West African banks setting up shop in East Africa to service nascent oil and gas sector

Oil rig in Uganda. PHOTO/Tullow Oil

West Africa’s insurance companies and commercial banks are setting up subsidiaries in East Africa to take advantage of the oil and gas financing skills gap following recent discoveries in the region.

Kenya and Uganda are estimated to have recoverable oil reserves of 2.5-billion barrels, but prospectors and geologists believe the amount will increase as the drilling activities continue, especially in the East Africa Rift Valley basin.

Tanzania has recoverable natural gas reserves of 33-trillion cubic feet, according to data released by its energy and minerals ministry.

East Africa’s insurance and banks have been caught unaware by recent oil and gas discoveries and are struggling to cope financially, and lack skills to benefit from the sector.

In the past year, Ghana Re and Nigeria’s Continental Re have opened branches in the Kenyan capital, Nairobi, with their major focus being the oil and gas sectors.

This month, Nigeria’s GT Bank announced it was buying a 70 percent stake in Kenya’s Fina Bank, again with an eye on oil and gas. Ecobank Kenya (a subsidiary of Nigeria’s Ecobank) also announced it would launch an investment bank in September to finance deals in these sectors.

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