Citing Nigeria’s revenue crisis, immediate-past President, Major Oil Marketers Association of Nigeria and Managing Director of 11Plc, Mr. Tunji Oyebanji, has said Nigeria would not be able to float an energy bank that can provide the huge funding needed for high profile oil and gas projects.
Oyebanji’s position is contrary to that of many industry players, especially those in the upstream segment of the industry, who had been advocating for that an energy bank should be established in the country.
The proponents of energy bank say the bank should have the status of Bank of Industry (BOI) or Bank of Agriculture (BOA) arguing that the bank should be able to provide large funding to companies at lower interest rates and with a longer term.
The proposal is coming as a response to the reduction or halting of funding by international bank and non-bank institutions, who are heeding the call by climate change and energy transition campaigners to stop or reduce the financing of fossil fuel projects.
But speaking to THISDAY, Oyebanji said with the kind of funds required to set up such energy bank and considering the state of the nation’s economy, the government will not be able to establish it.
He added that the devaluation of the Nigerian currency, the naira, had further made such energy bank idea unrealistic
He said even the whole capital of some banks in Nigeria cannot be able to fund upstream ventures like oilfield development.
He said, “Don’t forget that our currency has been devalued significantly over the last few years. So, a project that may have required $300 or $400 million a few years back, the naira equivalent has almost doubled.
“In fact, first and foremost, anybody would have told you that all the Nigerian banks virtually need to recapitalise because in dollar terms, they have actually lost a lot of their value because of the devaluation of the naira.
“So, this energy bank you are talking about, is it the government that is borrowing money left, right and centre to even fund the budget that will now have the capital to go and set up a bank whose primary area of focus is investment in crude oil production, refining, all those kind of things that require billions of dollars.”
Oyebanji also questioned the kind of equity contribution such an energy bank would require to operate.
“Does Nigeria have that kind of money today when we are borrowing so much, when we are subsidising everything? So, all these things are interwoven.
“So, I don’t think government is in a position to set up a well-funded energy bank given the current state of the country’s finances,” he added.
On the outlook for the oil sector for 2022, Oyebanji predicted that more attention would be focused on renewable and alternative energy sources partly because many financial institutions globally are not supporting fossil projects again.
He said based on this, it would be difficult to get international banks to support the building of a big refinery like Dangote Refinery or major investments in crude oil explorations.
This lack of funding and waning investments, according to Oyebanji, are part of what is driving the tightness in the crude oil market, as production is no longer increasing.
“Therefore, they are predicting that there will be tightness in the supply of crude which is why the price continues to be on the high side.
“So, these are few issues that I think, from a positive point of view or from a negative standpoint will affect 2022,” the marketer stated.