Nigerian Banks’ Headache Worsens As Electricity Companies Get Into Deeper Debts
Nigeria’s electricity companies are struggling and that means big headache for some Nigerian banks that loaned them money to buy the power assets four years ago.
Punch reports that many of the Nigerian banks that gave loans to core investors during the privatisation of the power sector in 2013 may have incurred losses.
It was gathered that the banks had, in the past four years, been struggling to ensure the repayment of the acquisition loans they granted to the power investors.
The privatisation of the power assets fetched about $3.2 billion naira for the Federal Government, with the generation and distribution companies sold for $1.7 billion and $1.5 billion, respectively.
The assets were purchased with significant leverage, estimated to be 70% debt and 30% equity, with most of the debt provided by the local banks.
Loans to the power and energy sector stood at 768.27 billion naira as of June 2017.
This accounts for 4.83% of the total loan portfolio of the nation’s banking system, up from 4.5%, 726.29 billion naira as of December 2016, according to the latest Financial Stability Report of the Central Bank of Nigeria.
An energy analyst at Ecobank, Mr Kareem Jubril, told Punch that the power firms had become a major problem to the banking sector in terms of their outstanding loans, adding that banks had begun to write down some of the loans as losses.
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