Nigeria floats $100million intervention fund for oil industry operators

Crude oil extraction [Photo credit: Bloomberg]
Crude oil extraction [Photo credit: Bloomberg]

The Nigerian government on Tuesday floated a $100million (about N28.4 billion) Nigerian Content Intervention Fund (NCI Fund) to take care of the challenge of securing credit facilities to fund the activities manufacturers, service providers and other key players in the Nigerian oil and gas industry.

The pool of funds would be managed by the Nigerian Content Development and Monitoring Board (NCDMB) in conjunction with the Bank of Industry (BOI) to provide lending directly to qualified players in the oil and gas industry under competitive terms.

The new funding arrangement is different from the old Nigerian Content Development Fund (NCDF), which provided partial guarantees and 50 per cent interest rebate to service companies obtaining facilities from commercial banks for asset acquisition and projects execution.

Under the old model, which became operational in 2012, three indigenous oil servicing companies – Ladol, Starz and Vandrezzer were able to benefit from finances they used in running their operations in the industry.

At the signing of memorandum of understanding (MoU) to signal the formal take off of the NCI Fund in Lagos, the Acting Executive Secretary of the NCDMB, Patrick Obah, said the Board opted for the new model in response to the feedback from industry operators who experienced difficulties accessing funds to carry out their bsuiness.

He said the Board was leveraging on BOI experience in development financing, pointing out that the MOU reflected the determination of the two agencies to lead the industrialization process, by closing the financing gap in projects with high prospects of creating employment, retaining revenue in-country and adding value to the economy.

Benefiting companies are expected to deploy the funds for the acquisition of fixed assets (machinery and ancillary equipment) as well as provide working capital, for leasing of industrial and business equipment and constructions and acquisition of marine vessels.

Mr. Obah said the revised conditions for the NCI Fund include compliance with the Treasury Single Account (TSA) policy of the government, with on-lending to beneficiaries at eight per cent interest rate, long tenure of up to 10 years, single obligor limit of $10 million and varied application, including manufacturing and asset ownership.

Transactions that were consummated under the partial guarantee arrangement will be managed to final settlement and promised that the Board will continue to work with stakeholders to develop financial products that address other unique financial requirements of interest of Nigerian Oil and Gas Service Providers (NOSPs),” he said.

The NCI Fund is sourced from the NCDF funded from one per cent deduction from the value of all upstream contracts.

The NCDF is underpinned by Section 104 of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act which provided that the funds be used for developing capacity in the oil and gas industry. About $600million has accumulated in the NCDF till date.

According to the acting Managing Director of BOI, Waheed Olagunju, the mandates of NCDMB and BIO were similar, as both agencies were created to drive industrialization of the country and add value to the nation’s natural resources.

He assured that the NCI Fund would avoid the pitfalls of the past, which limited the success of the previous funding arrangement, by ensuring that qualified service companies were granted access to the funds they require to grow their capacity.

On conditions for accessing the NCI Fund, the Acting MD explained that the Bank would consider viability as well as social impact of loan proposals before granting credits, pledging that it would apply its competencies and tested banking principles to surpass the expectations of potential beneficiaries.

Advertisement

Mr. Olagunju also promised that the Bank would guard against persons who obtain loans from government agencies without any plan of repayment.

Chairman of the Petroleum Technology Association of Nigeria (PETAN), Bank-Anthony Okoroafor, commended the Board for being responsive to the demands of the industry stakeholders who clamored for a change in the operating model of the NCDF.

Mr. Okoroafor said many PETAN members were unable to access the Fund under the old model because of the posture of banks to financing oil and gas projects as well as other cumbersome conditions.

“Several companies had good ideas and projects, but could not access the funds,” he said. , He challenged the Board to increase the size of the NCI Fund to $600million so that legacy projects, like a big shipping yards, could be set up in the country.

Advertisement

PT Mag Campaign AD

Support PREMIUM TIMES' journalism of integrity and credibility

Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.

For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour.

By contributing to PREMIUM TIMES, you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.

Donate


TEXT AD: To advertise here . Call Willie +2347088095401...



NEVER MISS A THING AGAIN! Subscribe to our newsletter

* indicates required

DOWNLOAD THE PREMIUM TIMES MOBILE APP

Now available on

  Premium Times Android mobile applicationPremium Times iOS mobile applicationPremium Times blackberry mobile applicationPremium Times windows mobile application

All rights reserved. This material and any other material on this platform may not be reproduced, published, broadcast, written or distributed in full or in part, without written permission from PREMIUM TIMES.