Mr. Funso Akere, Chief Executive of Stanbic IBTC Capital
The Stanbic IBTC Capital is the investment banking subsidiary of Stanbic IBTC Holdings PLC, a member of Standard Bank Group. IBTC Capital is the leading bank offering financial support to the energy sector in Nigeria, doing all sorts of assistance such as structural funding arrangement. The company can assist in solving financial needs with array of experts in 22 countries in Africa and has its presence in leading financial centres across the world.
The Chief Executive of Stanbic IBTC Capital, Mr. Funso Akere made it known that the bank can solve all financial needs of companies wishing to seek fund from it especially the energy sector.
Revealing to participants at the Energy Sustainability Conference in Lagos that upstream financing cuts across gas, power and renewable. These three sectors are incredibly important for a country like Nigeria with future prospects and growth.
Akere said broad spectrum of financial options across the oil and gas value chain includes upstream, midstream and downstream. Debt funding for exploration risk has to be funded out of equities. The hurdle must be crossed in development and production stages. There are host of funding options depending on maturity as an oil and gas company.
In terms of midstream and downstream, equity is demanded. “If the company expands with customers there are range of funding options and the most liberal form of financing is through capital market and bonds.”
The Stanbic IBTC Chief Executive was of the view that liquidity pools available to an energy company is enormous. Nigerian banks could fund naira and dollar tenure for about seven years with price sensitivity because it cost money to raise dollar financing project in Nigeria due to constraints.
Thus, regional banks are focused on Africa with similar tenure for funding. They balance both local expertise backed-up with international knowledge or reach and can fund in dollars with cheaper sources of funding than Nigerian banks. International banks have much cheaper sources of funding than local banks because they can tap into political arena like the US. They issue bond with relatively low rates. In the past this use to be the cheapest sources of funding but presently, international banks demand for premium. They can fund projects for more than fifteen years.
Akere pointed out that Chinese funding into Africa relative to GDPs of countries, Nigeria is at the bottom, the lending could have been an opportunity for energy companies but at disadvantage due to the ranking. It means the country should get its acts together to get fund from international sources. The Chinese play a long game and it takes a while for them to get an understanding of the risk and appraise it as a long-term opportunity before approving capital.
Banks consider various aspects in business before they finance the energy sector. For upstream, they want to know where the asset is located, are there multiple export routes? Who are the sponsors including their history? Are there multiple assets so that cash flows are not tied to one asset? Is the licence expiring, among other significant considerations.
The financial executive said midstream sponsors are significant and number of things are also considered in raising fund. For instance, does the company has capacity to receive USD? How strong is the uptake contracts? Does it have requisite requirements?
There are issues on board considerations, political, regulatory environment, security, commodity price and technical operations. The player must be able to drive efficiency from the asset which transcends oil and gas, power, energy infrastructure.
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