The Nigerian Content Development Monitoring Board and the Nigerian Export-Import Bank signed a $30 million working capital and capacity building fund on Wednesday to help oil and gas service firms in Nigeria.
Simbi Wabote, Executive Secretary of the NCDMB, and Abba Bello, Managing Director of NEXIM Bank, signed the funding agreement at the Nigerian content monitoring agency’s Abuja office.
Wabote stated that the Oil Producers Trade Section, Independent Petroleum Producers Group, and Petroleum Technology Association of Nigeria had expressed concerns about the funding challenges confronting oil services firms, which had caused most of them to consider downsizing.
He said, “The OPTS and IPPG had at some point raised before the NCDMB the inability of most indigenous contractors to provide services to them due to challenges of funding.
“This was especially when we got struck by the COVID-19 pandemic. I recall receiving several letters particularly from IPPG trying to see how we can support this.”
He added, “I also recall receiving similar letters from PETAN when the COVID-19 struck and most of their members had nothing to do anymore.
“This is because companies were shut down and their members were threatening on how to downsize and take Nigerians off their payrolls.
“Based on this, we then set up a committee to say how do we support these firms with the provision of working capital.”
Wabote stated that the fund’s launch date would be July 1, 2021, and that the fund’s $30 million sizes would be supplemented by matching funds in naira provided by NEXIM (to be converted at the prevailing official exchange rate).
“The scheme will cover loans for working capital support and capacity building, oil service contracts, invoice discounting, and the acquisition of low-end equipment to service short-term contracts/service obligations,” he said.
According to him, the target market consisted of Nigerian oil service providers who were members of a professional association in the Nigerian oil and gas industry and were commercially viable with a business relationship with either an international oil company or a major Nigerian oil firm.
“Maximum amount that can be borrowed by a single obligor is $1m or its naira equivalent at the official exchange rate prevailing at the time of borrowing,” Wabote said.
He added, “Tenor shall be up to 12 months for working capital loans and up to three years for capacity building loans with a moratorium of up to 12 months.
“The applicable interest rate shall be five per cent per annum all-in for dollar-denominated loans and eight per cent all-in per annum for naira-denominated loans and the rate shall be fixed throughout the tenor of the loan.”
Because all applications would be submitted via the web, the NCDMB boss stated that the maximum processing time would be 21 working days from the date the applicant provided all required documentation.
He stated that NEXIM would create and make available a dedicated portal to help with the process, with access granted to designated NCDMB staff for monitoring and other functions.
Wabote stated that each scheme party (NCDMB and NEXIM) would bear 50% credit risk on loan repayment and be entitled to an equal share of interest income each month, after a 0.5% provision for capacity building of scheme operators.
Source: Punch Newspaper