A total of N100.42bn loans advanced by the nation’s banks to power firms have been recorded as non-performing, the latest data from the National Bureau of Statistics have shown. The power and energy sector, out of 22 sectors/business lines, accounted for the fifth biggest share of banks’ N1.69tn non-performing loans as of April 30.
The total debt owed by power firms to banks stood at N683.93bn at the end of April, according to the NBS data. A breakdown of banking sector credit to the private sector showed that the power and energy sector got the seventh biggest credit from banks. The oil and gas sector received the lion’s share (N4.68tn) of the N15.45tn bank loans as of April 30, followed by the manufacturing sector (N2.24tn), governments (N1.37tn) and general commerce (N1.04tn).
The total loan portfolio of power and energy firms is made up of a naira component of N280.42bn and a foreign currency component amounting to N403.51bn, according to the NBS. Bad bank loans in the power and energy sector saw the smallest decline in one year, falling by 0.59 per cent from N101.07bn as of April 2018 to N100.42bn in April 2019. The amount of the NPLs fell by 10.71 per cent in the oil and gas sector to N777.84bn; by 7.01 per cent in the general commerce to N166.86bn; by 27.72 per cent in the general sector to N151.12bn; by 21.82 per cent in the manufacturing sector to N113.82bn.
The amount of bad loans declined by 51.1per cent in the information and communication sector to N75.98bn; by 61.26 per cent in the real estate sector to N65.87bn; by 34.81 per cent in the construction sector to N59.23bn; by 46.24 per cent in the transportation and storage sector to N54.27bn.
The bad loans recorded in agriculture, forestry and fishing; finance and insurance; education and government sectors dropped by 2.56 per cent, 59.68 per cent, 32.84 per cent and 34.24 per cent to N47.53bn, N17.63bn, N8.61bn and N1.72bn, respectively at the end of April 2019.
The bad loans in the remaining sectors, including capital market and arts and entertainment, stood at N49.77bn. The distribution and generation companies carved out of the defunct Power Holding Company of Nigeria were handed over to private investors on November 1, 2013, following the privatisation of the power sector. Our correspondent gathered that many of the investors had yet to pay the bank loans used to finance the acquisition of the assets.
The privatisation of the power assets fetched about $3.2bn for the Federal Government, with the generation and distribution companies sold for $1.7bn and $1.5bn, respectively. The assets were purchased with significant leverage, estimated to be 70 per cent debt and 30 per cent equity, with most of the debt provided by the local banks. “The investors that bought the power assets took some loans from banks at the existing exchange rate then (around N170/$1), and now they are paying back the debt using the prevailing exchange rate (around N300-plus/$1). They are still making efforts to pay back the debt gradually,” a former Managing Director, Eko Electricity Distribution Company, Dr Oladele Amoda, told our correspondent.
He said the lack of cost-effective tariff was responsible for the revenue shortfall and mounting debts in the sector. “Discos are distributing electricity below costs; that is, the cost of delivering electricity to the customers is higher than what they are getting from the customers,” Amoda added.
The PUNCH reported on June 17, 2019 that a former Executive Director at the Asset Management Corporation of Nigeria, Mr Kola Ayeye, decried the default on bank loans by electricity generation and distribution companies in the country. Ayeye, who is the Managing Director of Growth and Development Asset Management Limited, stressed the need for the Central Bank of Nigeria and commercial banks to collaborate with the Nigerian Electricity Regulatory Commission to reposition the power sector for a quantum leap in performance. “The current operators should be compelled to either liquidate their debts or participate in a better managed programme of ceding management and control to a best-in-class operator. The debts provide a platform for inviting new operators through either voluntary negotiation with the existing owners or receivership,” he was quoted in a statement as saying at an interactive forum.
NERC had said that the challenge of poor remittance by the Discos had remained a serious concern, describing it as one of the main causes of the liquidity crisis facing the industry. It said while the low remittance by the Discos to the Nigeria Bulk Electricity Trading Plc and the Market Operator was partly due to tariff shortfall, the Discos must improve on their technical and commercial efficiency for improvement on the payment obligation to the market, thereby improving sector liquidity. Punch
Pix: Some Nigerian Banks