- $200m floated in intervention fund
- Contributors to borrow at 8%
- Community contractors to borrow at 5%
- Wabote board targets $14Bn in 10 years
By Codratus Godson/Port Harcourt
The Petroleum industry in Nigeria is considered to be the largest with the potential to generate average Gross Domestic Product (GDP) higher than any other country in the West Africa sub-region.
Over the years the oil and gas sector has continuously battled with the problems of infrastructural development, project financing, transparency and the dearth of local content participants in the industry.
But the recently launched $200 million Nigerian Content Intervention Fund (NCIF) is expected to grow local capacity so as to increase their participation in the Oil and Gas industry.
Before this time the huge financial investment made by the government in the oil and gas industry had not resulted in significant benefits for most Nigerians as local content in the industry in Nigeria was very low, being that over 60 per cent of the industry was managed by multi-nationals.
The inauguration of Engineer Simbi Wabote as the Executive Secretary of the Nigerian Content Development and Management Board (NCDMB) by the Muhammadu Buhari administration seems to have changed the narrative of poor performance of local participants in the industry.
The intervention fund which was established as an enabler in 2017 has a single digit interest rate of eight per cent for loans to Nigerian oil and gas service providers and single interest of five per cent extended for loans to community contractors.
Engineer Wabote in a recent interview explained that the release of the fund is one of several strategic initiatives of the Board in its bid to deepen local content participation in the oil and gas industry.
The Nigeria Oil & Gas Industry Content (NOGIC) Act was enacted in April 2010 and within the seven years period it has been in operation, the oil and gas sector has made tremendous gains in terms of what it has been able to draw back and domicile in the country.
The Executive Secretary said that aspiration of the Board in terms of its 10 years strategic plan is to have up to $14 billion out of the about $20 billion domiciled in the country annually.
The critical success factor of the Board, the Executive Secretary pointed out, has been the implementation of the Act itself. “The Act has been very critical to the success we have achieved. Prior to now we practised what we call poles in terms of local content implementation”
Engineer Wabote further disclosed that one of the major impediments for most Nigerians in the Oil and Gas sector was the cost of financing projects which was put at between 15 per cent and 26 per cent. Now, working in partnership with other stakeholders, he said, the Board came up with the types of facilities that involve a large range of funding up to $10 million with a single digit interest rate as earlier stated. “But aside from that we also have a facility for contract financing for those that have short term contracts to access up to $15 million at the rate of eight per cent.”
Explaining further, Engr. Wabote said for community contractors, they can access up to $20 million with an encouraging interest rate of five per cent that can span up to five years. “This time you will be able to get a loan because you access it through personal guarantors of the promoter or with people that work in Government Ministries from grade level 12 and above or people that work in the banks.”
The Executive Secretary of the Board, however, pointed out that the facility is not a grant or a national cake to share, but strictly for the purpose of business. “For anybody to access the fund, which is managed by the Bank of Industry, such beneficiary must be a contributor to the fund. The fund is contributed by contractors that execute business in the oil and gas sector,” he said.
According to him, those applying for the loan must go directly to the Bank of Industry as they have also opened a web portal were people can apply.
Being a pilot scheme, the NCDMB Boss believes it can only get better as partnerships can also be formed with other financial institutions to expand the size of the fund. But he said; “The idea was to start with a development bank that has managed such scheme in the past because if you look at their history, you’ll find experience as there is intervention fund for small and medium scale enterprises and now for the oil and gas sector.”
“People think there is so much money in the oil and gas sector so why the need to finance them but Nigerian businesses are struggling to take advantage of the local content act because of finance, so this fund is meant to bridge that gap and support genuine Nigerian businesses that are within the oil and gas sector. So, we advise them to go further and access this single digit loan.”
With the success that has been achieved in the oil and gas sector, the Board is already engaging in discussions that would result in expanding the current law to cover the Power and the ICT sectors because these are sectors that create huge employment, while also
being heavily dominated by foreign concerns.
According to him, the Nigerian Content Consultative Forum is currently deliberating on how to expand the NOGIC Act which has the manufacturing, fabrication, and engineering sectors, as well as insurance and banking.