A Review of the Nigerian Energy Industry

Nigeria: Banks recommit to power sector development

Executive Director of FCMB Capital Markets, Mr. Tolu Osinibi.
Executive Director of FCMB Capital Markets, Mr. Tolu Osinibi.

17 July 2015, Lagos –  Six financial institutions on Wednesday expressed their commitment to the development of Nigeria’s power sector by signing a $445 million senior debt facility for Accugas Limited.

The banks that provided the facility were United Bank for Africa Plc, First City Monument Bank, FBN Capital, Ecobank Nigeria, Union Bank Plc and FirstBank UK.

Accugas is the indirect wholly owned subsidiary of Seven Energy International Limited, an independent Nigerian integrated oil and gas exploration, development, production and gas distribution company. The firm would use the funds for the purposes of refinancing its existing facilities and to support additional medium-term capital requirements. This will enable Accugas achieve its objective of satisfying the growing energy demands from power plants and industrial users in Nigeria.

Speaking on the sidelines of the agreement signing ceremony for the facility in Lagos, the Executive Director of FCMB Capital Markets, Mr. Tolu Osinibi, described the investment to be made in the gas infrastructure by the firm as very critical, saying that would have a positive impact on the Nigerian economy.

He said despite the challenges in the economy as well as the global markets, banks would continue to support credible firms.

“Nigerian banking industry is not immune from the wider economic challenges. I think it is very clear to us today what is going on in the country. The currency, especially because the energy sector is largely funded in US dollars. I think we are all aware of what is going on with exchange rate and liquidity for foreign currency financing. So, the banks are limited in what they can do.

“So, while it seems like the bank’s ability to support is reduced, it is a function of what is going on in the economy. We are not immune from that. But this deal shows that with very good transactions that are important, with sponsors and clients who know what they are doing, banks will be willing to support.

“The ability to support may be reduced, but we are still actively looking for ways to support our clients that are making impact. So, we must realise that the market environment is now a difficult one,” he explained.

Also, the Chief Executive Officer of Seven Energy, Mr. Philip Ihenacho, said the facility was Accugas’ fourth financing, saying that the deal showed the level of confidence the banks have in the gas sector.

“For Nigeria to be able to develop domestic gas infrastructure to solve the problems of the power sector, we need to mobilise capital. This deal would help improve the power sector. We are currently supplying gas to about three power plants in Nigeria. Financing like this that allows Accugas to continue to develop is very important for the economy,” he added.

The Managing Director of FBN Capital Limited, Kayode Akinkugbe said the successful signing of the financing deal showed that lenders see the Accugas business as a catalyst for economic development in Nigeria.

*Obinna Chima – Thisday

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