Raising Finance Amid Political and Energy Transitions

At the eleventh Energy and Finance Forum of the energy think-tank, Centre for Petroleum Information (CPI), speakers and participants reached a consensus that both Nigeria’s ongoing political transition and the longer-term energy transition would impact on raising finance for the energy sector. Whether the impact would be adverse or not would very much depend on the dexterity of managers of the transition and the policies adopted.

Event chairman, Dr. Olisa Agbakogba raised several questions in his opening remarks. He noted that given that the country is currently “technically insolvent,” where would the money to pursue Net Zero 2060 come from?

He commended NNPC Limited for attending and speaking at the Forum. He rhetorically asked: Is NNPC Limited the chameleon it promises to be? Will the structure achieve the objective?

CPI Board chairman, Engr. Afolabi Oladele in his address of welcome considered the Forum timely. It came at atime the global financial markets are in turmoil as major banks are facing insolvency issues in America and Europe, with dire consequences for raising finance internationally. For Nigeria, the increasing sovereign risk reflected in its recent CAA1 Moody’s rating, some seven notches below investment grade, is a matter for concern.

Keynote speaker and Chairman AA Holdings, Austin Avuru, who is Deputy Chairman of CPI speaking on the topic: “As political and energy transitions intersect, implications of industry financing,” lamented Nigeria’s steep decline in oil and gas production and reserve addition over the last decade and the adverse impact is has had on the national economy.

Capital expenditure (CAPEX) in the industry has slid by $20 billion annually to about a quarter since 2019. A three-fold boost is required is Nigeria intends to sustain its typical two million barrels per day production. The statistics as they stand are pathetic: Nigeria’s oil revenue was only 27 per cent of the 2019 target and despite signature bonus and renewals in 2020, oil revenues were only 44 per cent of the target.

Avuru raised three posers: (1) How do we as a country manage the Energy Transition without hurting the domestic economy? (2) Who replaces upstream the retreating international oil companies (IOCs)? and (3) Where is the economic policy readjustment to tap Energy Transition opportunities and promote energy security? He concluded that government policy should ensure a shift from the current “collector” mode to “enabler for business” mode.

Chief Finance and Investor Relations Officer of the NNPC Limited, Adedapo Segun provides insight into ongoing changes at the new NNPC making it profitable and fit to attract investment. He outlined the four steps in the journey to become a “leading global energy company” from 2028. He extensively discussed NNPCL’s three mandates: profitability, energy security and future proofing. We have “embarked on capital market readiness process subject to shareholder decision.”

Partner, Sustainability, PwC Nigeria, Rukaiya El-Rufai stressed the importance today of meeting Environmental, Social and Governance (ESG) requirements, for entities in the energy sector hoping to raise meaningful finance.

There has been a 25 per cent increase in global energy transactions in 2021, she noted. Africa has made a case for Just Energy Transition. Nigeria’s energy sector must drive the transition to low carbon energy as the country seeks to lift 100 million persons out of poverty while driving economic growth.

The Centre hopes the incoming Nigerian government will recognise the developments outlined by the Forum by pursuing policies that result in a better and prosperous energy sector and country.





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