In a bid to boost access to the $600m Nigerian Content Development Fund, the Nigerian Content Development and Monitoring Board and the Bank of Industry have launched a new fund for oil industry operators.
The NCDMB described the $100m Nigerian Content Intervention Fund as a major step geared towards addressing the paucity of funding and inability to access credit that often beset manufacturers, service providers and other key players in the oil and gas industry.
It said in a statement that the pool of funds would be managed by the BoI, which would lend directly to qualifying players in the industry under competitive terms.
“This is a departure from the old model whereby the NCDF provided partial guarantees and 50 per cent interest rebate to service companies who obtained facilities from commercial banks for asset acquisition and projects execution,” the board said.
It said under the old model, which became operational in 2012, three companies, Ladol, Starz and Vandrezzer, consummated the transactions.
According to the statement, the NCI fund is sourced from the NCDF, which is funded from the one per cent fee deducted from the value of every upstream contract.
It said, “The NCDF is underpinned by Section 104 of the Nigerian Oil and Gas Industry Content Development Act, which provided that the funds be used for developing capacity in the oil and gas industry. About $600m has accumulated in the NCDF till date.”
The Acting Executive Secretary, NCDMB, Mr. Patrick Obah, was quoted to have said, at the Memorandum of Understanding signing ceremony of the NCI fund in Lagos, that the board opted for the new model in response to the feedback it received from industry stakeholders who experienced difficulties in accessing the NCDF.
He said the board was leveraging the experience of the BoI in development financing, adding, “The MoU between our two agencies reflects the strong determination of the BOI and the NCDMB to lead the process of industrialisation, by closing the gap in financing of projects that have high prospects of creating employment, retaining revenue in-country and adding value to our economy.”
Obah listed the features of the NCI fund as compliance with the Treasury Single Account policy of the Federal Government, on-lending to beneficiaries, eight per cent interest rate, long tenure of up to 10 years, single obligor limit of $10m and varied application, which could include manufacturing, asset ownership, among others.
He said transactions that were consummated under the partial guarantee arrangement would be managed to final settlement and promised that the board would continue to work with stakeholders to develop financial products that could address other unique financial requirements of interest of Nigerian oil and gas service providers.
The Acting Managing Director, BoI, Mr. Waheed Olagunju, said the NCI fund would avoid the pitfalls, which limited the success of the NCDF and ensure that qualified service companies would access the funds they needed to grow capacity.
On the conditions for accessing the NCI fund, he 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.