By Clement Olumba
Financial experts have cleared the misconception of investors over their seeming unwillingness to invest in the downstream sector of the country, stating that it is rather the lack of integrity among other factors on investors path that has led to the sector being denied of financial support in terms of investment required.
Speaking on the theme –‘Financing for downstream trading and infrastructure projects’ at the Oil Trading and Logistics Africa Downstream Conference 2017 at the Oriental Hotel, Lagos, the Managing Director of Fidelity Bank Plc, Nnamdi Okonkwo identified lack of proper structure, failure to honour loan repayment agreement and diversion of funds alongside the lack of integrity as some of the major challenges towards financing the downstream oil sector in Nigeria.
He stressed that where these factors are effectively dealt with, the bank will certainly finance the sector and maintained that as enablers of proper investment, the banks need structured financing for the downstream sector, stating ‘’ that there is no project the banks cannot finance.” He further stated that with liquidity challenges in the system, there is every need to safe guard depositor’s funds.
On his part Head of Energy Research of Ecobank Plc, Dolapo Oni stressed the importance of proper financing of the sector while pointing to the challenges facing the downstream on outstanding payment to marketer’s worth over $2bn. He explained that despite the challenges, the downstream financing needs are huge, which includes: Refinery expenditure over the next five years which is over $5bn, excluding the ENI and Dangote Refineries, repairs to NNPC depots and inland tank farms, LPG/Aviation fuel storage, distribution network expenditure on pipelines, railways and dredging of tributaries to enable vessel distribution inland, cost of running petrol stations is also an issue.
Oni while calling for proper restructuring of the sector to encourage financing, he cautioned that banks need to examine the entities looking for funds as depositors funds cannot be risked, adding that corporate governance is a major requirement and full sector deregulation could ease financing burden for segments. He concluded by calling for creative financing structures: which include but not limited to Integration with upstream players (M&A opportunity), Private Equity/Mez Capital, Listing on equity exchanges, Diversifying business risk like using LPG, solar.