Financing options in the oil and gas sector in Nigeria, 2015

Financing options in the oil and gas sector in Nigeria, 2015

Published in the Journal of Energy & Natural Resources Law, 2015
Volume 33, Issue 3, 2015

pages 218-240
Contributors: Osayaba Giwa-Osagie & Emwanta Ehigiato

ABSTRACT

This article examines the financing options in the oil and gas sector of Nigeria and acknowledges the important role of oil and gas to the Nigerian economy in terms of generating the bulk of government revenue, which is estimated to be over 70 per cent of the total revenue. It also identifies the regulatory framework for the oil and gas sector and captures the various forms of financing and securities taken by major financiers like local and foreign banks, as well as international financial institutions.

This article is necessitated by the various challenges besetting oil and gas financing in Nigeria, such as the technicalities and the substantial capital outlay required for such financing, the sabotage of oil and gas equipment and installations, which may jeopardise the collateral securities taken by financiers, the relatively low knowledge of the concept of reserves-based lending, which accepts ‘oil in the ground’ as collateral, lack of equity contributions, high cost of security documentation, the rigorous process of achieving a change in control arising from investment in the sector and the reluctance of foreign banks to fund oil and gas projects in Nigeria due to the attendant high risk. This article highlights the role of lawyers in oil and gas financing in Nigeria and concludes that there has been an increase in oil and gas financing in Nigeria over the years and proffers solutions aimed at meeting the financial needs of the sector.

 
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