Debt levels in Nigeria’s oil and gas sector nearly doubled in the nine months of 2024 driven by the Naira’s depreciation and rising interest rates, an analysis by BusinessDay shows.
A review of the debt profiles of oil and gas companies listed on the Nigerian Exchange (NGX) reveals a 73 percent increase in borrowings, rising from N1.72 trillion at the beginning of the year to N2.97 trillion by the end of September 2024.
The seven oil and gas firms listed on the NGX are Aradel Holdings, Oando Plc, Seplat Energy, TotalEnergies Marketing Nigeria, Conoil, MRS Oil Nigeria, and Eterna Plc. These companies operate in the upstream, midstream, and downstream sectors.
Data reviewed by BusinessDay shows that in just the first half of 2024 (H1 2024), Oando Plc’s borrowings doubled, hitting N1.61 trillion, from N818.3 billion at the start of 2024.
While there was a massive increase in some company’s borrowings, there was a significant decline in others. For example, within nine months, MRS Oil Nigeria paid off all its N1.4 billion borrowings.
The upstream players unsurprisingly incurred the highest debts, with Oando Plc leading the charge. In H1 2024, Oando took a new loan of N655.5 billion, meanwhile, the company also spent N289.5 billion on the repayment of its loans.
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Essentially, Oando’s borrowings increased by N790.7 billion during the half-year, reflective of the effect of Naira’s depreciation as well as increasing interest rates on its loan profile.
Seplat’s borrowings also increased by 66 percent during 9M 2024, from N679.7 billion at the start of the year to N1.13 trillion as of September 30, 2024. During this period, Seplat did not take on any new loans.
However, the depreciation of the Naira added an extra N524.9 billion to the company’s debt burden, as a significant portion of its non-current borrowings are denominated in USD. Seplat currently has a $350 million revolving credit facility.
During the period under review, Seplat paid back about N151.2 billion in interest and principal repayments on its current borrowings. Elevated interest rates also caused the company to accrue new interest of N75.4 billion during the nine months.
Aradel Holdings, another upstream and midstream player also recorded a 26 percent growth in its debt profile in nine months, despite spending N30.2 billion on principal and interest repayments during the period.
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The depreciation of the Naira led to an added N37.6 billion liability for Aradel, even as the group took no new loans during the period. The company’s loan from GTBank increased by N16.9 billion to N56.1 billion in nine months due to incurred interest.
TotalEnergies’ borrowings increased by 20 percent during the nine months to N101.5 billion, from N84.5 billion at the start of the year. The growth in Total’s loan profile was driven by rise in the effective interest rates on its bank overdrafts.
During the nine months, TotalEnergies expended a net cash of N53 billion on its financing activities, as the group took a new N133.2 billion however, spent N161.6 billion on repaying its borrowings.
Conoil’s borrowings also declined by 62 percent, from N32 billion at the start of 2024 to N12.3 billion at the end of September 2024. All of Conoil’s borrowings are bank overdrafts which are charged at the effective interest rate determined by the bank.
Eterna Plc took new N117 billion in loans during the nine months however, the group also spent N138.4 billion repaying bank loans. However, the Naira’s depreciation led to an N13.4 billion additional liability for Eterna during the nine months.
In the first nine months of 2024, Eterna’s borrowings declined by 1 percent, from N43.2 billion at the start of the year to N42.7 billion as of September 30, 2024.
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