The Nigerian government on Thursday launched a $200 million Nigerian Content Intervention Fund, NCIF, to guarantee financing at single digit interest rates for local operators handling projects in the oil and gas industry.
The Minister of State for Petroleum Resources, Ibe Kachikwu, said funding challenges had hampered the growth and success of indigenous manufacturers, service providers and other key players in the industry.
He was speaking at the launch and formal signing of the agreement between the Nigerian Content Development and Monitoring Board, NCDMB,and the Bank of Industry, BOI, in Abuja.
The minister said over the years, Nigerian companies had found it difficult to compete with others from where funding was accessible at five per cent or less. The current bank lending rate in Nigeria is over 20 per cent.
He said the Fund would be accessible at a single digit interest rate, with a tenor of five years.
“It is a known fact that the exorbitant cost of funds in our market is partly responsible for the high cost of service delivery by Nigerian Oil and Gas Service Providers, NOSPs,” Mr. Kachikwu said.
“This feeds into the unacceptable high cost of our crude oil production currently at current at about $32 per barrel.”
He said the Nigerian Content Development Fund, NCDF, meant for projects, programmes and activities to increase Nigerian Content in the oil and gas industry, would help address funding challenges among local operators.
The areas the fund would be useful included providing financing for the establishment of manufacturing facilities for goods used in the oil and gas industry; acquisition of asset, such as oil rigs and marine vessels; financing of contracts for projects; community contractors financing and contract/loan refinancing.
The minister lamented the inability of some Nigerian banks to provide long-term financing required by the local supply chain in the oil and gas industry to build capacity, pointing out that the BOI experience and operating model would help close that gap.
The Fund is a portion of Nigerian Content Development Fund, NCDF established by Section 104 of the Nigerian Oil and Gas Industry Content Development, NOGICD Act, drawn from one percent of all contracts awarded in the upstream sector of the oil and gas industry.
Although the NCDMB started collecting the funds since 2012, it was unable to utilize it to support the operations of indigenous service companies in the industry.
With the formal launch of the Fund, government said it was anxious to grow Nigerian Content in all its facets, including manufacturing, asset acquisition, contract financing and contract financing for community contractors.
Mr. Kachikwu said this was in line with government’s Economic Recovery and Growth Plan, ERGP, which recognizes access to cheap funds as a key enabler for industrialization.
He underlined the need for NCDMB and BOI to adhere strictly to the detailed operating model, to ensure only serious companies with bankable business plans and prospects of repayments were granted
access to the funds.