Operators Eye $600m Local Content Fund

transport equipmentA worker fixes bolts to a custom snowboard at the Prior Snowboard Manufactory Ltd. facility in Whistler, British Columbia, Canada, on Tuesday, Dec. 3, 2013. Photographer: Abigail Saxton/Bloomberg
  • Operators Eye $600m Local Content Fund

With the Nigerian Content Development and Monitoring Board set to ease access to the $600m Nigerian Content Development Fund, industry operators have expressed interest in the fund.

The Chairman, Petroleum Technology Association of Nigeria, Mr. Bank-Anthony Okoroafor, told our correspondent that many members of the association had applied for the fund, but the modalities had been the challenge.

He spoke on Wednesday on the sidelines of the 6th Practical Nigerian Content Conference in Abuja.

He said, “I think what the board is trying to do is to make it easier to access. None of our members has really been able to access it because of the too many hurdles. But now, the new board is coming up with clear guidelines for accessing the fund.”

Okoroafor, who noted that it was difficult to borrow money from the banks because of the high interest rates, said, “If you have any fund whose interest rate is lower, and if you make it easy for people to access, a lot of people will be interested. But what matters is the conditionality attached to it.

“Whoever wants to access the fund, the people managing it must find out whether what the fund will be used for is in line with the objectives of the fund, which include building capacity and adding to your facilities.”

The Executive Secretary, NCDMB, Mr. Simbi Wabote, also said at the conference on Wednesday that the board was working to close skills, infrastructure and assets ownership gaps in the oil and gas industry.

The NCDF, which is funded from the one per cent deducted from the value of all upstream contracts, is underpinned by Section 104 of the Nigerian Oil and Gas Industry Content Development Act.

The fund was designed to provide partial guarantees and 50 per cent interest rebate to service companies that obtain facilities from commercial banks for asset acquisition and projects execution.

The Act provides that the funds be used for the development of capacity in the oil and gas industry.

The NCDMB executive director said, “Any time you assemble a gathering and you talk about the Nigerian Content Development Fund, everybody wants to know what will become of the fund. What this current board will assure you is that within the shortest time possible, we will come out with a clear blueprint on how that fund will be utilised to promote local content development in our industry.

“We will no longer have a situation where people continue to wonder what is happening to that fund, if it has been put into political use or into local content development. One thing I can assure you is that very soon, a transparent process of accessing that fund will be made known to all stakeholders.”

Noting that the fund had grown over the years, Wabote said six Nigerian companies had tapped it for capacity development.

He said, “I must say that it is not directly giving money to those six Nigerian contractors; it is about guaranteeing some of the loans that they got from the banks because we are not a funding institution.

“Not much has been expended from that fund for capacity development. Part of the strategy of this new board is to come out with a very transparent process through which genuine Nigerian contractors involved in the oil and gas sector will have access to the fund.

“While the people who are contributing worry about the fund they have contributed, there are a lot of Nigerian companies that are not making their contributions as enshrined in the Act. This board will look at strategies to make them comply with the provisions of the Act.”

The NOGICD Act seeks to develop Nigerian content across the oil and gas value chain – upstream, midstream and downstream sectors, according to Wabote.

He said, “There is an opportunity for demand-driven investments across the oil and gas industry value chain. Today, a lot of people ask me, why is Nigerian content not also focusing on the downstream and midstream activities? My response is simple: with the new board and the council, our focus will go beyond the operators in the upstream sector; our activities are all-encompassing as enshrined in the Act.”

The NCDMB boss said one of the interventions the board had put in place to attract investments and stimulate domiciliation of manufacturing activities was the Equipment, Components Manufacturing Initiative.

He said the ECMI was developed to promote the local manufacturing of equipment, components, spare parts and other accessories for the Nigerian oil and gas industry.

He said, “So far, we have issued 1,430 certificates as of October 31, 2016. This translates to investment commitment valued to about $2bn as of today. The board ensures that the commitments are complied with before reviewing or issuing certificates to companies.

“Some other initiatives that the board has put in place to stimulate domiciliation of manufacturing and other value-adding activities include the establishment of the oil and gas park that will serve as the manufacturing hub for equipment and the provision of funding support for local manufacturers of the LPG cylinders.”

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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