Nwapa: $350m Nigerian Content Fund is Not a Grant

Executive Secretary of Nigerian Content Development and Monitoring Board (NCDMB), Mr. Ernest Nwapa spoke to Ejiofor Alike on the milestones achieved in the implementation of the Nigerian Content Act, saying that the Nigerian Content Development Fund (NCDF) is not meant to be given out as grant to indigenous operators.

We understand that the Nigerian Content Development and Monitoring Board about $350 million in a fund called the Nigerian Content Fund but it is alleged that this fund is not accessible to the local operators. What is happening to this fund?

I don’t agree with you; the money is accessible. The money is meant to facilitate funding agencies to give money to indigenous operators. That is the way the fund is designed, at least at this phase. You remember that this fund came in as a zero fund. So, we designed it such that in the first five years of the fund, it will only be a fund that people will see as a guarantee, believing that it will grow. It is growing and it has grown to the point where we are looking at remodelling it because now, there is cash in that fund but it will never be a fund that people will treat as grant. It is something that people will take in a structured way. Many of the banks that are funding operations are funding because that fund is there. The fund is there as a collateral sitting in many banks and the banks are linking the loans they are giving to stakeholders to that fund. So, if you expect the NCDMB to have a vault somewhere so that when you want to do something, you will come and the Executive Secretary will approve $10 million for you, it does not work that way. The banks are designed to give those monies out.

The NCDMB is not a bank. The Bank of Industry (BoI) is managing the funds. We are an agency of government that is holding contributions of oil industry stakeholders in trust for them. We have to put the contributions in a bank; we have to use banks that understand financing to administer the fund. NCDMB was not set up to administer funds; it is only set up to make sure that people pay the money into an account as designated by the law. The usage of the money has been structured – two legs. The 30 per cent leg is for direct interventions as you know, where if we find a project to do, we promote it and pay for it. If we find a scheme that trains our people, we pay for the training. If we find things that people are reluctant to fund because they are not sure it is beneficial, we pay for it as a pilot. But if you have a business venture and you need a loan to execute that business venture, especially if it is a capacity development-related venture, the fund gives your bank comfort to give you a loan because the fund is a guarantee from us. When you start paying back your loan, 50 per cent of your interest is taken by the fund. That is what investors want. But there are people, who have the view that because that fund is there, they can just come to the NCDMB to give them money. How many people will get such money? The demand for fund by the industry is beyond $1 billion at any given time for these kinds of things. So, the fact that there is $350 million in that fund or has been collected does not mean that NCDMB will start giving people the money. That is not the way the fund was structured.

The fund is performing satisfactorily; it started as zero fund in 2010. By 2011, we had only about $25 million. Today, we have over $300 million and the more it grows, the more the banks have confidence to give loans to the operators. We are constantly reviewing with the banks and encouraging them to be less rigid about their requirements from oil and gas sector companies because they have, in addition to whatever direct collateral and security they are providing, our fund provides additional guarantee.

The oil and gas industry is so structured that before you get a major contract, you have gone through a lot of screening and beyond that, the law states that if a product is being manufactured in Nigeria, it must be used before you import. So, I would as a bank manager, be very keen to loan money to somebody, who is going into manufacturing because the product he is going to manufacture already has a market and is therefore, going to be used. It demonstrated the will and the strength and authority to make sure those things are manufactured in Nigeria. So, we keep telling the banks to be a little bit more liberal with their requirements because the fund has given them further underpinning. It is important that you understand this because I have seen some reports in the media that the fund is not accessible.

The reports are totally inaccurate. If you understand this, you are going to provide accurate reporting on that. You should not expect a story that the “NCDMB gives Shell $20 million.” The fund is not structured that way. Please, what the stakeholders have agreed is the best model. There are people who have taken loans and are building marine vessels with the support of that fund. There are people, who are building new factories; there are people, who are improving their factories; there are people, who are trying to go into manufacturing of gas cylinders. If you look at the newspapers in the next few days, you will see that the Minister of Petroleum Resources has approved that the NCDMB should push for local manufacturing of gas cylinder. So, if you come today and say that you want to push for gas cylinder manufacturing, we will write to the banks and say that the fund is going to support your project because it is a new area.

