Emmanuel Addeh in Abuja
The Nigerian Content Development and Monitoring Board (NCDMB) and the Petroleum Technology Association of Nigeria (PETAN) have signed an agreement on $30 million working capital scheme that will support the operations of oil companies against the adverse effects of Covid-19 pandemic and loss of contracts due to low oil prices.
Executive Secretary of NCDMB, Mr. Simbi Wabote and the Chairman of PETAN, Mr. Nicolas Odinuwe signed the Memorandum of Understanding (MoU) on the credit scheme in Abuja.
A statement from the executive secretary’s office, stated that the working capital scheme was one of the newly introduced products in the Nigerian Content Intervention Fund (NCI Fund) approved by the NCDMB’s governing council under the leadership of the Minister of State for Petroleum Resources, Chief Timipre Sylva.
“Key features of the credit scheme are single obligor limit of $1,000,000, tenor of 365 days after 90 days moratorium and eight percent interest per annum for naira and five percent for United States dollars,” the organisation said.
In his remarks at the event, Wabote explained that the fund which is currently domiciled with the Bank of Industry will bridge the oil companies’ cash flow gaps, support operations and prevent staff layoffs in the industry.
He said the scheme would be triggered whenever the oil price of $40/barrel benchmark is reached and whenever there are such negative impact on the industry, adding that the $40/barrel trigger point strategy is important considering the rapidly changing nature of the oil and gas industry.
Providing details on the eligibility of beneficiaries, 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 funds will also be applied in acquiring and maintaining assets, expansion or renovation related to ongoing projects for which working capital is being sought and refinancing of loans.
“Insurance guarantee covering 120 per cent of the loan has to be issued to NCDMB by the intending beneficiary. The board will also demand a letter of sponsorship and guarantee by PETAN and irrevocable standing payment order issued by beneficiary bank,” NCDMB said.
Wabote also confirmed that application to the fund will be processed approved within seven days and repayment will be in three instalments, effective six months, after 90 days moratorium.
He also clarified that the MOU has a validity period of three years from effective date and renewable thereafter at the instance of the board when the Brent crude price falls below $40 benchmark or whenever there are such negative impact on the industry caused by unforeseeable circumstances beyond control.
He recalled the drastic drop in the price of crude oil largely due to the battle for market share between Saudi Arabia and Russia and further worsened with the serious impact of the COVID-19 outbreak.
The ES added that the global oil and gas industry witnessed serious downturn in business fortune and Nigeria operators were equally affected, stating that it was what prompted the new agreement.