Business
Banks face N3 trn exposure in fuel depots collapse
The imminent collapse of the fuel storage and distribution arm of Nigeria’s midstream petroleum sector is posing a major threat to the stability of some commercial banks operating in the country, Business Hallmark’s findings have revealed.
According to findings, several trillions of naira commercial banks gave out as loans to investors in the sector for the construction of fuel depots, tank farms and pipelines conveying refined petroleum products from ocean going vessels to the facilities are heavily exposed to the dying depots.
BH had on Monday, April 28, 2025, published a story titled: ‘Over 80% of fuel depots shut down as Dangote Refinery disrupts market’. The report had highlighted how fuel depots and tank farm owners had continued to incur heavy loses with over 80 percent of their facilities across the country currently shut down or dormant.
According to the report, out of the 105 fuel depots in the country, only 24, namely BOVAS, AITEO, AIPEC, Pinnacle, Pinnacle Warri, Ardova, MRS Tincan, Eterna, FYNEFIELD, Parker, Sigmund, Prudent Oghara, Matrix Warri, Matrix Lagos, Ardova, Rainoil Lagos, Liquid Bulk, Zamson, Dangote, Bono, NIPCO Lagos,11 Plc, Sahara, Sharon and Eva currently had products in their tanks as of Sunday, April 27, 2025.
The 24 active depots displayed real-time prices, product discharge details, quantity discharged, discharge date, and loading status, which serve as indicators of whether they are still operational.
For instance, while Dangote had the lowest PMS price of N835 displayed on the terminal, Sigmund had the highest petrol price of N870.
In the same vein, data on petroleumprice.ng showed that AITEO received its current stock of 37,424 metric tones of petrol on March 30, 2025, while Bovas received 20,000 metric tones on March 4, 2025.
On the other hand, the remaining 81 depots did not have real-time prices, product discharge details, quantity discharged, discharge date, and loading status, which serve as indicators of whether they are still operational displayed on their sites and energy intelligence platforms.
Sources in the oil industry had informed BH that the depots didn’t have a single litre of petroleum products in their tanks as of Sunday, April 27, 2025.
Meanwhile, out of the 24 fuel loading depots still selling products, at least five, including Heyden, Eterna, Ardova, MRS and Dangote get their products from Dangote Refinery.
Some of the idle and dormant depots, checks revealed, last received petroleum products into their tanks in January 2024.
Boom from Import
It would be recalled that fuel depot and tank farm business began thriving in the 1990s with the collapse of the nation’s four public refineries based in Port Harcourt, Warri and Kaduna.
Unable to supply the needed volume required for local consumption, the Nigerian National Petroleum Company (NNPC), now NNPCL, resorted to importing fuel to fill the gap.
In an effort to ensure fuel security as the 20 fuel depots owned by the Petroleum Products Marketing Company of Nigeria (PPMC) became increasingly idle owing to the collapse of the four public owned refineries, private investors were wooed by the Federal Government through the NNPCL to import fuel and build storage facilities to hold the products.
Investors approached and got loans from few willing banks who bought into the programme. Huge loans were given out to investors for the construction of the depots and supplementary facilities. In less than 10 years, the number of active depots in the country climbed from 20 to over 100.
Encouraged by the high returns from the business, other banks soon joined the scramble for the apple pie by offering loans to investors to build more fuel storage and transportation facilities.
Ending Subsidy and Dangote Refinery
However, the scrapping of fuel subsidy by the present administration and the coming on board of Dangote Refinery in 2023 threw spanners into the tank farm business with investors now facing an existential threat from the direct supply of refined petroleum products to the market by the new refinery.
While the termination of the subsidy regime and the spike in the prices of petrol crashed demand for the product, leading to a sharp fall in fuel importation and fuel depots becoming redundant, the coming on board of Dangote Refinery at Ibeju-Lekki, Lagos, crashed the pump price of petrol, making imported fuel uncompetitive.
As a result, many fuel depots have shut down with the several trillions of naira banks pumped into the moribund facilities now trapped.
BANKS’ EXPOSURE
Available information showed that from early 2025, Nigerian banks have substantial exposure to the oil and gas sector, particularly the midstream petroleum segment, which spanned transportation, storage and processing.
According to a report by the Central Bank of Nigeria (CBN) showing the banking sector’s lending to different sectors of the economy, banks’ combined exposure to the oil and gas sector stood at N14.07trillion at the end of first quarter 2024, with the 10 biggest banks in the country, GTBank, First Bank of Nigeria (FBN), United Bank for Africa (UBA), Access Bank of Nigeria Plc, Zenith Bank Plc, Fidelity Bank, Stanbic IBTC, First City Monument Bank (FCMB), Sterling Bank and Wema Bank accounting for the major chunk of N12.08 trillion.
A further analysis of the apex bank report showed that while upstream petroleum sector accounted for about N10.9 trillion in lending, the remaining N3.8 trillion loan went to the midstream and downstream petroleum sectors.
A breakdown revealed that three banks, FBN Holdings, Zenith Bank and GTBank’s lending to the oil and gas sector at the end of the 2023 financial year climbed above the N2 trillion mark.
For instance, while FBN Holdings exposure to the oil and gas sector stood at N2.19 trillion, Zenith Bank’s exposure was N2.1trillion and GTbank N2.29 trillion.
BH reliably gathered that out of the N3.8 trillion loan that went to the midstream and downstream petroleum sectors in the period under review, about N2.7trillion, representing 70 percent, was obtained by investors in the midstream sector.
While the full exposure figures for 2024 are not yet released, BH gathered that it significantly grew in the last one year with many operators not generating enough revenue to service their loans, which is ballooning daily.
With the midstream petroleum sector currently struggling to stay afloat (with the exception of crude oil refinery segment), the over N3.8 trillion bank loans given out to the sector may go bad, financial experts warned.
“The oil and gas sector’s credit allocation is predominantly in foreign currencies, which exposes Nigerian banks to exchange rate volatility.
“While the banks have deepened their involvement in the oil and gas sector, reflecting the sector’s strategic role in the nation’s economy, this heightened exposure necessitates careful management of associated risks, especially those related to the transportation and storage segments”, admonished Vincent Kalu, an oil and gas expert based in Lagos.