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Nigeria’s inability to attract sufficient financing for major oil and gas projects stems not from a shortage of resources but from uncertainty over investment terms, project execution and guaranteed markets for output, NLNG has said.
Managing Director and Chief Executive Officer of NLNG, Mr. Adeleye Falade, stated this in Abuja at the 32nd Nigerian Economic Summit during a panel session titled, “Unlocking Nigeria’s Oil Potential: The Push for More Oil”.
The company said investors and lenders must be confident that contractual agreements will be honoured, projects will deliver as planned and buyers will be available to purchase production before committing billions of dollars to capital-intensive energy developments.
He cited the financing of NLNG’s Train 7 expansion as evidence that investment certainty, a proven delivery record and credible commercial agreements could unlock substantial funding, even under challenging global economic conditions.
Falade explained that projects requiring huge upfront capital and 20 to 30 years to recover investments depend on confidence that the terms underpinning them will remain stable throughout their lifespan.
According to him, lenders assess not just the quality of an oil or gas resource but also the durability of the investment framework, the predictability of future earnings and the capacity of project sponsors to meet their obligations.
Falade pointed to the $3 billion in external financing secured from 31 local and international financial institutions for Train 7 in 2020, at the height of the COVID-19 pandemic, as proof of the importance of a credible investment proposition.
The project is being financed through a combination of internally generated cash flows and external funding, underpinned by NLNG’s record of developing six operating trains and repaying the loans used to finance their construction.
He said that track record gave lenders tangible evidence of the company’s capacity to execute complex projects and honour financial commitments, reducing the uncertainty that often discourages investment in capital-intensive developments.
He noted that each successful expansion strengthened NLNG’s credibility and positioned it to secure subsequent financing on more competitive terms.
He identified three fundamental questions that lenders seek answers to before financing major energy projects: “Who buys the product? Who carries the risk? Who stands behind the project?”
For NLNG, he said, long-term sales and purchase agreements, some spanning 20 years, provide the commercial foundation required to secure funding before a final investment decision is taken.
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Such contracts give lenders greater visibility into future revenues, allowing projected production to be translated into anticipated cash flows against which financing decisions can be made.
Falade also stressed the importance of allocating risks to parties best equipped to manage them, explaining that buyers are better positioned to manage market risks, while the company and its contractors assume responsibility for technical and operational risks.
He added that operational reliability was critical to sustaining lender confidence, citing an improvement in NLNG’s plant utilisation to 81 per cent year to date, after operating at about 60 per cent for approximately two years because of feedgas constraints.
The recovery, he said, demonstrated the plant’s ability to deliver improved output when adequate gas supplies were available, reinforcing the relationship between feedgas availability, production reliability and predictable earnings.
Beyond financing and production, Falade said major energy investments must also create lasting opportunities for Nigerian businesses by deliberately developing local industrial capacity, rather than measuring participation solely by the amount of money spent domestically.
“Capability has to be deliberately built into what you do,” he said.
He cited the construction of NLNG’s six vessels, during which Nigerian manufacturers supplied products including furniture and cables. Some of the suppliers subsequently secured business with the overseas companies involved after completing their initial contracts with NLNG.
According to him, the experience showed how participation in major projects could help Nigerian companies gain access to international supply chains, develop technical expertise and win business beyond the domestic market.
He said the next priority should be to deploy those capabilities across subsequent projects, enabling local suppliers to deepen their experience, undertake more complex assignments and compete more effectively in global markets.
Falade urged policymakers to provide an enabling business environment that would support the growth of local companies and ensure that capabilities developed through major energy projects were sustained and expanded.
The discussions at the summit highlighted the need for Nigeria to move beyond its resource endowment and build the contractual certainty, commercial structures, operational reliability and domestic industrial capacity required to attract long-term capital into the oil and gas industry.
