The ongoing ground breaking reforms in the nation’s oil and gas sector which has been hailed by critical stakeholders in the industry could give the nation’s ailing economy a big boost, reports GIDEON OSAKA
These are the best of times for the Nigerian oil and gas industry, as the sector continues to be in the global spotlight for the right reasons. First was the announcement by the Minister of Petroleum Resources, President Muhammadu Buhari, of a whopping N287 billion profit after tax (PAT) made by the Nigerian National Petroleum Corporation (NNPC), for the first time in 44 years of the corporation’s existence. The announcement came a few weeks after the President made history with the signing of the long-delayed Petroleum Industry Bill (PIB), now Petroleum Industry Act (PIA)– a feat that is expected to change the fortunes of the nation’s oil and gas industry for the better.
Before these recent milestones in the petroleum industry, some unprecedented and remarkable developments around the local content subsector had also taken place, and these developments aligned with the long-term aspirations of the PIA, of getting more Nigerians and Nigerian made technology/products to dominate the industry.
At the time the industry was reveling over the passage of the PIB, the Nigeria Content Development and Monitoring Board (NCDMB), being a proactive and forward-thinking agency, introduced new, innovative and first-of-its-kind initiatives that underscored its practical efforts to institutionalise financial support for indigenous companies in the industry, and reverse the unhealthy dominance of foreigners.
The schemes, which had to do with newly developed loan products – the $40 million Intervention Fund for Women in Oil & Gas, $30 million Working Capital and Capacity Building loans for member companies of the Petroleum Technology Association of Nigeria (PETAN), as well as a $50 million Nigerian Content Research & Development Fund (NCR&DF) – were carved out from the Nigerian Content Intervention Fund (NCI Fund), to support indigenous players in the industry.
“…Gender diversity decreases with seniority, with only a tiny proportion of women in executive positions. The percentage of women in the industry drops over time, from 36 per cent to 24 per cent between the middle and executive level”
The NCI Fund was instituted in 2017 as a $200 million Fund, managed by the Bank of Industry (BoI), to facilitate on-lending to qualified stakeholders in the Nigerian oil and gas industry on five loan product types. The NCI Fund is a portion of the Nigerian Content Development Fund (NCDF), aggregated from the one per cent deduction from the value of contracts that are executed in the upstream sector of the oil and gas industry.
The Governing Council of the NCDMB, under the leadership of the Minister of State for Petroleum Resources, Chief Timipre Sylva, had, in June 2020, approved the expansion of the Fund by $150 million, from $200 million to $350 million. The Council had approved that $20 million and $30 million, respectively, be deployed to the intervention fund for women in oil and gas and PETAN member companies, to cushion the impact of COVID-19 on indigenous service companies.
The $40 million intervention fund for women in the oil and gas industry, one of numerous gender-friendly policies being championed by the Board, affirmed the special interest the Board is according women in a bid to improve their participation in the industry, as past studies have indicated a chronic shortage of women in the sector.
According to a study by the Global Energy Talent Index Report, it is estimated that women occupy about 50 per cent of non-technical positions at entry level, compared to only 15 per cent of technical and field role positions in the energy sector globally. Gender diversity decreases with seniority, with only a tiny proportion of women in executive positions. The percentage of women in the industry drops over time, from 36 per cent to 24 per cent between the middle and executive level.
Therefore, it did not come as a surprise when the industry threw its weight behind the collaboration between the Nigerian Import-Export Bank (NEXIM) and the NCDMB, following the recent launch of a $40 million intervention fund for women in the industry.
According to the Executive Secretary of NCDMB, Engr. Simbi Kesiye Wabote, during the signing in Yenagoa, Bayelsa State, of the memorandum of understanding (MoU) on the administration of the Fund, the target beneficiaries are firms where women hold majority shareholding of 51 per cent, or where, at least, 50 per cent of the management are women, or where the Chief Executive Officers (CEOs) and, at least, 40 per cent of the management are women.
He said the scheme would be available to both startups and existing companies, and would cover manufacturing, oil service contracts, environment management, leasing, logistics, catering and training.
The maximum amount that can be borrowed by a single obligor is $500,000 or its naira equivalent at the official exchange rate prevailing at the time of borrowing. The loan can be processed online, and in 21 working days, provided all the required documentation has been provided.
The global oil and gas industry witnessed a serious downturn in fortune due to the serious impact of the COVID-19 outbreak, and the Nigerian operators were equally affected. However, relief came the way of indigenous operators who, before now, were constrained by funding to win and execute projects, as the NCDMB put in place a funding mechanism that will bridge the companies’ cash flow gaps, support operations, and prevent staff layoffs in the industry.
The Board and PETAN had, in December last year, signed a $30 million Working Capital Scheme (WCS) 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 fund, which is currently domiciled with the BoI, has a single obligor limit of One Million US Dollars ($1,000,000.00), the tenor of 365 days after 90 days’ moratorium, and eight per cent interest per annum for naira, and five per cent for United States’ dollars.
The Scheme will be triggered whenever the oil price of $40/barrel benchmark is reached, and whenever there are such negative impacts on the industry. The $40/barrel trigger point strategy is important, considering the rapidly changing nature of the industry.
Providing details on the eligibility of beneficiaries during the signing of the MoU with PETAN in Abuja, recently, 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 Fund will also be applied in acquiring and maintaining assets, expansion or renovation that are related to ongoing projects for which working capital is being sought, and refinancing of loans.
Nigeria’s poor commitment to research and development (R&D), resulting in over-dependence on foreign technology for critical economic development activities, including oil and gas operations, has become a source of concern for the Board, and this necessitated an intervention.
To institutionalise a robust R&D ecosystem that will lead to continuous development of technology, materials and process for industry application from indigenous research efforts, the NCDMB commenced implementation of an R&D roadmap, through the establishment of a $50 million NCR&DF.
The Governing Council of the Board had, in June, approved the establishment of the NCR&DF, and the deployment of $50 million research fund for sustainable funding of NCDMB’s mandate on R&D, as enshrined in sections 37 to 39 of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act 2010, which empowers NCDMB to superintend over R&D activities in Nigeria’s oil and gas industry.