NCDMB and BOI Launch $100m Fund for Oil and Gas Growth

In a bid to boost financing for Nigeria's oil and gas service sector, the Nigerian Content Development and Monitoring Board (NCDMB) and the Bank of Industry (BOI) on Friday in Lagos launched the Investment Committee for the Nigerian Content Equity Fund (NCEF). This new fund, worth $100 million, aims to provide long-term financing to service companies, allowing them to access funds through equity instead of traditional loans.

Felix Omatsola Ogbe, the Executive Secretary of NCDMB, inaugurated the committee. This step marks the beginning of the financing option under the Nigerian Content Intervention Fund (NCI Fund).

The goal of the Nigerian Content Equity Fund (NCEF) is to lower the cost of oil and gas products and services in Nigeria. It also aims to create an extra income source for NCDMB and attract other investors to support viable businesses. The product paper states, "By providing access to equity financing, the NCEF will enable service companies to expand and increase their market share, which will contribute to the growth of the Nigerian oil and gas industry."

The fund has a total size of $100 million, with a limit of $5 million for each company. NCDMB provides the fund, while the BOI acts as the Fund Manager.

Target beneficiaries include oil field service companies, manufacturers connected to the oil and gas sector, and fabrication yards. The main aim is to encourage economic growth, job creation, and wealth creation in Nigeria. It is estimated that the fund could create around 12,500 direct jobs and 7,000 indirect jobs in oil and gas projects.

The committee's launch is another step forward for the NCI Fund, which was set up under the Nigerian Oil and Gas Industry Content Development (NOGICD) Act. The fund helps to close financing gaps faced by local oil industry firms. Over the last ten years, five NCI Fund products managed by BOI and two by the Nigerian Export-Import Bank (NEXIM) have given out loans to qualifying service companies. These loans last five years with an interest rate of 8%. The Equity Fund offers a new financing option.

During the event, Ogbe urged the investment committee to carefully evaluate each company applying for support. He emphasized that the fund is not a grant and that beneficiaries must use the funds wisely and repay them as agreed. He said, "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."

Olasupo Olusi, the Managing Director of the Bank of Industry, called the inauguration a significant milestone for the NCI Fund Equity Fund. He noted that this initiative is the next step in the long-standing partnership between BOI and NCDMB. He mentioned that this collaboration started with the management of the $350 million Nigeria Content Intervention Fund, which has helped many local oil and gas companies secure financing.

Olusi pointed out that the new equity financing option fills a gap in the industry's funding structure. He said, "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 added that equity financing is a different type of financial support that can help businesses that may not yet qualify for traditional loans. Olusi is confident this fund will attract more investment into Nigeria's oil and gas sector and boost local participation. He said, "We believe that this fund will help fertilize additional resources and move the industry forward."

Chike Chukwuelu, the Group Head of Equity Investments at BOI, explained that the Equity Fund targets what experts call the "missing middle." Many local businesses find it hard to get senior debt because they do not have enough collateral, even though they have strong growth potential.

Chukwuelu stated that the equity structure allows fund managers to closely monitor beneficiary companies. This will help them improve their operations and become sustainable businesses. He said, "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."

Austin Uzoka, the Senior Technical Adviser to the Executive Secretary, noted that the Equity Fund is an opportunity to achieve what previous financing efforts could not fully accomplish. He said, "The striking thing is that the fund is about doing things the other funds have not been able to accomplish."

Uzoka added that the committee's job is to oversee the Equity Fund, make wise investment choices, and build a portfolio of companies that can grow into major players in the industry.