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Alternative financing powers up in Nigeria

A business manager has two main decisions. On the one hand is how to start or grow and improve the performance of her business. This may include acquiring or expanding the business with investment in new assets or investment in initiatives that increase revenue or reduce cost. This, in Corporate Finance 101, is known as the investing decision. On the other hand is the – sometimes even more important – financing decision. In other words, how she pays for all this.

In the wake of the commodities price crisis, which started mid-way through 2014 and which has not fully been cured, financing decision making has been a major headache for managers, and even owners, of businesses in affected industries. This is particularly poignant for the oil and gas industry, as well as general mining industries, especially in countries like Nigeria.

Against the backdrop of the oil price crisis, which stretched till mid- to late 2016 and the recovery from which can still be considered weak to date, access to finance has become one of the key challenges faced by many industry participants, especially the indigenous, mostly mid-cap/independents in the E&P upstream sector. For this segment, financing challenges could be seen in two prongs. The first is the need for refinancing of existing obligations, comprising mostly debt exposure to local commercial banks. The second is financing requirements (for those who could even consider such opportunities) for acquisition of new assets and development of ones already owned.

Click here to read more about The Oil and Gas Year’s interview with our Managing Director, Diekola Onaolapo.

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