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Commercial banks in Nigeria are set to begin the recovery of N6.125 trillion borrowed by oil firms to braze themselves amidst the sector’s recapitalization fears.

The banks have reportedly issued correspondences to oil firms, marginal filed operators and downstream operators, as debts in the sector, according to a 2018 CBN financial stability report, showed that N1.235 trillion had been added to the sector’s debt profile since 2016 when it stood at N4.89 trillion.

FG battles 6 oil firms for failure to remit N20 trillion , ExxonMobil, Shell, Chevron delay $58.4 billion oil and gas investment in Nigeria 

Banks are beginning to takeover collateral tied to the loans, a management staff of one the marginal field oil firms reportedly said over the weekend, as banks followed up on the correspondence sent to his firm.

 “Oil firms form the major part of their (banks’) heavy debtors’ list and they have written some of us with non-performing loans to prepare for the worst,” Anonymous Management staff said.

The banks’ exposure in terms of loan facilities to the oil sector is, according to the CBN document, about N6.1 trillion debts.

Meanwhile, as earlier published on Nairametrics, bank’s non-performing loans have been on the decline and a chunk of which was attributed to the oil sector. As the CBN announced in 2019, the immediate suspension of interests on non-performing loans to oil marketers and similarly granting Deposit Money Banks the approval to directly debit bank accounts belonging to loan defaulters across all banks in the country.

[READ MORE: Banks borrow N19.64trillion from CBN in 2019)

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However, according to analysts, CBN’s planned recapitalisation programme might trigger fresh waves of mergers and acquisitions in the banking industry adding that though the country’s banking industry had grown strong, as Capital Adequacy Ratio (CAR) increased from 10.2% in December 2017 to 15.5% in September 2019 and the percentage of Non- Performing Loans (NPLs) declined from its high of 14.7% in January 2017 to under 7% as at October 2019, New Telegraph reported.

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Banks had helped indigenous firms with financing, helping them become key players in the nation’s oil and gas industry, but in recent years, indigenous firms are now struggling to maintain the assets they acquired through Federal Government’s marginal field programme.

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