The Non-Performing Loans (NPLs) of commercial banks is likely to worsen if government fails to stop the illegal trade in the petroleum downstream sector.
According to the Association of Oil Marketing Companies (AOMCs), the development has made it difficult for their members to repay debts due to the low sales.
The caution by the OMCs follows the surge in the illegal sale of petroleum products by unregulated businesses.
“It’s a very dire situation in that if this one continues we will not be able to service our debt obligation as we ought to because we rely on this sale of fuel to generate our revenue. So if the revenue is not forth coming it remains difficult to determine where you could get money to service your debt on a monthly basis,” the CEO of the AOMCs, Kwaku Agyeman Duah said on Business Today.
Already the NPLs of banks have increased by about 36 percent as at February this year 2017.
Some banks have also cited the huge debt burden in the energy sector as reasons for their non performance in recent years.
Mr. Agyeman-Duah further cautioned that the banks would be compelled to shy away from granting credit in order to avert the huge losses.
“It’s a chain reaction to affected banks, the non-performing loans of the banks will also be higher and if we don’t take care we will have our banks recoiling to their old selves as they used to be,” he observed.
The unbridled activities carried out by the illegal traders have made the genuine businesses uncompetitive.
This is largely due to the fact that the products of the genuine companies have been rendered uncompetitive as their products are relatively expensive compared to the illegal ones.
The OMCs have also threatened of job layoffs which are likely to affect at least 4000 employees in the sector.
They have since appealed to the Presidency to intervene after a two day ultimatum to get their concerns addressed