Lagos — For all the noise about Nigerian content development in the oil and gas industry, and for all the efforts to involve more indigenous companies in this key sector, a game changer than cannot be ignored or wished away is money, or finance, as the professionals call it. The central aim of the Nigerian Content Act, as it came into force on 22 April 2010, was to ensure Nigerians – big or small contractors, consultants, vendors or just manpower – stopped gazing as befuddled bystanders in the oil and gas business, and get involved, and continue to get involved in value, quantum and reach. To its credit, the Nigerian Content Development and Monitoring Board (NCDMB) quickly achieved 26 per cent Nigerian content in the industry, taking this up to 30 in 2017, with plans to increase it to 70 by 2027. The availability of financing cuts to the heart of these milestones, and this is where the Nigerian Content Intervention Fund (NCI-Fund) deserves specific mention as the NCDMB turns 10 this year.
The Nigerian Content Act established the Nigerian Content Development Fund (NCDF) “for purposes of funding the implementation of Nigerian content development,” and “one per cent of every contract awarded to any operator, contractor, sub-contractor, alliance partner or any other entity involved in any project, operation, activity or transaction in the upstream sector of the Nigerian oil and gas industry shall be deducted at source and paid into the Fund.” Breaking down the head-twisting legalese, it simply means 1 per cent of all contracts in the upstream sector is reserved for the NCDF. Out of the NCDF pool, the Board set aside the sum of 200 million USD for local vendor development. This amount is the Board’s Nigerian Content Intervention Fund (NCI-Fund). The products of the NCI-Fund are Manufacturing, Asset Acquisition, Contract Financing, Loan Refinancing and Community Contractors Loan Scheme. The Community Contractor a novel offering of the intervention fund as it seeks to provide access to loans for contractors from the core Niger Delta states.
The Fund answers to the money factor in the development of Nigerian content because without access to finance, companies will be hard pressed to execute contracts. True, banks continue to play their role in the value chain, but nobody should be taken in by the glitz and glam of altruism; a bank remains a bank, driven by profits and process. Initially, the $200-million NCI-Fund was disbursed by commercial banks but in 2017, soon after Engr. Simbi Wabote assumed office as the 3rd Executive Secretary, the NCDMB signed an agreement with the Bank of Industry (BoI) to manage the fund. This was a smart move; the BoI is Nigeria’s oldest development finance institution, having commenced operations in 1959 as the Investment Corporation of Nigeria (ICON) Limited.
To date, the BoI has disbursed a total of US$158.46 million and N7.31 billion to 26 beneficiaries representing 91 per cent of the NCI-Fund. The disbursements cover manufacturing, asset acquisition, contract finance and loan refinancing. Normally, potential beneficiaries apply for loans for contracts in the oil and gas industry with an annual interest rate of eight per cent. The loan disbursements are more than figures and statistics. They speak of Nigerian companies that have taken advantage of an innovative funding regime to improve their capabilities and business, and which has given confidence to the NCDMB that it can achieve 70 per cent Nigerian content by 2027.
The management of the fund by BoI means it can bring international development standards to the loan processes, and yet appreciate and respond to local circumstances. This was seen in the decision to cushion the impact of the COVID-19 pandemic on NCI-Fund beneficiaries. Effective April 1, 2020, the NCDMB cut the interest rate from 8 to 6 per cent per annum, extended loan tenors and payment moratorium. Under the palliative regime, loans with tenor of three years will be extended by six months, while those with a tenor above three years will get a grace period of 12 months. Similarly, there will be extension of moratorium on all running loan facilities for manufacturing, asset acquisition and contract finance with outstanding tenor not exceeding three years by six months, and by 12 months for all applicable running loan facilities.
Engr. Wabote said the palliatives support the Board’s commitment to continue to provide impetus to businesses in the oil and gas industry to overcome emerging operating difficulties in line with the Federal Government’s policy direction. Also, they help to ensure Nigerian content plans and objectives are not derailed by the current economic downturn. Still, for all the pioneering pace of the NCI-Fund, it does not augur well for the growth of Nigerian content that the Community Contractors Loan Scheme has yet to take off. 10 years after the enactment of the Nigerian Content Act, it will not be asking too much if community contractors enjoy access to innovative financing as their bigger cousins are doing. Thankfully, the performance of the NCI-Fund has been encouraging as the loanees are paying up and not defaulting. This is the impetus we need to bring community contractors on board so the march to 70 per cent Nigerian content by 2027 becomes unstoppable.