The Chartered Institute of Treasury Management has urged oil and gas companies in Nigeria to enhance their financial management systems and adopt prudent treasury practices to prevent insolvency.

The call follows the receivership of Nestoil Limited, whose Lagos headquarters was sealed after a Federal High Court order permitted creditors to take possession of its assets.

The enforcement, backed by a Mareva injunction, also affected Neconde Energy Limited and its stake in Oil Mining Lease 42, with outstanding liabilities reportedly exceeding $1.01 billion and N430 billion.

Daniel Akeju, a researcher and advocate for treasury policy guidelines at the institute, said in a statement on Thursday that the development had sent shockwaves through the oil and gas sector.

According to him, it exposed systemic weaknesses in treasury governance, liquidity planning, and financial risk management.

“This development serves as a critical warning to operators in a capital-intensive and volatile sector such as oil and gas,” he said.

He explained that, despite the industry’s exposure to global price shocks, disciplined and professionally structured treasury systems remained the foundation of financial stability.

He noted that successful oil companies often maintained rolling liquidity forecasts, conducted scenario-based stress tests, and sustained reserve buffers.

“Ignoring these fundamentals leaves firms vulnerable to price fluctuations, production delays, and cash flow disruptions. Liquidity planning must align with market volatility, or the organisation risks collapse. Sustainable treasury management requires constant debt sustainability analysis, covenant monitoring, and proactive refinancing. When borrowing outpaces cash inflow, insolvency becomes only a matter of time,” he said.

He emphasised the need for treasury functions to report directly to boards and risk committees to ensure proper oversight of funding strategies and exposure management.

“A governance gap allows financial stress to grow unnoticed until it becomes a crisis; that is precisely what happened in this case,” he said.

He explained that receivership was often a last resort, triggered by eroded trust between borrowers and lenders.

“When communication weakens and debt restructuring is delayed, confidence deteriorates. Treasury officers must maintain transparency with banks and investors to preserve trust,” he said.

Mr Akeju also identified a lack of embedded risk controls in the sector, including commodity price hedging, foreign exchange management, and production-linked financial simulations.

“Without these buffers, firms are left at the mercy of unpredictable global forces beyond managerial control,” he added.

He urged oil firms to reposition treasury management as a strategic survival function rather than a mere administrative unit. According to him, key focus areas should include liquidity resilience, debt governance, transparency, governance oversight, and market risk mitigation.

“Investments should be driven by measurable returns, not prestige-driven expansion. Treasury governance must promote operational realism,” he said.

Mr Akeju stressed that the Nestoil case should serve as a warning to all upstream, midstream, and downstream operators, particularly indigenous firms dependent on leveraged financing.

“Financial sustainability in today’s oil and gas sector is no longer defined by asset size or project volume. It is defined by treasury discipline, governance integrity, and strategic liquidity management,” he said.

He said the Nestoil receivership underscored the urgent need for structured treasury systems, sustainable financing frameworks, and transparent lender engagement.

“In an industry where fortunes can change overnight, treasury leadership is not optional. It is indispensable,” Mr Akeju stated.

(NAN)