Banks have confiscated and placed on sale 13 tank farms, scores of filling stations, landed properties and exotic cars seized as collateral from debtors in the downstream sector, it was gathered at the weekend, as recovery of $600 million loans in the sub-sector takes a new twist.
Head of Energy, Ecobank Plc., Mr. Dolapo Oni, who confirmed the development yesterday, lamented that the sale, which began some weeks back, was suffering low patronage and undervalue.
“We have placed assets, including tank farms, filling stations and some landed properties obtained from the loan recovery efforts of banks for sale,” he said.
It was earlier reported that banks were making moves to declare some tank farm owners bankrupt and take over their collateral.
Stating that the liquidity challenge in the system has also constituted a threat to the banks’ efforts to secure buyers for the seized assets, Oni said that most of those who have the financial muscle to buy the assets on sale could not come forward because of fear of anti-graft agencies.
“The major challenge we now have is that the assets are suffering very low patronage because no one wants to bring out huge amount needed to purchase these assets without fear of being followed by anti-graft agencies,” he said.
The Asset Management Company of Nigeria (AMCON), which, according to him, is prepared to take over the assets is, on the other hand, under-valuing the assets.
“Where we place N100 million on some of them, the commission usually values them at around N30 million,” he said.
The lenders, a manager at the oil and gas unit of one of the Tier 1 banks said, have earlier scaled down the number of debtors in the tank farms investments from 34 to the 13, who have shown no signs of recovery.
The banks could no longer bear the brunt of harsh liquidity problem “occasioned by their overexposure to oil and gas industry,” he said after his anonymity was guaranteed.
The source added that the banks have “scaled down their hunts for debtors and collateral take-over in the depot and jetty business peopled by about 34 investors to the 13, whose loans are irrecoverably bad.”
Noting that this was even a tough terrain for banks and other lenders now, Oni maintained that the bottom line, however, is that the bad loans recovery moves in the downstream sector had gone beyond collateral/ assets take over in most cases where the debts are considered irrecoverably bad.
The debt figure in the oil and gas sector, he added, is still very large, and other measures that are now being taken by banks is the deal struck to get some of the debtors to sell some of their assets.
The debt recovery approach, he said, “is now happening,” adding that the banks which are now feeling the heat more than before were acting fast.
“The banks’ exposure to oil and gas sector is high and the debts are huge because they are in dollars and you will understand this when you look at the difference in the exchange rate then and now.
“The loans were issued at 24.7 per cent, which is more than the 20 per cent requirement by the Central Bank of Nigeria (CBN),” he said on the sideline of a conference in Lagos.
Checks at the weekend also showed that loading activities have been grounded at seven of the tank farms in Apapa. They suffer product drought while their businesses have nosedived.
Twelve depot/marketers have, since August 2017, been suffering from products’ droughts.
Daily price survey of depots in Apapa since Week 31, corresponding to Wednesday, August 9, 2017, showed that products’ drought on some of these facilities have grounded fuel loading activities and placed them and their tank farms in the eyes of the storm.
About 34 owners of private tank farms and depots for petroleum products scattered across Apapa in Lagos, Nigeria’s commercial capital have earlier been slated to be declared bankrupt as the $600 million loans they got from banks went bad.
It was gathered that these firms that account for 75 per cent of all tank farm and depot owners in Nigeria are on the cliff of losing vital assets including, in some cases, their depots to banks over bad loans.
The aggressive collateral takeover exercise has begun in earnest by lenders who are, according to checks, also battling liquidity challenges. The loans, which were accumulated during the fuel subsidy regime, Oni said, are now a major cause for concern for banks. Declaring that banks had since embargoed further exposure to tank farms and depots investments, Oni said that the marketers had also blamed the government for the loans.
“The $600 million debts were accumulated during the subsidy regime; the time government used their (depot owners) facilities for fuel stock. As we speak, nothing has changed.
“These accumulated loans of about $600 million form major part of the debts government still owes them,” he declared.
Asked of plans to recoup the loan, Oni had earlier said: “The marketers have told us that the money was trapped in government’s hands. Surely, the only thing to do for banks is to deploy means available to recoup the debts from the marketers; you will agree that we don’t have direct dealing with government on this.”
Another manager at oil and gas investment section of one of the new generation banks was, however, clearer on steps being taken by banks on the debts.
He said: “The dire situation being managed by banks is caused by too much exposure to these players in the oil sector, particularly the downstream sub-sector. To take over collateral is the last resort and that is what we are doing now.”
He added that their situation would be compounded with the planned closure of the Apapa-Wharf expressway.
The Nigerian National Petroleum Corporation (NNPC), further checks showed, remained the major importer of petroleum products just as lenders’ apathy for private oil marketers climaxed, forcing the few credit-worthy private importers to deploy supplier credit mechanism. Lenders have continued to tighten the noose on oil firms.
Managing Director of MRS, Amina Maina, confirmed on the sideline of an event in Lagos that the business atmosphere is very tough for marketers due to difficulties they face from lenders.
“What we are left with is suppliers’ credit mechanism,” she said, explaining that this mechanism was deployed by her company in funding the 120,000 metric tonnes capacity jetty it just commissioned.