Lending to oil sector 'risky' - Amoabeng

Oil Rig@jubilee File photo

Tue, 30 Aug 2016 Source: classfmonline.com

Founder of UT Holdings, Prince Kofi Amoabeng, has advised the banking sector to be cautious in lending to importers of oil and gas describing the sector as risky.

Banks are having to deal with non-performing loans partly due to the failure by importers including state-owned Volta River Authority (VRA) and Tema Oil Refinery (TOR) as well as some oil marketing companies to pay back loans in time.

Speaking to Class Business, Mr Amoabeng said price fluctuations and currency instability make the petroleum sector a risky area and, therefore, advised banks to exercise a lot of caution in financing the sector.

“It is always risky lending to the oil sector. Prices are volatile, profits can shift, and it also involves foreign exchange and, therefore, if the central bank does not hold the conversion rate stable and it keeps running, you will realise that when you bring the products in, it takes you time to sell and make the cedis available to acquire the foreign exchange. But if the cedi is losing value against the dollar at a fast rate, by the time you finish selling and mobilise the cedis to acquire the dollar, you would have made a loss, so it’s naturally a risky place to go,” he stated.

“So, with the banks, we now have to adopt a position where we mitigate those rates – the foreign exchange rates, the profit rates and the rates in price fluctuations that you have to do to stay in that platform, but it’s a huge sector I don’t think banks can neglect but have to go in carefully,” Mr Amoabeng said.

Source: classfmonline.com
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