The Nigerian Content Development and Monitoring Board (NCDMB) and the Petroleum Technology Association of Nigeria (PETAN) on Monday signed an agreement on US$30m Working Capital Scheme that will support the operations of oil companies against the adverse effects of COVID-19 Pandemic and loss of contracts due to low oil price.
The Executive Secretary of NCDMB, Engr. Simbi Kesiye Wabote and the Chairman of PETAN, Mr. Nicolas Odinuwe signed the Memorandum of Understanding (MoU) on the credit scheme in Abuja.
The Working Capital Scheme is one of the newly introduced products in the Nigerian Content Intervention Fund (NCI Fund) approved by the NCDMB Governing Council under the leadership of the Minister of State for Petroleum Resources, Chief Timipre Sylva.
Key features of the credit scheme are single obligor limit of One Million US Dollars ($1000,000.00), tenor of 365 days after 90 days moratorium and eight percent interest per annum for Naira and five percent for United States Dollars.
In his remarks at the event, the Executive Secretary explained that the fund which is currently domiciled with the Bank of Industry will bridge the oil companies’ cash flow gaps, support operations and prevent staff layoffs in the industry.
He said the Scheme will be triggered whenever the oil price of $40/barrel benchmark is reached and whenever there are such negative impact on the industry. The $40/barrel trigger point strategy is important considering the rapidly changing nature of the oil and gas industry, he said.
Providing details on the eligibility of beneficiaries, Wabote stated that loans granted under the Scheme will enable the beneficiaries to manage operating expenses related portfolio of oil and gas operations, bridge payment delays and restock inventory. The Funds will also be applied in acquiring and maintaining assets, expansion or renovation related to ongoing projects for which working capital is being sought and refinancing of loans.
To further guarantee the security of funds, the Executive Secretary indicated that “Insurance Guarantee covering 120 percent of the loan has to be issued to NCDMB by the intending beneficiary. The Board will also demand a Letter of Sponsorship and Guarantee by PETAN and Irrevocable Standing Payment order issued by Beneficiary Bank.”
He also confirmed that application to the fund will be processed within seven days and approved within seven days and repayment will be in three instalments, effective six months, after 90 days moratorium.
According to him, “the Scheme will be directly managed by the Board using credible consultants in order to simplify and expedite its implementation.”
He also clarified that “the MOU has a validity period of three years from effective date and renewable thereafter at the instance of the Board when the Brent crude price falls below $40 benchmark or whenever there are such negative impact on the industry caused by unforeseeable circumstances beyond control.”
Providing basis for the new funding scheme, the Executive Secretary noted that “NCDMB is an Agency established to increase indigenous participation in the oil and gas industry; build local capacity and competencies; create linkages to other sectors of the national economy, and boost industry contributions to the growth of Nigeria’s National Gross Domestic Product.”
He added that Section 104 of the Nigerian Oil and Gas Industry Content Development (NOGICD)Act established the Nigerian Content Development Fund (NCDF) drawn from one percent of all contracts awarded in the upstream sector of the Nigerian oil and gas industry which is managed and employed by NCDMB for projects, programs and activities directed at increasing Nigerian Content in the oil and gas industry.
He recalled the drastic drop in the price of crude oil largely due to the battle for market share between Saudi Arabia and Russia and further worsened with the serious impact of the COVID-19 outbreak.
He added that the global oil and gas industry witnessed serious downturn in business fortune and Nigeria operators were equally affected.
This was the basis for the NCDMB and PETAN to develop a Business Continuity initiative under the NCDMB Local Content Intervention for Target (LIFT) Sectors.