Positioning the Nigerian Capital Market for PIA Gains | The Guardian Nigeria News

August 16, 2021 marked what has been described as the end of several years of uncertainty and stagnation in the oil industry. The Petroleum Industry Act (PIA) was enacted by President Muhammadu Buhari.

Nigeria has been on this path for 20 years, but the recent signing of the PIA promises to reform and modernize the regulatory and operational framework. The PIA has introduced several changes in the administration of the industry, its licensing regime and its overall tax framework.

The US Energy Information Administration estimated Nigeria was losing more than $ 15 billion a year due to the delay in adopting the PIA. Despite the delay in enacting the bill, the organized private sector (OPS) and the capital markets community believed that the development would galvanize the growth of the oil and gas sector with a multiplier effect in the capital market.

At the recently concluded 25th Annual General Meeting of the Chartered Institute of the Stockbrokers (CIS) in Lagos, attendees said the new law has the potential to end decades of uncertainties about the future of Nigeria’s oil and gas industry by providing a strong legal framework that would support the reforms needed to position the industry as an investment hub that can attract investors from around the world.

They said the emergence of a more structured industry would provide a level playing field that could attract massive foreign direct investment (FDI) into the country, promote competition that could result in a more efficient system, product choices and lower prices in the long run.

According to them, the result of the repositioning was to trigger fundraising activities in the domestic market and boost the main market segment of the exchange.

Partner, Energy & Natural Resources Tax KPMG Nigeria, Wale Ajayi asserted that the PIA would present significant investment opportunities for regional and international stakeholders, especially at a time when the global energy sector is particularly competitive for foreign capital. .

Ajayi pointed out that this offers greater opportunities for the capital market as oil and gas players, who seek to maximize the gains from deregulation, are likely to approach the equity and fixed income market for raise funds.

He expressed optimism that the adoption of GDP would have a positive impact on the national economy as well as the capital market by attracting both institutional and retail investors as well as local and foreign issuers to the market. capital market.

He said this in turn would provide the necessary funding both on a bridging basis (bridging) and long term, thus making the capital market a real part of the financial system that contributes to economic growth and development.

According to him, due to the challenges of the environmental, social and governance (ESG) agenda, it has become increasingly difficult for oil and gas players to raise funds for oil investments in mature markets.

Environment, Social and Governance (ESG) is a method of analyzing and reporting on how a company serves all stakeholders, including workers, communities, customers, suppliers, shareholders and the environment.

ESG is important for the oil and gas industry, especially as momentum continues to build to promote renewable energy, sustainability and energy transition, as investors, governments and individuals remain focused on issues such as climate change, labor standards, diversity and corporate governance.

Oil and gas companies have been implementing ESG strategies for years through reducing emissions, responsible use and disposal of water, and research and development of renewable energy programs.

The current push to monitor and report ESG programs is seen as an opportunity for oil and gas companies to promote, validate and expand these efforts.

Ajayi argued that local players who fail to meet this obligation will likely look to primary and secondary markets to expand their portfolio, as it would be extremely difficult for them to access capital in the international market.

Therefore, he highlighted the need for the entire capital market ecosystem to be well positioned and take advantage of the opportunities in the Oil Industry Law.

He said: “It has become extremely difficult to raise funds because everyone will be asking you what your ESG program is, so what we expect is that local players will have to expand their portfolio.

“We also know that the international oil companies (IOCs) in Nigeria are pulling out of onshore and shallow waters and if they pull out the local player is independent and will have to make these acquisitions and the money will come from the capital market. “, did he declare.

He noted that while the expected improvements in the overall macroeconomic situation of the country will improve the environment in which the capital market operates, the direct impacts will also come from the fact that more companies in the oil and gas sector will use the capital market for finance their Activities.

Also speaking, Stanbic IBTC’s oil and gas chief Joyce Dimgba said that with the new petroleum law, many institutions that would support clean gas projects, issue green bonds and invest heavily in infrastructure. would see the light of day.

Therefore, she also urged the capital markets community to identify some specific areas that could be used as a stimulus to unlock the potential of the law and grow the economy.

Securities and Exchange Commission (SEC) chief executive Lamido Yuguda said stock brokers need to create innovative and viable financial products that will support businesses, boost market liquidity, and breathe if they were to unleash the potential of PIA.

He argued that the capital market can channel assets into long-term productive investments such as the critical infrastructure needed to unlock economic improvement and improve the standard of living of our citizens.

Therefore, he urged the Chartered Institute of Stockers to ensure that its members continue to uphold high ethical standards in exercising their fiduciary duties as agents of investor confidence.

“So we have to rise to the challenge of working hard and doing whatever we need to to attract investors to the market and engage in strategic discourse and advocacy with policy makers at all levels, to channel funds for the long haul. run towards cost-effective infrastructure based cost recovery.

In February 2021, when the National Assembly ensured the rapid passage of GDP, there was a slight increase in the NGX index for oil and gas. On July 21, 2021, there was a drop because the GDP was expected to be exceeded by then and because that did not happen the index fell. In August 2021, the industry also saw a sustained recovery when the president sanctioned the bill.