The Honorable Minister of State, Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, today headlined the Launch and Signing Ceremony of the $200 Million Nigerian Content Intervention Fund (NCIF) event in Abuja.
CKN News brings you, the minister's speech, where he highlighted some of the factors and challenges confronting comapnies in Nigeria, among other vital issues
Distinguished ladies and gentlemen it is my honour to invite you all to the signing ceremony of the Memorandum of Understanding between the Nigerian Content Development & Monitoring Board (NCDMB) and the Bank of Industry (BOI) on the implementation of the $200 million Nigerian Content Intervention Fund (NCI Fund).
Today’s event is significant for the oil and gas industry and the Nigerian economy because the NCI Fund being launched today 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.
Over the years, Nigerian companies have found it difficult competing with their counterparts from jurisdictions where funding is accessible for 5% or less as compared to our market where bank lending rates hover around 20%.
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.
At the SPE Conference in Lagos weeks ago, I directed all players in the sector to work assiduously to cut the cost of producing a barrel of oil, which current stands at $32/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.
As you are aware, the NCI Fund being launched today 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 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 $200m. 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 the Muhammadu Buhari led administration, which recognizes access to cheap funds as a key enabler for industrialization.
We are excited by the collaboration between NCDMB and Bank of Industry and are optimistic they will leverage on their respective strengths and track record of achievements to make the NCI Fund a resounding success.
I have been assured by the Executive Secretary of NCDMB that the modalities for accessing the NCI Fund have been simplified and is now devoid of cumbersome processes and conditions that affected the old model.
The Board must also ensure that it deploys effective communication strategies and educates Nigerians sufficiently on the terms of the Fund and conditions that must be met before companies can apply and secure loans under the NCI Fund.
In conclusion, I wish to advise companies that will successfully access the NCI Fund to be diligent in utilization 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.
I congratulate both organisations on the successful launch of the NCI Fund and I look forward to receiving positive reports on the administration and impact it would make on the Nigerian economy.
On this note, I wish to formally launch the $200 million Nigerian Content Intervention Fund.