Smuggling and the circulation of unregulated alcoholic products may skyrocket, worsening public health dangers. Government tax revenue could decline sharply as factories shut down or scale back operations.
“With rising unemployment and no safety nets, this ban will plunge families into poverty. The very children the policy claims to protect may be forced out of school if their parents lose their jobs”.
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Estate Developer Harps On Real Estate investment 

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6 days ago

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November 24, 2025

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A  Canadian based Nigerian Estate  Developer, Andrew Enofie, has said that diversification of investment into the real  estate sector remains the key to business sustainability.
Enofie said this during the launch of The Golden Gate investments, in Port Harcourt, recently.
He said  real estate sector has always remain stable during period of  inflations, adding that diversification into the sector would ensure that businesses never loose out during such periods.
He also called on Nigerian businessmen to put their money into the Canadian estate industry with the view to reaping maximum benefit.
According to him, Canada  has one of the lowest inflation rate in the world and Nigerian businessmen can reap benefits by putting their monies into the Canadian estate sector.
Enofie said his company, with many years of experience in the real estate sector, can assist Nigerian businessmen with the quest  to acquire property in Canada.
According to him, investors have more opportunities to diversify their funds, saying “it also open doors for investors to invest in the Canadian real estate market.
“With the launch of this fund, we are strategically positioned to navigate current market dynamics,r3 rising demand, shifting rates and evolving economic trends, while focusing on sustainable growth”, he said.
Also speaking, an investor, Mike Ifeanyi, also called on investors to invest in real estate.
He commended the company for its pledged to assist Nigerian businessmen willing to invest in Canada, but added that the whole thing must be transparently done inorder to avoid fraud.
Also speaking, Chukwudi Kelvin, yet another investor, described the event as an eye opener, stressing that time has come for Nigerian investors to go into the Canadian estate sector.
By: John Bibor,/Isaiah Blessing/Umunakwe Ebere/Afini Awajiokikpom
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FG Reaffirms Nigeria-First Policy To Boost Local Industry, Expand Non-oil Exports

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6 days ago

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November 24, 2025

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The Federal Government has reaffirmed its continued commitment to driving Nigeria-First policy aimed at encouraging local manufacturers and improving the economy through the non-export sector.
This is as the National Assembly has revealed that a bill for establishing a Weights and Measures Centre is advancing.
Delivering the keynote address at the Opening Ceremony of the 2025 Nigerian International Trade Fair, in  Lagos, Minister of Industry, Trade and Investment, (FMITI), Dr. Jumoke Oduwole, said that government would continue to promote locally made goods.
Oduwole stated that the fair was not only an opportunity to showcase the best of Nigerian products but ensuring that the country continues to accelerate its non-oil exports under the Renewed Hope Agenda.
The minister noted that the government’s reforms are working and demands a lot of support from all stakeholders.
In her words, “Already, our non-oil exports have grown by 14 per cent. Our exports to the rest of Africa was the fastest growing at 24 per cent last year Q1, year-on-year, CBN released the results at the end of Q1.
“Now, this shows us that our goods are in demand across Africa. Earlier this year, the Federal Ministry of Industry, Trade and Investment opened an air cargo corridor in partnership with Uganda Air, and we mapped 13 Southern and Eastern African countries who want Nigerian products. We understood that they want our fashion, they want our light manufacturing, our food, our snacks, plantain chips, chin chin.
“They also want our zobo, our shea butter, beauty products. The things we take for granted here, our slippers, our hair wigs, are things that are in demand across the continent. And so we’re here to support our Nigerian exhibitors and to welcome our friends across Africa and across the world.
“Exhibitors, buyers who are interested in purchasing, we’re interested in growing these businesses. So a business that is a small business this year should be a medium-sized business in the next five years. Each trade fair has its uses, each trade fair has its conveners, and really, to be honest, there cannot be too many.
“This trade fair, traditionally, has been the largest in the country, and we want to bring it back to its former glory. There’s nothing like a competition.
On her part, the Executive Director, Lagos International Trade Fair Complex Management Board, Vera Safiya Ndanusa, said the board would, in the coming months, champion structured and modernised regulatory frameworks for trade fairs and exhibitions.
She stressed that reviving the Tafawa Balewa Complex was part of a broader mission to strengthen confidence in the nation’s trade infrastructure, while stimulating industrial activity and showcasing the enormous potential of the nation’s citizens.
“Most importantly, we remain the only agency in Nigeria expressly mandated by law to organise trade fairs, and we intend to restore that statutory responsibility to the prominence it deserves ensuring coherence, quality, and national alignment in trade events across the country.
“We will be deepening our engagement with NACCIMA, whose partnership has historically anchored the success of organised trade in Nigeria, while also strengthening ties with ECOWAS, continental business groups, and international partners who share our vision for a more integrated African marketplace.
“In the coming months, we will champion a more structured and modernised regulatory framework for trade fairs and exhibitions, one that protects stakeholders, ensures standards, and positions Nigeria as a credible and well organised destination for regional and continental commerce”, she stated.
She noted that as Africa embraces the promise of the African Continental Free Trade Area, a new momentum was building across the continent.
“For Nigeria, AfCFTA is not just an economic framework; it is a pathway to industrialisation, job creation, and intra-African collaboration.
“This complex must play a central role in that journey. We intend to make this fairground a primary entry point for African trade, a marketplace where producers and buyers from across the continent meet, a logistics hub connected to regional value chains, a centre for cross-border SME activity, and a launchpad for Nigerian businesses looking to expand beyond our borders.
“To achieve this, we are intentionally expanding access to markets physically, economically, and digitally. We are working to make participation more affordable for SMEs, women-led enterprises, and young entrepreneurs. We are improving mobility within and around the complex. A truly vibrant trade ecosystem must be inclusive, and inclusivity begins with access,” she stated.
Chairman, House Committee on Commerce, Ahmed Munir, commended Ministry of Industry Trade and Investment, ED LITF and her team, for promoting the platform as a veritable marketplace of ideas, innovation, and partnership.
He said the event was a clear reflection of the economic agenda of the current administration, supported by Speaker Rt. Hon.Abbas Tajudeen.
According to him, “The House of Representatives recognises that the engine of our economy is the private sector, particularly our Micro, Small, and Medium Enterprises (MSMEs), which contribute nearly 50 per cent to our GDP and employ the vast majority of our citizens.
“To create the competitive environment they need, the National Assembly has been working assiduously to pass and amend vital legislation to enhance the Ease of Doing Business by Streamlining regulatory bottlenecks and reinforcing essential infrastructure to make business operations simpler and more predictable.”
He stressed that as policy makers they would continue to promote the “Nigeria First” Policy through robust legislative support, ensuring that government ministries and agencies prioritise locally manufactured goods in all public procurement processes. “This is our clear statement: We must buy Nigerian to build Nigeria.
“Also to ensure quality and standards, the bill for establishing a Weights and Measures Centre is advancing. Quality is not optional; rather, it is the key to consumer trust and international competitiveness,” he said.
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