In a move to provide a new financing solution to the Nigerian oil and gas service sector, and accelerate local content growth, the Nigerian Content Development and Monitoring Board (NCDMB) and the Bank of Industry (BOI) on Friday in Lagos inaugurated the Investment Committee of the Nigerian Content Equity Fund (NCEF) – a groundbreaking $100 million financing product designed to avail long-term financing to service companies and provide access to funds in exchange for equity rather than traditional debt instruments.
The committee was inaugurated by the Executive Secretary of NCDMB, Felix Omatsola Ogbe, setting the stage for the rollout of the pioneering financing window under the Nigerian Content Intervention Fund (NCI Fund).
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According to the product paper, the underlying goal of the Nigerian Content Equity Fund (NCEF) is to reduce per-unit cost of oil and gas products and services locally, create an additional source of income for NCDMB, and play a catalytic role in attracting other investors and lenders to financially viable organizations. “By providing access to equity financing, the NCEF will enable service companies to expand and increase their market share, which will contribute to the growth of the Nigerian oil and gas industry,” the paper further read.
The Fund size is $100million, while the obligor limit is $5million. The Fund is provided by the NCDMB, while the Bank of Industry serves as the Fund Manager.
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The target beneficiaries are oil field service companies, manufacturers connected to the oil and gas sector, fabrication yards, and connected sectors, with the primary goal being to promote economic growth, job creation, and wealth creation in Nigeria. The impact of the Fund on oil and gas projects could potentially create about 12,500 direct jobs and 7,000 indirect jobs, it was estimated.
The inauguration of the investment committee marks another milestone in the evolution of the NCI Fund, a flagship intervention established under section 104 of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, to bridge financing gaps confronting indigenous oil industry firms. While the five NCI Fund products managed by the BOI and two products managed by Nigerian Export-Import Bank (NEXIM) have provided debt financing to qualified service companies over the past decade, with loans lasting five years and interest rates of 8%, the Equity Fund has carved a new niche.
In his remarks, the Executive Secretary charged the investment committee to carry out rigorous due diligence on every company seeking support and ensure that the objectives for which the Fund was established are fully achieved. According to him, the Equity Fund must never be mistaken for a grant. He stressed that beneficiaries are expected to deploy the capital judiciously and repay in accordance with the terms of the investment.
He urged the committee to ensure that only credible people with viable businesses benefit from the scheme. “Our top priority should be identifying people who will use the Fund properly and, most importantly, return our funds back to us so that we can continue the programme for other deserving beneficiaries,” he said.
On his part, the Managing Director of the Bank of Industry, Olasupo Olusi, described the inauguration as a major milestone in the consummation of the NCI Fund Equity Fund, noting that the initiative represents the next phase in the long-standing collaboration between BOI and the NCDMB. According to him, the partnership, which has lasted for nearly a decade, began with the administration of the US$350 million Nigeria Content Intervention Fund, through which hundreds of indigenous oil and gas companies have accessed financing to expand their operations.
He noted that the introduction of an equity financing window addresses an important gap in the industry’s financing architecture. “The next step, which I am very impressed with and very thankful to the NCDMB for thinking through with BOI, is the need to fill the finance gap with equity,” he said.
According to Mr Olusi, equity financing offers an entirely different class of financial instrument capable of supporting businesses that may not yet qualify for conventional debt facilities. He expressed confidence that the initiative would attract additional investment into Nigeria’s oil and gas sector while strengthening indigenous participation. “We believe that this fund will help fertilize additional resources and move the industry forward,” he said, while expressing confidence that members of the investment committee would serve the interest of the fund with integrity and professionalism.
Providing further insight, the Group Head, Equity Investments at the Bank of Industry, Mr Chike Chukwuelu, explained that the Equity Fund addresses what industry experts describe as the “missing middle.” According to him, many indigenous businesses struggle to secure senior debt because they lack the level of collateral demanded by commercial lenders, despite possessing viable businesses with strong growth prospects.
Mr Chukwuelu said the equity structure would also enable the fund managers to maintain closer oversight of beneficiary companies, helping them strengthen governance, improve operations and evolve into sustainable businesses. “What this also does is that we will now have more oversight in these companies because of the instrument that we’re using, and we can help them develop into sustainable companies, which is what the fund is targeted at,” he stated.
The Senior Technical Adviser to the Executive Secretary, Austin Uzoka, observed that the Equity Fund represents an opportunity to accomplish what previous financing interventions could not fully achieve. “The striking thing is that the fund is about doing things the other funds have not been able to accomplish.”
He said the committee’s responsibilities are to provide strategic oversight for the Equity Fund, ensure prudent investment decisions and build a portfolio of companies capable of growing into major industry players.
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