When the conversation turns to financing options for natural gas distributors, particularly how smaller distributors can finance growth in response to rising market demand, there’s always a temptation to reach for the word “innovation” first.
But the answer lies mostly in tried-and-tested approaches many operators have overlooked, even though they remain highly effective in today’s market.
Although it’s not a popular option, regular balance sheet funding still works. Using the assets you already hold as collateral to secure funding you repay over a sustained period remains a dependable way to secure funding.
An emerging pathway is the rise of blended finance, where public or philanthropic capital is invested alongside private sector capital, with the former helping to absorb risk for the latter. Blended finance exists to attract additional private capital by covering early losses, de-risking investments, or funding initial technical costs that would otherwise make a project too risky.
In Nigeria, we’re already seeing this take shape. Government agencies are investing early, often below market rate, which opens the door for private investors to follow. Climate funds are also entering the picture, increasingly viewing gas as a transition fuel that displaces significant fossil fuel usage, and in doing so, helping to attract the commercial capital needed to drive this growth.
For existing players already generating revenue, asset-based financing tied to cash flow offers another route. Current receivables and long-term customer contracts can be assessed and used to secure funding for scale, based on the strength of that guaranteed cash flow. As long as those assets keep generating income and the cash flow stays constant, so does access to capital.
A third pathway worth considering is partnering with Original Equipment Manufacturers through an equipment-for-equity swap, which softens the initial capital burden considerably. Whether it’s equity for a truck or equity for processing equipment, these arrangements are unusual, but they can be genuinely impactful when structured well.
Moving now into what I’d consider true innovation: the case for building dedicated vehicles around license execution. Distributors holding exclusive licenses to certain regions, or building out facilities to drive distribution across a territory, don’t have to run those assets under their existing corporate structure. Instead, they can create Special Purpose Vehicles that ring-fence both the licensing and the capital tied to it. This should become a far more common option, because it is often better to split equity and own a genuinely valuable piece of something than to own the entirety of an asset you’re struggling to commercialise alone.
A final note, not on financing innovation, but on an important policy gap that directly undermines all of the above.
The Pioneer Status Incentive, which offered qualifying natural gas businesses a 3–5 year tax holiday, has now been replaced by the Economic Development Tax Initiative. Under the new regime, qualifying companies receive a 5% annual tax credit on qualifying capital expenditure in designated priority sectors. Gas transportation, distribution, and supply are all included as qualifying sectors, but the capex threshold is set at ₦100 billion.
This is a disservice, as it effectively locks out small and medium-scale operators who need this incentive. It also calls for deeper reflection when assessed against the qualifying threshold for coal mining investment, which sits at ₦10 billion.
A policy environment that makes it easier to qualify for incentives in coal than in gas runs directly counter to the broader pro-gas transition agenda Nigeria is actively pursuing, and it should concern anyone serious about Nigeria’s energy future.
In the end, while there are multiple routes to financing gas distribution, the real innovation isn’t only in chasing what’s new; it’s in revisiting what already works.
John Kadiri is the MD/CEO at Alpha Maxvalue Energy & Renewables Ltd and the Executive Secretary of the Association of Local Distributors of Gas
This is the concluding note from my participation in the Nigeria Oil and Gas Outlook 2026 organised by Africa Energy Series, where I contributed to a panel alongside Chijioke Uzoho, MD/CEO, Gas Aggregation Company Nigeria Limited; Engr. Chichi Emenike FNSE, MCIoD, Ag. Managing Director & Gas Asset Manager, Neconde Energy; Pade Durotoye, Managing Director, Savannah Energy; Sumeet Singh, CEO, Powergas Nigeria; Ayo Salami Partner & Head of Natural Resources, KPMG West Africa and moderated by Amel Grabsi, Regional Director, Gas for Africa.