‘Why banks are skeptical to fund oil coys’

CBN buildingLong gestation periods, insecure locations and poor infrastructure are among the key factors that make funding of marginal oil companies unattractive to banks, Group Managing Director of Diamond Bank, Dr Alex Otti, has said.

Speaking at the pre-conference workshop at this year’s Nigeria Association of Petroleum Explorationists (NAPE) Monday in Lagos, Dr Otti said banks are yet to be convinced that their monies are safe in the hands of the marginal oil operators who are mostly indigenous operators.

He said banks are taking into consideration these factors among others before giving loans to them.
Dr Otti who is also the chairman, committee of bank CEOs, said in addition, other factors like host community issues, integrity of the marginal oil  fields managers and corporate governance challenges are playing key roles in banks’ decisions to give loans.  But Otti admitted that some banks lack technical capacity to make proper investment analysis in the oil fields, at the end missing various opportunities.

“Sometimes the problem is that some banks don’t understand the technicalities in the oil and gas drilling business”, he said.
He said with huge investments into the electricity sector by the banks, it is a clear signal that banks are ready and willing to invest in the energy sector.

In her presentation, Chairperson of the Brittania Company, Mrs Uju Ifejika, said in every business there must be risks, therefore, the marginal oil fields are not the only risky areas for the banks.

[Leadership]
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