Falling prices in the oil and gas sector which gulp 26 per cent of the credit in the banking sector exposes the lending institution’s risk exposure to non-performing loans.
A member of the Monetary Policy Committee, Adamu Lametek, said this in his personal statement which was released by the CBN following the last MPC meeting.
The oil price shock continued to reverberate through the economy from the oil and gas sector, he said.“In April 2020, credit to the oil and gas sector accounted for about 26 per cent of the industry’s total loans and advances, making the sector the single most important in terms of credit exposure of the banking system.”
He said, “Low oil prices translate directly to low resources in the oil and gas sector and reduced foreign exchange inflow to the economy.Though key banking system Financial Soundness Indicators– capital adequacy ratio, non-performing loans ratio, earnings among others had been quite robust, he said the industry was not insulated from the adverse impacts of the global economic and financial weakening arising from COVID-19 and soft oil prices.
In addition to easing the lockdown and restoring supply lines, he said the exchange rate of the naira would be a key factor in the short-term evolution of inflation and output.
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