The intervention fund, according to the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, is part of measures to improve access to low-cost credit for oil and gas firmsl operating in the economy.
The Nigerian Content Development Fund is expected to be financed through the allocation of one per cent of the value of all contracts awarded in the upstream oil and gas industry, the petroleum ministry said.
Oil sales make up about two-thirds of national revenues, which is in its first recession in 25 years largely caused by low global crude prices.
The new fund would offer finance to energy firms setting up manufacturing facilities or acquiring assets such as oil rigs, ministry officials said.
It would also offer project financing and help refinance existing loans, they said.
“I would like to see this fund going to cutting-edge, tech-driven businesses,” Kachikwu told a gathering at the fund launch in Abuja.
The minister called on the Bank of Industry to work with the Nigerian Content Development and Monitoring Board to raise the local content intervention fund from the current $200m (N61bn based on the official exchange rate of N305 to a dollar) to $1bn (N305bn).
The event was attended by the Managing Director of BoI, Mr. Olukayode Pitan; the Executive Secretary, NCDMB, Mr. Simbi Wabote; and other major players in the oil and gas industry.
Kachikwu said while the sum of $200m had been set aside for the fund for disbursement, the ultimate goal of the government was for the fund to increase to $1bn in order to meet some of its objectives for the sector.
The minister described the fund as a game changer in the oil and gas industry as it would galvanise the much-needed investments into the sector through local content development.
He commended the BoI and the NCDMB for coming up with the fund as it was in line with the objectives of the Federal Government to attract fresh investments into the oil and gas industry.
He, however, cautioned that during the disbursement of the funds, there was a need for the bank to ensure geographical spread so as to avoid situations where the majority of the beneficiaries would come from a particular section of the country.
He also advised that adequate attention should be given to the local communities during the disbursement of the funds so as to enable them to meet the environmental challenges being faced by them.
He said, “The essence of the funds is to help galvanise Nigerian experts who want to invest in various areas but lack the funds to enter the industry.
“This $200m will ginger everybody to begin to see how to expand the funds. My goal is to expand the funds to $1bn and after the launch today, we would have to set up a team to work internally to first of all get to the BoI to get their counterpart support for the funds.”
In his comments at the event, Pitan said that the funds would be disbursed at a single-digit interest rate of eight per cent with a repayment period of five years.
He added that for contractors that were located in the host communities, the loans would be given to them at a five per cent interest rate.
He said that each beneficiary would get a maximum amount of $10m, adding that the funds would be used to increase the capacity of local players in the oil and gas sector.
Pitan said the funds could be used to acquire assets to execute projects for the major players in the sector or to finance contracts.