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Structural Reforms in Power and Petroleum Sectors to Encourage Banks Lending

By on November 23, 2012

 

With the ongoing reforms in the Power sector and the recent development of the Petroleum Industry Bill for the Oil and Gas sector, the confidence in the resurgence of the economy has given optimism to Nigerian Banks in the area of Lending.

Prior to this period, Lending after the 2008 Global Banking crisis which affected the Nation’s economy and slowed the economic recovery process , because the Central Bank Policy put a strong lid on any guarantee for the issuing of loans.

Renaissance Capital (RenCap) has stated that the reforms in both sectors have prompted the tier-one banks to resume aggressive lending to viable businesses, as a result of a very positive trend for the Nation’s economy.

The Financial Advisory firm stated this in its report titled ‘All eyes on Fourth Quarter 2012 which was covered and monitored by Thisday yesterday.

RenCap said  ‘In our view, we are likely  to see tangible progress in the power sector before the PIB is finally passed (and hence the extension of loans to the power sector before we see a significant increase in upstream oil and gas investment)’.

The Strategic firm asserted that ‘Some of the Banks have indicated that,  should the power privatization go ahead this quarter could see a jump in Fourth Quarter loan growth. While this would be a welcome surprise, we are holding our breath, with regard to timing; experience suggests to us that timing is likely to be delayed. In  our forecasts, we have assumed little-to- zero impact on loan growth in fourth quarter with the benefits from power privatisation only beginning to come through in full year 2013.’

This coming at the backdrop of positive assessments from International Financial rating agencies like Fitch that believe the Nigerian banking system has proven itself strong and firm enough to endure the challenges of asset management and capital.

 If the Reforms are effectively implemented and the Nigerian Banking system sustains its stabilization process and continues its transparency and probity on lending, the leading  economy in Sub-Saharan Africa will be the toast of the globe.