The African Export Import Bank (Afreximbank) has announced a $5 billion financial commitment with the Nigerian National Petroleum Corporation (NNPC), enabling the Corporation to kickstart investment in Nigeria’s oil and gas sector. With the NNPC looking to expand its upstream portfolio, the funding will be critical for the Corporation as it steps up investments in new and strategic prospects.
The NNPC has set clear targets for upstream developments, of which a few include increasing revenue for the country and investing in strategic upstream oil and gas producing assets. With the Corporation’s funding strategy aimed at raising between $2.5 billion and $3 billion to fund upstream investments, the commitment by Afrieximbank is significant.
Following international oil company divestment from oil and gas assets and production declines at mature fields across the country, the Nigerian government has reaffirmed its commitment to spurring investment and development in Nigeria. With the implementation of the Petroleum Industry Act (PIA) in 2021, the country has not only outlined a clear strategy for sectoral development, but made a strong case for investment through the implementation of attractive terms and ensured transparency.
The financial commitment made by Afreximbank serves to promote the effectiveness of the PIA, while at the same time representing a step in the right direction for African oil and gas investments. With international financial institutions are reducing capital expenditure for fossil fuels projects, countries such as Nigeria – with over 36 billion barrels of oil and 200 trillion cubic feet of natural gas – stand to lose out. Accordingly, the role of African financing institutions has been emphasized, with entities such as Afreximbank having a critical role to play.
“This commitment is a step in the right direction for Nigeria. This level of commitment not only reaffirms the potential of the country’s upstream sector, but emphasizes the capability of African financial institutions. However, this is only the beginning, and a lot more needs to be done to ensure the continent fully exploits its immense resources,” states NJ Ayuk, Executive Chairman of the AEC.
In addition to the financial commitment, the NNPC and Afreximbank have agreed to explore the idea of an African Energy Bank, recognizing the role African financing institutions will play in expanding the continent’s energy sector. Having agreed to work collaboratively on establishing a pan-African bank, the two entities have demonstrated their commitment to Africa’s oil and gas future.
The value of an African Energy Bank cannot be overstated. There is a need to cultivate a pool of investors who understand and appreciate the importance of oil and gas to Africa. Capital from foreign countries and companies will always be welcome, however regarding oil and gas, it isn’t reliable. Therefore, through institutions such as the African Energy Bank, local oil and gas companies will be able to boost new and existing project developments; ensure reliable financing channels for oil and gas; and position the continent as a net exporter of hydrocarbons, all while creating critical capital opportunities for renewable energy projects.
Afreximbank itself represents an important institution in Africa’s energy sector, serving as a valuable partner for oil and gas companies across the entire continent, as demonstrated through the $5 billion commitment for the NNPC. Having been a diamond sponsor for last year’s edition of African Energy Week (AEW), Afreximbank will drive the discussion on the role of African financing institutions during the 2022 edition of AEW. The event serves to promote the achievements and future objectives of Africa’s energy sector, and has placed financing oil and gas as a key topic in the program agenda.