Experts have predicted that banks in the country are on the verge of another credit crises as a result of the macro conditions in the country.
According to the Head of Frontier Market Banks and Research for Citigroup, Josh Levin, borrowers, mostly oil and gas industry operators are unable to service the loans obtained from the Nigerian banks as a result of the lingering plunge in oil price.
He said banks have made a lot of loans to the oil and gas industry, adding thatabout 25 to 30 per cent of the bank loans went to the oil and gas sector. “So as the price of the oil plunges, there will be a lot of concerns about the ability of the borrowers to service the loans, because the cash flow of the borrowers goes down.”
.“The macro environment has really deteriorated over the past 15 months; so, what’s going on, the price of oil has plummeted. Even though Nigeria directly derives only a 15 per cent of its GDP from the oil industry, Nigeria derives roughly 80 per cent of its tax revenue from oil. So the low oil price, certainly negatively impacts the country’s economy.”
He said the consequence of this is the slowing loan growth; adding, “When the GDP goes high, loan growth goes high, when the GDP goes down, and the loan growth tends to slow.”
Levin, who put the average assets of big Nigerian banks at roughly $12 billion to $15 billion in size, said they are very small when compared to banks in the frontier markets.