KEY POINTS
- Oando says operating risks, policy inconsistency and regulatory uncertainty are discouraging foreign lenders from financing African oil firms.
- Neconde Energy says infrastructure gaps and government-controlled gas prices are limiting investment in Nigeria’s gas sector.
- Both executives call for stronger local financing and market reforms to improve investor confidence and unlock energy resources.
Oando Plc has identified operating risks, inconsistent government policies and regulatory uncertainty as major reasons foreign lenders are reluctant to finance African oil and gas companies, warning that the funding gap could limit the growth of indigenous energy businesses.
The company’s General Manager of Corporate Communications, Alero Balogun, said international lenders were increasingly unwilling to provide the long-term financing required by oil and gas projects across Nigeria and the wider African market.
She made the remarks at an industry event organised by energy journalists in Lagos, where industry stakeholders discussed the challenges facing investment in Nigeria’s energy sector.
Balogun said there was a mismatch between the financing required by Africa’s energy industry and the type of capital international lenders were prepared to provide.
Oil and gas projects typically require substantial upfront investment and several years to generate returns. However, foreign lenders are becoming more cautious about financing projects in markets where operating conditions, government policies and regulatory frameworks are considered uncertain.
She argued that these challenges make it harder for indigenous companies to secure the funding needed to acquire assets, develop oil fields and expand production.
According to Balogun, Nigeria must begin building a stronger domestic financial system capable of supporting the energy industry rather than relying heavily on foreign financing.
She stressed that local investors and financial institutions would need to play a bigger role in funding projects if Nigerian companies were to compete more effectively in the sector.
Nigeria needs stronger local financing
Balogun maintained that reducing investment risks and mobilising domestic capital were essential to expanding opportunities for indigenous oil and gas operators.
She said local financing could help companies overcome some of the difficulties associated with obtaining international loans, particularly when lenders are reluctant to commit funds to projects in uncertain operating environments.
However, building such a financing system would require more than the availability of money. Investors would also need greater confidence in government policies, regulatory stability and the commercial prospects of energy projects.
Without these improvements, local companies could continue to struggle to raise sufficient funds to develop assets, even where investment opportunities exist. Meanwhile, Chichi Emenike, acting managing director and gas asset manager at Neconde Energy Limited, said Nigeria’s ambition to build a thriving gas economy would remain difficult to achieve unless the government liberalised pricing and established a commercially viable domestic market.
She argued that gas producers needed confidence that customers would pay prices capable of covering production costs, financing expenses and infrastructure investments.
According to Emenike, Nigeria’s domestic gas market is not yet sufficiently attractive to mobilise the scale of investment required to achieve the country’s Decade of Gas ambition.
She identified inadequate infrastructure and government-controlled pricing as major obstacles to investment.
Although the government has introduced reforms to encourage gas development, she said more changes were needed to make projects commercially sustainable and attract investors willing to commit capital over the long term. Emenike explained that producing and delivering natural gas requires substantial investment at every stage of the value chain.
Companies must finance drilling operations, pipeline construction and processing facilities that separate gas into products such as dry gas, liquefied petroleum gas (LPG) and condensates.
These activities require significant capital, much of which is denominated in US dollars. This exposes operators to foreign exchange risks, particularly when their revenues are earned in naira or when domestic pricing does not adequately reflect their costs.
Nigeria has explored alternatives such as compressed natural gas (CNG) and liquefied natural gas (LNG) to improve gas distribution and reach customers beyond existing pipeline networks.
However, Emenike said these options had not eliminated the sector’s challenges, noting that substantial gas resources remain undeveloped because of funding and infrastructure constraints.
The problem is therefore not simply whether Nigeria has gas reserves, but whether companies can afford to extract, process and deliver the resources to paying customers.
