Effect of Covid-19: How COVID-19 worsened oil, aviation sectors’ N4.4tr debt

Effect of Covid-19: How COVID-19 worsened oil, aviation sectors’ N4.4tr debt

Oil Theft in Nigeria
The coronavirus pandemic has made the aviation and oil sectors more vulnerable to a huge financial crisis.
Already, operators and service providers in the two sectors are beginning to experience challenges in meeting their financial obligations to their staff, value-chain operators and financial institutions in terms of loan servicing.
Like the 2008/09 and 2015/16 financial crises that led to the near-collapse of the Nigerian banking industry, the slump in oil prices as a result of the COVID-19 pandemic may bring the country’s financial sector to its knees again, if the Central Bank of Nigeria (CBN) fails to look into the sector’s over N3.4 trillion exposure to local oil companies and about N1trillion to
local airlines.
With the Brent Crude priced at $23.14 and Nigeria’s Bonny Light at $14.85 per barrel as at 3:45 p.m. local time, Nigerian banks with exposure to local oil firms and aviation sector, are presently experiencing difficulty in getting the companies to service their loans as indigenous oil firms need between $35 and $40 a barrel to remain in operation, unlike oil majors whose average cost of production is about $22 a barrel.
As a result of the debt profile of the banking sector, international rating agency, Moody’s reviewed the outlook for Nigeria’s banking system from stable to negative. According to Moody’s, Nigerian banks will face weakening loan quality and foreign currency liquidity challenges as depressed oil prices and the coronavirus pandemic weigh on the nation’s economy.
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