Despite Epileptic Power Supply, Banks’ Credit to Energy Sector Hits N15.55trn

Kayode Tokede

Against the backdrop of worsening power supply in Nigeria, Deposit Money Banks’ (DMBs) credit to the power and energy sector increased to N15.55trillion between 2019 and 2021,  the National Bureau of Statistics (NBS) data has revealed. 

A breakdown of the numbers showed that banks in 2021 alone, extended N10 trillion credit to the power and energy sector, about 14 per cent of the N71.71trillion total private sector credit.

Aside the power sector, Agriculture, Mining & quarrying, manufacturing, Oil & Gas Power & Energy, Construction, Trade/General Commerce, Government, Information & Communication, among other sectors were extended credits.

In 2020, the Bureau reported N2.91trillion DMBs sectoral allocation of credit to the power and energy sector, an increase of 10.6 per cent from N2.63trillion in 2019.

According to the bureau report, DMBs in 2019 reported N46.13billion out of the N1.06trillion sectorial Non-Performing Loan (NPL) and it dropped to N33.22billion in 2020 out of the N1.23trillion total sectoral NPL.

Commenting on DMBs increasing lending to the power and energy sector, the Managing Director, ARM Securities Ltd, Mr. Rotimi Olubi noted that the energy need of the country required more capital and it is the DMBs that can

According to him, “In terms of returns on investment, DMBs have not been able to generate profit because most consumers do not have meters, while some do not pay and it becomes energy loss. Part of this is affecting the energy and power sector in Nigeria. We all know there is a huge energy gap in Nigeria and DMBs will continue to play a critical role in funding the power and energy sector.”  

THISDAY reported that spanning the period from 2010 to the first half of 2022, Nigeria’s power grid suffered at least 222 partial and total collapses, according to industry data from the Nigerian Electricity Regulatory Commission (NERC).

A Finance analyst, Mr. Rotimi Fakeyejo in a chat with THISDAY said the energy and power sector in Nigeria has failed to live up to its expectations, blaming it on weak government policies, among others.

He noted that poor management of Distributing Companies (DisCo) and Generating Companies (GenCo) should be a concern for DMBs lending to the energy and power sector.

According to him, “The energy and power sector in Nigeria is not a profitable business despite its lucrativeness.”

In 2022, the federal government in conjunction with Fidelity Bank and Asset Management Corporation of Nigeria (AMCON) have taken over the affairs of five electricity distribution companies, also known as DISCOs, over debts owed to Fidelity Bank.

The government took the step to save the companies from insolvency, among other reasons.

The affected companies are Kano Electricity Distribution Company (KEDCO), Ibadan Electricity Distribution Company (IBEDC), Benin Electricity Distribution Company (BEDC), Kaduna Electric, and Port Harcourt Electricity Distribution Company (PHED).

The companies had failed to repay loans obtained to pay for assets acquired in the 2013 privatisation exercise.

The Nigerian electricity sector has failed to live up to initial optimism where the country is expected to be enjoying nothing less than 40, 000 megawatts of electricity.

Instead, bottlenecks persist, crippling the sector below 3,000 megawatts, which was the case before privatization.

In June 2022, it was reported that Nigeria’s electricity sector, struggling to perform, has gulped over N1.5 trillion in interventions and loans from the Central Bank of Nigeria (CBN).

The latest being a N103billion intervention aimed at ensuring the rehabilitation of critical interfacing infrastructure between transmission and distribution.