Nigeria’s oil and gas sector has experienced a significant rise in debt levels, with total borrowings among listed companies nearly doubling in the first nine months of 2024. According to an analysis by BusinessDay, the combined borrowings of oil and gas firms listed on the Nigerian Exchange (NGX) increased by 73%, from N1.72 trillion at the start of the year to N2.97 trillion by the end of September 2024.
The sector’s debt surge comes amid rising interest rates and the ongoing depreciation of the Naira, which have significantly impacted the financial profiles of major oil and gas companies. Among the seven listed oil and gas firms on the NGX—Aradel Holdings, Oando Plc, Seplat Energy, TotalEnergies Marketing Nigeria, Conoil, MRS Oil Nigeria, and Eterna Plc—the upstream players have incurred the highest levels of borrowing.
Oando Plc Leads the Debt Surge
Oando Plc, one of Nigeria’s largest oil and gas companies, saw its borrowings double in the first half of 2024, reaching N1.61 trillion by June, up from N818.3 billion at the start of the year. The company took out a N655.5 billion loan during the period, and also repaid N289.5 billion of its existing borrowings. The increase in Oando’s debt load reflects both the rising cost of borrowing amid higher interest rates and the devaluation of the Naira, which added significant pressure to its loan profile.
Oando’s total borrowings rose by N790.7 billion in the first half, driven in part by the depreciation of the Naira. The company’s exposure to foreign currency-denominated loans made it vulnerable to fluctuations in the exchange rate, leading to higher debt servicing costs.
Seplat Energy Sees 66% Increase in Debt
Seplat Energy, another major player in Nigeria’s upstream oil sector, experienced a 66% increase in its borrowings, which grew from N679.7 billion at the beginning of 2024 to N1.13 trillion by September 30. Notably, Seplat did not take on any new loans during the period, but the devaluation of the Naira added an additional N524.9 billion to its debt burden, as a significant portion of its borrowings is denominated in US dollars.
Despite the increase in borrowings, Seplat made significant debt repayments, spending around N151.2 billion on interest and principal in the first nine months of 2024. The company also incurred an additional N75.4 billion in interest due to the rising interest rates.
Other Companies See Mixed Debt Outcomes
- Aradel Holdings, which operates in both the upstream and midstream segments, saw a 26% increase in its borrowings, despite paying N30.2 billion in principal and interest repayments during the period. The depreciation of the Naira added N37.6 billion to its liabilities, even as the company refrained from taking on new loans.
- TotalEnergies recorded a 20% rise in its borrowings, increasing from N84.5 billion at the start of the year to N101.5 billion by September. The increase was attributed to rising interest rates on the company’s overdrafts. TotalEnergies spent N161.6 billion on debt repayments, while taking out a new loan of N133.2 billion during the same period.
- Conoil saw a significant reduction in its borrowings, which dropped by 62% from N32 billion at the beginning of the year to N12.3 billion by September 30, 2024. All of Conoil’s borrowings are bank overdrafts, which are subject to variable interest rates.
- Eterna Plc took on new loans of N117 billion, but also repaid N138.4 billion in debt. The depreciation of the Naira led to an additional N13.4 billion liability for Eterna, causing its total borrowings to decrease by 1%, from N43.2 billion at the beginning of the year to N42.7 billion by the end of Q3.
Rising Debt Levels Reflect Broader Economic Pressures
The surge in borrowings across Nigeria’s oil and gas sector highlights the broader economic challenges facing the industry. The Naira’s depreciation against the US dollar has raised the cost of servicing foreign-denominated debt, while the Central Bank of Nigeria’s interest rate hikes have increased borrowing costs across the economy.
Analysts have expressed concerns that continued debt accumulation, particularly in the foreign currency space, could strain the financial health of oil and gas companies in Nigeria. While some companies, like Oando, have managed to secure additional financing, the rising cost of debt servicing could limit the sector’s ability to invest in growth and expansion, especially as the Nigerian economy faces macroeconomic headwinds.
Looking Ahead
The outlook for Nigeria’s oil and gas sector remains uncertain, as the combination of rising interest rates, exchange rate volatility, and the global oil market’s unpredictability continue to weigh heavily on the financial health of the industry. Companies will need to manage their debt profiles carefully to avoid potential liquidity crises, especially if the Naira continues to depreciate or if interest rates rise further.
As Nigeria’s oil and gas sector faces these financial challenges, attention will be focused on how companies navigate their borrowings, manage foreign exchange risks, and maintain profitability in a volatile macroeconomic environment.