Banking Crisis: Nigeria Banks Looking to Increase Earnings From Fintech Following the Increase in Debt Owed by Independent Oil Producing Firms.
Nigeria Banks is looking to increase earnings following the pressure on banks’ earning due to the unpaid loans owed by independent oil producing firms.
The global crash in crude oil price has signalled another incoming historic economic shift from crude oil to some other income generating industries in Nigeria. This unfortunate situation also shows a serious threat to Nigerian banks.
A report from Bloomberg suggests that self-reliant oil producing firms, pumping around 400,000 barrels of crude oil per day, which about a fifth of the country’s crude oil output will be at risk of causing some liquidity crisis for the local banks that manage them.
The self-reliant oil producing firms account for about 90 percent of the $8 billion, owed to financial institutions, including local banks. A small portion of these loans were insured at $50 per barrel with a greater percentage of them not insured.
Most Nigerian oil firms undergoing this crisis include Shoreline, Aiteo Group, Eroton Exploration & Production Company, Seplat Petroleum Development Company, and others.
According to data from the Central Bank of Nigeria (CBN), about a third of the loans by the Nigerian banks were given to oil firms, although some of their transactions are insured.
While commenting on the situation, the Chief Executive Officer of Shoreline Group, Kola Karim, said:
“Government needs to come up with the independents and the other oil producers, a financial rethink of the funding mechanics for the industry, if not we’ll see a total collapse which in turn will drag down the banks.”
Meanwhile, most analysts believe that a steady low price of crude oil for about 6 months, might lead to a full-blown crisis in the banking sector. Most banks already find it difficult to meet up with the regulatory cash reserve targets with the total bank debts amounting to $1.4 trillion.
The Rush into Fintech Services By the Banks
Earlier before now, banking revenue has been severely affected by fintech service companies in Nigeria, mostly loan providers like Carbon and digital banking service providers like Piggyvest.
GTBank’s 2020 Economic Outlook report shows that fintech platforms have severely affected the revenue been generated by the banks resulting to the loss of over four million bank customers.
The pressure on the revenue of Nigerian banks have made most of the banks to adjust their revenue models. Diutocoinnews previously reported the intentions of GTBank to restructure into a Holdings Company to help them generate a greater revenue through Fintech.
With the adverse effects of the coronavirus pandemic in Africa, we might see a big economic shift through different sectors and most especially through emerging technologies like blockchain technology, cloud computing, artificial intelligence and others.
Though there might still be a light at the end of the tunnel for banks after the Brent crude was slightly sold above $21 per barrel yesterday. The Bonny Light was earlier sold at a discounted price of $10 per barrel due to the supply glut in the market.
But as at yesterday, the Bonny Light was slightly sold above $16 per barrel.
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