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Nigeria launches $350m oil fund
10/12/2006 14:43 - (SA)
Abuja - Nigeria launched a $350m credit facility on Friday designed to give local companies in the oil and gas sector access to loans at single digit interest rates and raise the participation of Nigerians in the industry.
The bulk of Nigeria's 2.4 million barrels per day in crude oil production is pumped and exported by five Western oil majors while most firms that provide services to the oil and gas industry are also foreign.
Like other developing countries that produce oil, Nigeria has been trying to find ways to improve "local content", or increase the number of contracts and jobs available to its own nationals.
The new Nigerian Content Support Fund is backed by a consortium of local banks and by the state-owned Nigerian National Petroleum Corporation (NNPC).
"The support fund is home-grown and tailored specifically to the Nigerian oil industry," said the group managing director of NNPC,
Funso Kupolokun.
The fund aims to provide cheap loans for local companies that have been awarded contracts by NNPC or firms with which it has a
joint venture or a production sharing contract.
The Nigerian companies must be able to demonstrate that they have the capacity to execute the contracts.
One of the problems for any genuine company seeking to break into the business is that commercial terms on bank loans are prohibitive in Nigeria.
To access the new cheap loans, firms will have to pledge their revenues from the contracts they were awarded as collateral. The
money will be used to repay the principal and interest on the amount borrowed from the fund, while any excess cash will be paid to the companies as profit.
Contracting in the oil and gas industry is one of the major opportunities for graft in Nigeria, one of the world's most corrupt countries.
Little known local companies with no track record in the sector have often been awarded stakes in oil exploration blocks or contracts for maintenance or other services.
In another measure to try and improve contracting standards, Nigeria also launched on Friday a new electronic system designed to allow oil and gas companies to post available contracts online and to let registered suppliers bid for them.
The Nigerian Petroleum Exchange (Nipex) aims to give buyers in the upstream oil and gas industry better value for their money by
giving them access to a selection of contractors with proven capacity to carry out the jobs assigned to them.
Officials from NNPC said the system was already up and running and they expected all contractors wishing to do business in Nigeria to register into the Nipex database to improve transparency in contracting.
However, there was no indication that the launch of Nipex would prevent oil and gas companies from continuing to award contracts outside of the system in the discretionary way that has been the norm so far.
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