The Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, who is also the chairman, Governing Council, Nigerian Content Development & Monitoring Board (NCDMB), has said the inability of Nigerian oil firms to access funds from banks, at reasonable lending rates, necessitated the approval to disburse $200 million to such firms from the Nigerian Content Intervention Fund (NCI Fund).
Kachikwu said over the years, Nigerian companies have been finding it difficult to compete with their counterparts from jurisdictions where funding is accessible at five per cent or less, compared to our market where bank lending rates hover around 20 per cent, adding that the development hampers their productivity.
According to him, some Nigerian banks are still unable to provide long-term financing required by the local supply chain to build needed capacity; the banks also lack sufficient knowledge of the oil and gas sector. The pedigree and operating model of the Bank of Industry (BOI) is expected to close this gap.
It is as a result of BoI’s pedigree that the Nigerian Content Development and Monitoring Board (NCDMB) signed a Memorandum of Understanding (MoU) to implement the $200 million NCI Fund. The MoU is significant for the oil and gas industry and the Nigerian economy because the NCI Fund has been long expected and will go a long way in addressing the funding challenges, which hamper the growth and success of indigenous manufacturers, service providers and other key players in the sector, he added.
The Minister said: “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) and this feeds into the unacceptable high cost of our crude oil production.
“At the SPE conference in Lagos recently, I directed all players in the oil and gas sector to work assiduously to cut the cost of producing a barrel of oil, which current stands at $32 per barrel. I am optimistic that the NCI Fund, which will be accessed at a single digit interest rate, with a tenor of five years, will help in this regard.
“The NCI Fund is a portion of Nigerian Content Development Fund (NCDF), which was established by Section 104 of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act and is drawn from one per cent of all contracts awarded in the upstream sector of the oil and gas industry.
“Although the Board began in 2012 to collect the funds, it has not been very successful with utilizing it to support the operations of indigenous service companies in the industry. This has created a lot of frustration among stakeholders who felt that the purpose of the NCDF was not being achieved.
“The Governing Council of the Board, of which I am the Chairman, approved this transaction at our last meeting with an initial outlay of $200million. This is to ensure that a wide spectrum of NOSPs access the Fund. We are also desirous of catalyzing the growth and development of Nigerian Content in all its facets, including manufacturing, asset acquisition, contract financing and Contract financing for community contractors. The Governing Council’s approval is in keeping with the Economic Recovery and Growth Plan of President Muhammadu Buhari led administration, which recognises access to cheap funds as a key enabler for industrialization.”
He said NCDMB and BoI would leverage their respective strengths and track record of achievements to make the NCI Fund a resounding success and advised companies that will successfully access the NCI Fund to be diligent in utilisation and faithful in repayment. There is a tendency for companies to assume that it is free money and decide not to repay. To forestall this, NCDMB and BOI must adhere strictly to the detailed operating model, to ensure that only serious companies with bankable business plans and prospects of repayments access the funds, he added.
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