The Nigerian Content Development and Monitoring Board (NCDMB) and the Bank of Industry (BOI) established a fund for the NOGAPS Manufacturing Product Line on March 8, 2023, in Lagos, with a total of $50,000,000 USD.
The goal of this fund is to encourage companies to locate in Nigeria’s oil and gas parks and get involved in the manufacture of equipment parts used in both the oil and gas sector and other industries.
The fund will offer financial support to oil and petrol firms that will be operating in oil and petrol parks created by the Board in the states of Bayelsa and Cross River, said the Executive Secretary of NCDMB, Engr. Simbi Kesiye Wabote, during his remarks at the signing. These parks are now being built in Cross River and Bayelsa.
He emphasised that only enterprises that occupy space in the park in order to either buy manufacturing equipment or set up their production shop floor within the park itself will have access to the money.
Wabote emphasised that the NOGAPs Manufacturing Fund is distinct from the initial $300 million fund that is managed by BOI and consists of five product lines. The latter fund’s primary objective is to provide financial assistance to Nigerian companies that contribute one percent of their revenue to the Nigerian Content Development Fund.
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What NCDMB BOI fund will serve
The new fund would operate as a separate product line from the rest of the line, with its own different fund allocation as well as its own unique eligibility requirements and collateral structure.
Wabote, ”the decision of the Board to establish the product was informed by the peculiarities of the manufacturing sector, which include infrastructure challenges, long gestation, long lead time before returns, low margins on products, and high risk attached to the endeavour,
In addition to the reluctance of commercial banks to lend to the sector and application of stiff collateral and eligibility criteria where loans are extended.”
Concerning the requirements for accessing the NOGAPS manufacturing funds, the Executive Secretary alluded to the fact that in contrast to the Nigerian Content Intervention Funds, which requires companies to be contributors before they can profit, the NOGAPS fund can be obtained by companies that will be domiciled and will produce their products within the parks. This is in contrast to the Nigerian Content Intervention Funds, which requires companies to be contributors before they can benefit.
“The Fund will provide loans to Nigerian companies that meets the criteria to operate in any of the designated NOGAPS Industrial Park for the purpose of financing manufacturing activities, purchase of fixed assets, working capitals and logistic. Beneficiaries will get a maximum single obligor of $3m and minimum of single obligor of $250,000.00with one year moratorium repayable within five years at five percent interest per annum,” he said.
Wabote said, in regard to the various incentives in the NOGAPS park, that the tariff for accommodation is decreased, power is assured, and the rent won’t begin to count until the company begins manufacturing products.
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The financial impact of the NCDMB BOI fund
Mr Olukayode Pitan, Managing Director of the Bank of Industry, praised the Board for being a partner in advancement during his remarks. He thanked the Board for their efforts. He pointed out that the fund will further help encourage domestic manufacturing in addition to contributing to the establishment of employment opportunities.
Pitan said that the interest rate would make it simpler for businesses to access the product and make their payments.
“The interest rates are very good just like the initial fund, which is less than ten percent and the same thing will apply to this one. All we are looking for are Nigerians who want to manufacture in Nigeria.”
He challenged Nigerian businesses to make the most of the potential presented by the park to produce goods locally by leasing space there.
In 2018, the Board of Directors decided to establish the NCI Fund with the goal of providing finance to oil and gas firms so that they can expand their capacities and enhance the amount of Nigerian content in the industry. At the moment, the Bank of Industry is responsible for the administration of the NCI Fund’s five different product lines.
These are as follows: Factory Financing in the amount of $10 million; Asset Acquisition Finance in the amount of $10 million; Contract Finance in the amount of $5 million; Loan Refinance in the amount of $10 million; and Community Contractor Finance in the amount of N20 million.
In addition, the Board maintains a Working Capital Fund with a value of US$30 million for oil and gas service companies as well as an Intervention Fund for Women in the Oil and Gas Industry with a value of US$20 million. The Nexim Nigerian Export-Import Bank is in charge of the administration of the remaining two facilities, and the agreements governing them were signed in the middle of 2021.
A supplementary memorandum of understanding for the $300 million Nigerian Content Intervention Fund was signed by the two chief executives as a side event to the main event. This will allow the deal to continue for another year.
This fund is a progressive development which will encourage emerging and thriving entrepreneurs in the oil and gas sectors.