Following the discovery of N1.14 trillion non-performing loans in the financial books of five major banks by the Central Bank of Nigeria (CBN), some foreign financial institutions may have cancelled credit lines to many Nigerian banks.

Some of the foreign institutions include HSBC, Bank of China and BNP Paribas. The Tide learnt that the foreign banks took the measure to minimise risk even though the CBN had assured the correspondent bank to the Nigerian bank that the industry is safe and that their credit facilities to local banks are guaranteed by the nation’s apex bank.

CBN governor, Sanusi Lamido Sanusi, announced the removal of the managing directors and executive directors of Afribank, Intercontinental Bank, Union Bank, Oceanic Bank and Finbank, saying that the affected banks were in a grave situation and accused the management of acting in a manner detrimental to the interest of the depositors and creditors.

Out of the N1.14 trillion, the five banks exposure to oil and gas loans amounted to N487.02 billion sources from oil industry revealed that letter of credit (LC) issued by two banks arranging the purchase of trucks for fuel distribution were rejected by the banks of equipment manufacturer in Europe.

According to the sources, the banks have advised the manufacturers to stop communication with his company for fear that Nigerian banks many fail to meet with the obligation to pay.

“We have received four emails from different foreign banks that LCs issued by Nigerian banks would not be accepted for the next six months. Our challenge now is that we need to complete delivery of these trucks to the petroleum marketing company that gave us the contract in November 2009 for us to be paid the full cost of the contract, “he lamented.

An official of a petroleum marketing firm said his company experienced a similar problem when one of his banks in Nigeria raised an LC to  finance the construction of an oil tanker in China. He said the LC was rejected by Bank of China as a result of due diligence conducted on the bank’s books.

“Rejection of LCs raised by few Nigerian banks has contributed immensely to the slow pace of our trading activities since the beginning of the year even though Chukwuma Soludo, former CBN governor had consistently maintained that nothing is wrong with Nigerian banks until the new governor exposed insider abuse perpetrated by CEOs of these banks, “he said.