SONARA crisis: COBAC suspension of outstanding bank loans in Cameroon?

The Central African Banking Commission (COBAC) warned that the suspension of the activities of the National Petroleum Refinery Company (SONARA) has strongly influenced by the non-payment of debts in Cameroon.

In fact, the fire completely destroyed units 10 (atmospheric distillation), 30 (fractionation and stabilisation of essences), 40 (fractionation of vegetable and buspo gas, domestic gas) and 70 (process water treatment) , the refinery, paralysing its activities. As for units 20, 50 and 100, the analysis equipment, laboratory and offices were partially damaged.

An analysis after the accident that hit the company on 31 May, which damaged the processing chain of the country's only refinery, reducing the national production capacity of refined hydrocarbons to zero, shows that the volume of arrears in Cameroon's banking system will increase.

"The estimated gross loans granted to SONARA was CFAF 119.3 billion as at end-April 2019, representing 3.3% of the total loan volume. Assuming that SONARA is unable to meet its financial commitment due to the suspension of its activities, despite depositing about CFA francs 87 billion as at end-April 2019, mainly for urgent cases, the volume of arrears in the Cameroon banking system would be 19.6% against 16.2% as at end-April 2019," the Commission said.

COBAC's analysis is not reassuring for a sector where debts to commercial banks in Cameroon in 2016 amounted to 489 billion CFA francs. Thus, with 106 billion CFA francs of unpaid debts in the microfinance sector in 2017, Cameroon concentrated 79% of all CEMAC's non-performing loans at the time.

According to COBAC, the suspension of the country's main refinery, with a refining capacity of 2.1 million tonnes of crude oil per year, has an impact on the stock of bank loans in Cameroon. SONARA's management decided to suspend contractual obligations after four of the company's 13 production units burnt down.

The disaster suffered by the Sonara company comes as the State of Cameroon plans to contribute financially to the rehabilitation of its damaged units. The bill would reach FCFA 300 billion. Created on 24 March 1973, Sonara has a capital of FCFA 32,540 billion.

In 2010, an extensive modernisation and expansion project was started with the aim of increasing the refinery's production from 2.1 to 3.5 tonnes of crude oil per year. The disastrous fire on 31 May 2019 unfortunately stopped phase 2 of this major project.

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