The Vice President and Head, Energy and Natural Resources at FBN Capital Limited, Rolake Akinkugbe, has stated that local sources of finance have gained in popularity over the past decade as African banks have been better capitalised to take advantage of new opportunities in the oil and gas sector.
She shared this view as part of an expert panel reviewing current trends in African Oil and Gas Funding at the just concluded 2015 Oil Council Africa Assembly which held in Paris last week.
While examining the profile of projects corporate and investment banks are currently lending to, as well as the impact of the oil price plunge on the ability of these banks to lend to the sector, she emphasised that the new price environment has had an impact on the terms and structure of funding that have become available to oil and gas companies and projects.
According to her, “The price shift is forcing renewed policy focus on those parts of the oil and gas value-chain that create the greatest economic dividends in terms of contribution to inclusive economic growth. The implementation of such policies would have to be balanced with the need to keep Direct Foreign Investors (DFI) incentivised.”
Highlighting the challenges with achieving this balance from a sector finance perspective, she said “sector exposure limits and tight regulation, combined with the challenging oil price environment, have ushered in a more moderate risk appetite within Africa’s banking community.
“Often, their foreign counterparts try to offer more competitive rates for deals. In response however, local African banks are collaborating much more in order to build their pool of funds and match value so as not to lose too much market share to foreign banks”.
She summarily stated that emphasis on the value-add benefit of oil and gas projects goes hand in hand with governments’ push to demonstrate the benefits of the energy sector to the broader economy. In any case the capital requirements of such infrastructure-related projects are often more than local banks can handle by themselves.
The Oil Council Africa Assembly is the most senior and influential network of oil and gas executives in the world. It brings together top government officials, national and international oil companies, independent exploration, and production service companies, industry top players, investors, financial institutions and private equity firms to exchange ideas and also showcase available opportunities.