Local Content Fund Is Nigeria’s Energy Bank in The Making

By Adeniyi Adeoloye

There is need for an Oil &Gas Bank in Nigeria, in the opinion of a cross section of stakeholders in the country’s E&P sector.

“It is imperative for government to encourage the licencing of an Oil &Gas Bank”, declared Tunde Afolabi, Chairman of Amni International, giving a keynote address at a webinar on funding for the sector. “And Government should have significant subscription in the shares of the bank”.

Austin Avuru, former Chief Executive Officer of Seplat Petroleum, observed that “there is an Energy Bank in the making in Nigeria, if we watch carefully”.

“All of us operators, today contribute 1% of our budget to the Nigerian Content Fund, a fund that is run by the Nigerian Content Development and Monitoring Board (NCDMB”

The fund can act as seed capital for starting out an Energy Bank for the Nigerian hydrocarbon industry. “The local content fund currently has about $200Million and has the chance to grow to about $1Billion in the next 10 years given the proposed legislation that is underway at the National Assembly that seeks to increase the contribution to the fund to 2% from the current 1%”, Avuru explained.

“You don’t need more than that ($1Billion), to seed a bank that will cater solely to the needs of the industry”, especially the needs of the indigenous Nigerian firms who today struggle with funding their operations.

Afolabi’s key argument was that “an oil and gas focused bank will understand the market fundamentals and the rudiments of running an E&P business”. His paper laid out a list of challenges that stand in the way of financing of projects by indigenous Nigerian E&P companies from Nigerian banks. “Facilities granted by banks to the marketers of petroleum products are included in the count of what was given to the oil and gas sector, which comes to 50% of what is granted.

The webinar, entitled Long Term Funding of E & P Business in Nigeria- Strategies for Sustainability, was organized by the Nigerian Association of Petroleum Explorationists.

This story was originally published in the August 2020 edition of Africa Oil+Gas Report. Mr. Afolabi’s full paper is published in the October 2020 edition.



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