Financial experts are looking at the institutional capital market in Nigeria, of which Pension Fund forms about two-third at N31trillion as at June 2026 to fund the new generation of oil and gas operators.

They are suggesting a purposeful vehicle that will allow the investment of a sizable percentage of pension fund in oil and gas services.

This came to the fore in one of the panel sessions at the Nigeria Oil and Gas Energy Week in Abuja.

On the discussion themed: Financing the Next Phase of Growth – Unlocking Funding for Africa Energy Projects, moderated by Managing Partner Lagos McKinsey and Company, Peter Gaius- Obaseki, the panelists, comprising Corporate and Investment Banking, Stanbic IBTC Bank, Imoh Umah; MD/CEO, Energy Inc Advisor, Rolanke Akinkugbe – Filani; MD& Co Founder, Argenl Capital Partners Limited, Olumide Ogunfowora; and CFO Aradel Holdings Plc, Adegbola Adesina, reeled out suggestions on how to attract more institutional capitals for services that drive production in the the oil and gas sector.

Rolake Akinkugbe – Filani noted that only one per cent of N31.1 trillion pension fund under management was in the oil and gas sector despite the latter contributing almost 90 percent of foreign exchange (FX) revenues and five percent of Nigeria’s GDP growth.

She described the scenario as a “structural mismatch”, wondering why the biggest of institutional capital did not believe in the safety and security of investment in the oil and gas sector that actually underpins macroeconomic stability.

“So there’s actually a structural mismatch as an economy in that our biggest pool of institutional capital does not believe in the safety or security of investment in the sector that actually underpins macroeconomic stability,” she said.

She noted that most of the assets in the pension fund being invested were short-term for regular distributions.

She mulled the creation of safe-listed regulated vehicle to pull cash-generated oil and gas assets for pension funds’ investment.

“If you look at the assets pension fund are investing in today, they’re short-term, they deliver regular distributions to them. So can you create a safe, maybe a listed regulated vehicle where you pull these cash-generated oil and gas assets, and then you allow pension fund to invest?” she queried.

She said that the focus of her company was to support indigenous firms in their financing

“In the last three years, the industry has seen ownership transition and how funding is deployed and utilised,” she said.

“We’ve had over 500,000 barrels a day worth of production changed hands from International Oil Companies (IOCs) to indigenous operators, and the imperatives are different.

“So the very first point we need to ask and answer is whether the current policy and regulatory framework speaks specifically to their needs.”

Through the Petroleum Industry Act, she said there have been some benefits.

“We’ve also seen how specific aspects of that policy and the directives that have come after it have helped to unlock funding,” she said.

Despite these, she believes that the next frontier for funding these new groups of operators needed will be how to crowd in domestic institutional capital.

She urged operators to really look into this.

She said: “I don’t necessarily think Nigeria has a policy problem from an oil and gas sector perspective because the trajectory is right. I don’t even think we have a capital problem per se. What we have is an allocation problem.

“And the question then is, if we say domestic institutional capital is the next frontier, how can we make it safe, secure, and interesting for domestic institutional capital to fund this new generation of oil and gas operators?”

Another expert, Ogunfowora noted that 60 percent of pension fund is actually invested in credible bonds.

“So you’re not going to change that. But how can you structure your cash flows in a way and manner that is appealing to them?

“We have pension fund managers, they’re professionals, they’re regulated, they’re not just going to put in money. They’re actually quite conservative in Nigeria by the way. Nobody wants to lose their retirement.

“But the point about it is that can you structure a cash flow and assets, a liability, even to kind of meet some certain requirements?” he said.

In as much operators want to attract domestic institutional capital for project, Ogunfowora said there would be a need to be very intentional about some certain things, adding that industry players would have to change their perspectives on how they look at financing.

He said: “It’s not usually a question of how much capital do I need, and can you finance my project?

It’s usually the bigger question. Is this a bankable project?”

Usually, Ogunfowora said the real issue was how to segregate the cash flow to meet the risk-return requirements of different pools of investors.

He pointed out that the germane thing is how to structure the cash flows in a way and manner that is appealing to investors.

He observed that the institutional capital markets in Nigeria, excluding land, is somewhere around N50 to N55 trillion, of which pension fund forms the two-third.

The financial expert suggested the need to work the policies already secured to the point of determining whether they are working or not.

“We need to modify the new things,” he said commenting on the sectoral policies from a banker’s standpoint, Imoh Umah said the recent policies in the sector had been largely very positive.

According to him, most banks looked at risk and also the bankability of projects, pointing out that policies seen so far have been well received by the industry and the institutional investors.

“And you can actually see a number of transactions happening in the market.

We’ve seen quite a few FID deals, and we’ve also seen consolidations, we are seeing a number of merger and acquisition (M&A) deals happening in the market.

“And from the banker standpoint, we’ve seen a number of deals being closed. And then we’re asking ourselves, I mean, we’re looking at the playbook from the international markets, and we’re saying to ourselves, how can we domesticate this into the Nigerian scene, noting how nuanced the market is?”

According to him, the market likes stability and predictability.

On the policies rolled out so far, Umah advised that it has become necessary for the industry to consolidate rather than continuing pushing out more policies, because some of these policies are quite material. The presidential directive, subsidy removal, and the like have material impact on the banking and equity markets,” he said.

Akinkugbe – Filani added that maintenance capital expenditure (CapEx) for oil and gas in Nigeria required a minimum of N25 billion to N30 billion annually, not talk about incremental CapEx IOCs fund on their balance sheets.

She pointed out that domestic players don’t have that level of leverage, noting that a lot of the assets acquired were highly leveraged.

“So you need equity to sort of deliver them. So I think what we need to think about is regular distributions as part of the investment structure.

“The other thing pension fund loves is governance and reporting. So why not take that fund or trust and list it on the stock exchange, so you give liquidity to the unit holders or investees? I think that’s one of the ways to think about it,” Akinkugbe-Filani said.

In Malaysia, she said the officials have taken it further by instituting the Sovereign Wealth Fund to wade in and provide what they called “first lost capital” to de-risk the structure, to then crowd in additional long-term institutional money.

“So I really think we need to look at this very seriously.

“PenCom already allows infrastructure investment; I think up to 20 percent infrastructure bonds, 30 percent for pension fund administrators. So I really think that’s an important one.

“And the final thing I would say in terms of trying to get that capital is really looking at lenders and financiers. One of the things we’re trying to get them to look at is the profile of the operators and as much as the asset itself.

“So the lens of what you typically look at the IOC is very different for your domestic operators. I think that’s another important way you can help unlock the financing,” she added.

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