Published On: Wed, Sep 13th, 2017

$200m NCI Fund not enough for Oil, Gas industry – Expert

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Nigeria Extractive Industry Transparency Initiative (NEITI),

Nigeria Extractive Industry Transparency Initiative (NEITI)

By Etuka Sunday

The former Nigerian Officer of Natural Resources Governance Institute, and current Technical Adviser to Nigeria Extractive Industries Transparency Initiative, (NEITI), Mr Dauda Garuba has said, that the impact of the $200million Nigeria Content Intervention Fund (NCIFund) launched last week may not be felt in the Oil and Gas Industry as expected.
Mr Garuba’s fear is coming barely a month after the launch of the intervention fund by the Minister of State for Petroleum Resources, Dr Ibe Kachikwu in Abuja.
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 1% 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 utilising 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.
As planned, the fund is expected to enhance access to Nigerian Content Development Fund (NCDF), through financing products that meet the diverse funding needs of the Nigerian Oil and Gas Service Providers, namely: financing establishment of manufacturing facilities for goods used in the oil and gas industry; financing acquisition of asset such as rigs, marine vessels; contract financing for projects in the oil and gas industry; community contractors financing and contract/loan refinancing.
Nevertheless, Mr Garuba said, the amount was like a drop of water in an ocean looking at the enormous challenges confronting local content development in Nigeria, especially oil and gas industry, therefore, urged the Federal Government to develop a workable policy that would address the issues wholistically.
In a mobile phone interview with Peoples Daily, he said: “No amount is ever enough to deal with a dynamic issue such as local content development in the oil and gas industry. One can only commend the initiative and hope that we put more money into the process.
“Ordinarily, it doesn’t sound great to realise that Nigeria has lagged behind in local content development since oil production and export started in 1958 – i.e. two years after discovery. The sum of $200 million may be very small, especially when compared to the size of the country’s oil and gas industry and the fact that we only decided to take seriously the local content development issue seven years ago when we enacted the Nigerian Content Development Act 2010. I would expect that we should frog-jump in implementing local content, given that we are late starters.
“I listened to the the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB) recounted the progress made with local content development, including the number of jobs created. That is impressive. However, I’ve always argued that the issue of local content should be seen beyond numbers of jobs created. Numbers can be very deceptive in that it is possible to create local jobs in less critical units and assume we are doing great. As much as messengers, guards, clerks, artisans are an essential component of the oil industry work, they do not add up to the technical and managerial skills required to deepen local content in Nigeria.
“This is why we need to re-strategise our focus on local content. Restrategising requires that we prioritise high-level human capacity development across technical and managerial cadre and massive investment in hands-on learning and knowledge consolidation. This will require much more than $200 million which in this case can be assume to be mere seed money. The 1% charge on contract sum to indigenous contractors can also complement this,” he said.
Meanwhile, Dr. Ibe Kachikwu was optimistic that the NCI Fund, which would be accessed at a single digit interest rate, with a tenor of five years, would help address the funding challenges which hamper the growth and success of indigenous manufacturers, service providers and other key players in the sector.
The Minister who is also the Chairman of the Governing Council of the Board said, the $200million approval by the Council was in keeping with the Economic Recovery and Growth Plan of the Muhammadu Buhari led administration, which recognises access to cheap funds as a key enabler for industrialisation.
Dr. Kachikwu said, over the years, Nigerian companies have found it difficult competing with their counterparts from jurisdictions where funding was accessible for 5% or less as compared to Nigerian market where bank lending rates hover around 20%.
He said: “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 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.”
He however, said, since the funds is not free, 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 expressed optimism that NCDMB and BOI would leverage on their respective strengths and track record of achievements to make the NCI Fund a resounding success.
The Executive Secretary of NCDMB, Mr Simbi Kesiye Wabote has assured that the modalities for accessing the NCI Fund had been simplified and is now devoid of cumbersome processes and conditions that affected the old model.

Recall, ‎the NCDMB and Bank of Industry (BoI)launched the NCI Fund in July 2016 with $100 million which was now increased to $200 million but was marred by delays due to governance process.

The Fund‎ replaced the original model whereby the NCDF provided partial guarantees and 50% interest rebate to service companies who obtained facilities from commercial banks for asset acquisition and projects execution. Industry stakeholders’ difficulty in accessing funds under NCDF model, necessitated the change of strategy by the Board.

Key features of the NCI Fund, according to the Executive Secretary, are that the loans will be disbursed directly by the BoI at single digit interest rate and repaid within five years, and that only contributors to NCDF, with bankable proposals in the oil and gas industry can approach BoI for the Fund.

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