By Clara Nwachukwu
The surest way indigenous oil and gas operators or any company operating in Nigeria can continue to have support from the banks is by instituting a culture of good corporate governance, while also pooling resources together.
The Executive Director, Oil & Gas, Access Bank Plc, Mr. Elias Igbinakenzua, gave the charge last week, while speaking with journalists on the sidelines of the Nigeria Oil and Gas, NOG 2015 Conference & Exhibition, which ended last week in Abuja. Igbinakenzua, who spoke on a variety of issues insisted that this is the only way for operators to sustain participation for a long term for their businesses and enjoy financial support for their projects and developments from the financial institutions.
He said, “You must have good governance. This will help to determine how to organise your activities, what risks to take on and how to mitigate risks. A player cannot attract the bank’s attention if he does not have a structure that is observed and examined as transparent as well as operating in line with global best governance.
“So, we think that for our local players that want to grow big, they must embrace good governance. We have done that for a number of players; we have actually tried to make them to understand the need for governance. We have also called external parties to assist them to put the right structure in place and have good governance. This form of assistance by Access Bank has encouraged a good number of indigenous players. It is not about coming to borrow, but when they come to us, we help put to their companies to follow good steps as a player for the long run.” He noted that although the Nigerian banks now had the financial muscles to support local oil and gas industry operators for up to $10billion last year, they still must exercise some caution in the volume of support they can give. He said that this has become even imperative now following the Central Bank of Nigeria, CBN’s recent directive to banks on their exposures to the industry in order not to overheat the financial services sector.
He recalled, “The CBN during the last quarter of last year issued a circular that banks total loans for the Oil and Gas sector should not exceed 20percent of their portfolios. Before then, the policy was that a bank could finance 20percent downstream, 20percent midstream and 20percent upstream. And because the circular was issued towards the end of the year, virtually all the banks could not comply with that policy. The CBN had to suspend the policy for now.
According to him, “What I was trying to say is that sometimes things are allowed to happen by God because they will teach you a lesson that you need to learn. We are too dependent on oil as a nation. Like I said, the whole of Africa have only 8% of the global oil reserve and Nigeria has 2.25% of that reserve. So, why should that 2.5% be our sole focus? It should be one of our resources; we should have a way of having a broad income sources for the economy.
“It calls for a rethink. For instance, to say that we are too reliant on oil, let us think of Agriculture and other areas where revenues can be earned as a nation. That way we are better for a long run as a nation. So, to that respect the slide in oil price is a blessing in disguise.”