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The recent report that Shell Petroleum Development Company (SPDC) has started testing the Trans-Forcados crude export pipeline for a potential restart after months of repair is expected to have positive effects on banks’ earnings, according to analysts at Lagos-based CSL Stockbrokers Limited.
The analysts noted that the resumption of production may result in a reclassification of some bank loans that had been previously classified as non-performing loans (NPLs) and consequently results in a reduction in the NPL ratio of the affected banks.
Based on available data, FBN Holdings and Sterling Bank have a significant proportion of their non-performing loan portfolio from the upstream oil and gas sector, the report revealed.
Trans Forcados is owned by the Nigerian Petroleum Development Company (NPDC) and operated by SPDC.
Trans Forcados is a major evacuation route for onshore oil production but it is a sitting duck for militants due to its design (onshore that is not buried under the ground).
