Many indigenous crude oil producers are on the brink of liquidation following the raging COVID-19 pandemic, an expert, Abiodun Adesanya has warned.
Adesanya, a former vice president of the Nigerian Association of Petroleum Explorationists (NAPE) lamented that the producers could run out of business due to falling oil prices and inability to meet their loan obligations to Nigeria banks.
He disclosed that figures of total exposure as at December 2019 is at an average of N3.4 trillion and has been on the increase since then.
In a statement yesterday, the expert called for the intervention of the Federal Government through the Central Bank of Nigeria (CBN) in providing moratorium on principal and interests of loans taken by the local players from Nigerian banks.
This moratorium, he noted, should be for a considerable period to help the oil and gas companies recover as the oil prices would take some time to rebound even after the COVID-19 pandemic.
With the debt portfolio of the Local oil and gas players accounting for about 25% of total bad loans in the Nigerian banks, Adesanya said that unless the CBN intervenes, there may be issues of systemic shocks in the Nigerian banking system.
This, according to him, poses threats to depositors’ money and could hinder the effective functioning of the banks in their role in the country’s economic recovery.
He said, “This exposure may also lead to massive job losses in the Oil and Gas sector as a number of the indigenous players may not survive the present shock without assistance from the government.”
The expert emphasized that the debt default issue in the face of the current turmoil in the crude oil market also threatens the gains of the present administration and successive ones in implementing the Local Content policy which has given opportunity to indigenous companies to significantly play in the local oil and gas sector.
He therefore canvassed for a moratorium on debt repayments, applied on both principal and interests, through a policy to be championed by government working through the CBN.
On the part of indigenous oil producers, Adesanya advised that they should watch their operating costs by adopting innovative strategies to drastically reduce cost of production which currently stands at 30 dollars per barrel as it makes the local producers uncompetitive in the face of industry’s frequent volatility.
