Adeola Adenikinju, who is also the director for the Centre for Petroleum, Energy Economics and Law (CPEEL) at the University of Ibdan, expressed concerns when he was speaking at the Sixth African Petroleum Congress and Exhibition (CAPE VI) in Abuja, Vanguard reported.
[quote]According to the media, Adenikinju stated that a number of energy companies are presently not producing and this, as a result, is hindering their ability to service their loans from banks.
“If nothing is done there is that possibility of banks going bankrupt. Some of the banks are exposed to the energy sector, oil sector and electricity sector.
“Now, some of those companies are not producing and the interests on the loans are increasing, making it more difficult for them to service those debts. These would put those banks in deep problem,” he explained.
Federal government – rescue the energy sector
The media reported that the professor then called for “a proper study to see how deep the problem had become before it becomes a systemic problem or crisis.”
Adenikinju advised the federal government to consider setting up an intervention fund that would assist energy companies in repaying their debts to the banks.
He noted: “Maybe the federal government has to step in to help them out, like what it did to the electricity sector. The sector was given money, which did not directly go to the electricity companies.
“It was partly to clear the loan that they borrowed from the banks, so that the banks will not collapse.”
The media also reported that in addition to the huge indebtedness, Adenikinju further highlighted that the decline in oil prices would lead to a slowdown in the developments of new oil and gas projects, causing a sharp decline in investments in the energy industry and job losses.