By Esther Olaoluwa |
The Nigerian Content Development and Monitoring Board (NCDMB) and the Bank of Industry (BOI) have launched a $100 million equity fund to provide long-term financing to indigenous oil and gas service companies and strengthen local participation in the sector.
The Nigerian Content Equity Fund (NCEF) is designed to provide equity financing to eligible businesses rather than conventional debt, with a maximum obligor limit of $5 million per beneficiary.
The initiative is being implemented through the Nigerian Content Intervention Fund (NCI Fund), established under Section 104 of the Nigerian Oil and Gas Industry Content Development Act, to address financing gaps facing indigenous oil and gas companies.
NCDMB, BOI Inaugurate Investment Committee
The NCDMB and BOI inaugurated the Investment Committee of the NCEF on Friday in Lagos, with the Executive Secretary of NCDMB, Felix Ogbe, formally inaugurating the committee.
According to a statement signed by the General Manager, Corporate Communications Division, NCDMB, Obinna Ezeobi, the fund is expected to reduce the cost of locally produced oil and gas products and services, create additional income for the NCDMB and attract other investors and lenders to viable indigenous companies.
The fund will support oilfield service companies, manufacturers linked to the oil and gas industry, fabrication yards and other related businesses.
According to the fund’s product paper, equity financing will enable service companies to expand their operations and increase market share, thereby contributing to the growth of Nigeria’s oil and gas industry.
The NCDMB said the intervention could generate about 12,500 direct jobs and 7,000 indirect jobs through its impact on oil and gas projects.
Fund to Complement Existing Financing
The NCEF forms part of the broader NCI Fund, which has provided financing to indigenous oil and gas companies through various intervention products.
The statement noted that five NCI Fund products managed by BOI and two products managed by the Nigerian Export-Import Bank (NEXIM) have provided debt financing to qualified service companies over the past decade.
The existing loan products have five-year tenures and interest rates of eight per cent, while the new equity financing window is designed to provide an alternative for businesses that may face difficulties accessing conventional loans.
NCDMB Charges Committee on Due Diligence
Speaking at the inauguration, Ogbe charged members of the Investment Committee to conduct rigorous due diligence on companies seeking support and ensure that the fund achieves its intended objectives.
He stressed that the equity fund was not a grant and urged beneficiaries to deploy the capital responsibly and meet the terms of the investment.
“Our top priority should be identifying people who will use the fund properly and, most importantly, return our funds back to us so that we can continue the programme for other deserving beneficiaries,” Ogbe said.
He urged the committee to ensure that only credible businesses with viable operations and strong growth prospects benefited from the intervention.
BOI Highlights Financing Gap
The Managing Director of BOI, Olasupo Olusi, described the inauguration as a major milestone in the implementation of the NCI Fund Equity Fund and the latest phase of the institutions’ longstanding partnership.
He said the collaboration, which has lasted for nearly a decade, began with the administration of the $350 million Nigerian Content Intervention Fund, through which hundreds of indigenous oil and gas companies accessed financing to expand their operations.
Olusi said the introduction of an equity financing window would address a major gap in the sector’s financing architecture.
“The next step, which I am very impressed with and very thankful to the NCDMB for thinking through with BOI, is the need to fill the finance gap with equity,” he said.
He added that the fund would help attract additional capital and support the expansion of Nigeria’s oil and gas industry.
Equity Model Targets ‘Missing Middle’
The Group Head, Equity Investments at BOI, Chike Chukwuelu, said the fund was designed to address what industry experts refer to as the “missing middle” in business financing.
He explained that some indigenous businesses with viable operations and growth potential struggle to obtain senior debt because they lack the collateral required by commercial lenders.
According to him, the equity structure would enable fund managers to maintain closer oversight of beneficiary companies while supporting improvements in governance, management and operations.
“What this also does is that we will now have more oversight in these companies because of the instrument that we’re using, and we can help them develop into sustainable companies, which is what the fund is targeted at,” Chukwuelu said.
The Senior Technical Adviser to the Executive Secretary, Austin Uzoka, said the equity fund provided an opportunity to address gaps that previous financing interventions had not fully resolved.
He said the Investment Committee would be responsible for providing strategic oversight, ensuring prudent investment decisions and building a portfolio of indigenous companies capable of developing into major players in the oil and gas industry.
The NCDMB and BOI said the new equity financing window would strengthen the capacity of indigenous businesses, expand local participation and support sustainable growth within Nigeria’s oil and gas value chain.
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