How Nigeria's downstream sector can close funding gaps

Nigeria's oil and gas sector is undergoing discussions on how to close funding gaps in the downstream oil sector. Stakeholders believe that establishing an energy bank could be a potential solution to facilitate the funding of productive ventures in this sector. Gbenga Biobaku, a Partner at Gbenga Biobaku and Co, shared insights on the importance of this initiative and the challenges faced in attracting funding in the downstream sector. Biobaku highlighted the existing initiative for the upstream sector, where the African Petroleum Producers Organization is working on setting up an energy bank with a $5 billion fund to support upstream projects. He emphasized the need for a similar approach for the downstream sector, as obtaining funding from commercial banks is difficult and expensive due to high interest rates. Biobaku suggested that establishing a development institution supported by the government could unlock investments and drive growth in the downstream sector. However, he acknowledged the challenges in expecting the government to solely fund such projects, indicating that a collaborative effort is essential to address the funding gaps effectively. Biobaku pointed out that the downstream sector faces difficulties in attracting funding due to price issues, subsidies, exchange rate challenges, and the need for a more free-market operation. The operationalization of refining companies like the Port Harcourt Refining Company could marginally reduce the pump price of petrol in the medium term. Biobaku underscored the importance of increasing competition in the refining space through modular refineries to further drive down prices. Despite the progress seen in the market since the implementation of the Petroleum Industry Act, Biobaku noted that more incentives and a stable regulatory environment are necessary to make the sector more attractive for investors. While the PI has laid out rules and regulations, additional fiscal incentives and market stability are crucial to ensure investors can achieve returns on their investments. Despite some progress, attracting investors to the downstream sector post-PI implementation has not met initial expectations, indicating the need for further enhancements to boost investor confidence and drive sustainable growth.