Nigerian indigenous contractors in the oil and gas industry, especially those who have relationship with Shell Nigeria Exploration and Production (SNEPCO) would longer have trouble having access to funds to finance their contracts as the multinational oil company has signed a Memorandum of Understanding with five banks to provide N790 billion ($5billion) to facilitate the execution of their contracts.
This is part of the ways to deepen the local content development in the oil and gas industry and also to bolster the economy. Having access to funds has been a major constraint to local companies in executing their contracts. Their inability to execute the projects have often led to foreign firms taking up the jobs.
According to SNEPCO, Shell contractor’s support fund is a partnership for local content development between the ’Shell Companies’ in Nigeria and five reputable financial organisations.
The oil giant stated that the objectives of the financing arrangement is to alleviate funding challenges of Nigerian contractors, support their growth and aspiration of the Nigerian Content Act.
The banks which are led by Fidelity Bank plc will provide financier support to the tune $5 billion (N790 billion) to finance loans for contracts made available by Shell through competitive bidding.
The other financial institutions in the financing deal are Access Bank plc, First Bank of Nigeria plc, Standard Chartered Bank Limited and DLR Integrated Services Limited.
Igo Weli, general manager, Nigerian Content Development, Shell Companies in Nigeria while reinstating the commitment of his company to supporting the Federal Government’s efforts to reform the industry especially through the local content policy, explained that each of the banks is expected to provide $1 billion each for the fund, which is spread for five years period.
He said that the partnership becomes necessary because of lack of access to affordable funds, which has been identified as constraint to contract performance and growth, adding that the scheme would address the issue of access to funds, which appears to be a serious nightmare to operators in the industry. “Financing of projects has traditionally been a major challenge to contractors’ growth and participation in the delivery of goods and services to the oil and gas industry,” he said.
He explained that banks had committed themselves to relaxing the collateral security requirements, reducing interest rates and establish their competitive advantage and become global players.
In his presentation during the signing of the MOU, Emeka Nkemakolam, who was the Team head, E&P/Projects of Fidelity Bank plc, said the bank was fully committed to supporting the implementation of the Nigerian Content policy.
The scheme is accessible until certain conditions are met by the contractors, and these according to the Fidelity Bank plc boss is that for the contractors to qualify for the facility, they must have a good banking history and a valid contract with Shell.
“To qualify for the fund, contractor must have successfully executed contracts of similar nature and value in the last 12 months and must have lodged such proceeds with a bank. We shall review and appraise credit request and inherent risks. We also liaise with Shell on confirmation of contract and domiciliation of proceeds. We are also responsible for the disbursement and monitory of the facility,” he added.
He said that before the programme was launched last year, Fidelity was already involved in a similar funding.