There are many gas facilities springing up because of the Local Content Act. If we are saying that we want Nigerians to cook with gas, we do not want Nigerians to start importing gas cylinders. We can say that any bank that wants to fund a gas cylinder manufacturer, the NCDMB is willing to take $50 million and put in a special fund to underpin that transaction. We are not going to give somebody $50 million to go and manufacture cylinders because it is the role of banks to fund projects. But what we are doing is that the government is putting something to encourage certain projects by providing guarantee to show that it is a serious business. If they are asking investors to pay 18 per cent interest, by the fact that this fund is available, you are going to pay nine per cent interest. This is what people want.

Are you saying that the minister has approved that you should support indigenous operators that want to go into local manufacturing of gas cylinders with the Nigerian Content Fund?

Yes, as I am sitting here, I am finalising the public notice because we do not want to see people flooding the country with gas cylinders imported from abroad. There are facilities to manufacture gas cylinders in Nigeria but people are going abroad to import cylinders. These local facilities can employ so many people. So, the minister has directed that we should work with all stakeholders to realise this ambition. There are 160 million Nigerians or let us say there are 50 million households and every household needs two gas cylinders. That means Nigerians need 100 million cylinders and this is a very huge market. So, why won’t a bank fund that project? So, that is one of the areas we will flow with.

The Nigerian Content Law was four years recently but the NCDMB did not roll the drums in celebration of the success recorded, despite the fact that all the stakeholders have agreed that the country has recorded huge progress in the implementation of the Act. Why was the board silent?

We have reached a stage in this country where the government does its job and the people celebrate the government. If you look at what happened, it is the beneficiaries of Nigerian Content that celebrated the achievements of the board. We see what we are doing in government as our job. Why will the minister go and start celebrating Nigerian Content? It is the people she has impacted on that are celebrating. We did not place any advertisement and we did not put any canopy but companies like Nigerdock, LADOL and many others placed congratulatory messages to Mr. President and the Honourable Minister and the NCDMB for doing a great job. If you listen to speeches by local and foreign operators, they all attribute the success to the efforts of the minister but she never celebrated it. People came to me to organise celebration but I told them that we still have a lot of work to do. But for those people that have achieved their objectives, they have celebrations to make. Our objective is to see that Nigerian Content becomes a way of doing things in the industry. We are moving in that direction but there are still a lot for us. We don’t celebrate dates; we celebrate milestones. So, anytime we make a milestone, we celebrate. But to be honest with you, I did not recognise that date coming. What I am thinking is how to get a pipe mill to start operation; when am I going to get industrial parks to take off – these are things that are very important to us.

What is the significance of the gas processing facility built in Esit Eket in Akwa Ibom state to the Nigerian Content?

Well, this project is another validation of the benefits of the implementation of the Nigerian Content under the Ministry of Petroleum Resources. As you know, this facility is owned completely and operated completely by Nigerians. Beyond ownership and technical operatorship, this facility is very innovative because it has gone to the grass root to take a Greenfield facility and convert it today, to gas processing facility- something that would never have been done if it was in the hands of foreign interests. It is only Nigerians that can think like this; that can see these gaps at the grass root level and take these opportunities inherent, in spite of the challenges in developing a facility from scratch.

The government in all spheres from the Ministry of Power to the Presidential Task Force, to the Ministry of Petroleum, Nigerian National Petroleum Corporation (NNPC); NCDMB – every unit government is supporting this facility because we see the benefits. This facility has the potential of bridging the existing gaps in gas supply; it has the potential to pushing power supply and creating bridges to gap in the grid work in the pipeline networks for gas supply. So, it is something very significant and we are very happy that at the highest level of government, Mr. President came to commission the facility. This will encourage other indigenous investors to look at things like this. We believe that as Nigerians continue to move deeper into the oil and gas industry, they will begin to focus on these downstream activities that impact on the lives of Nigerians. We want Nigerians to step out of contracts and start looking at facilities like this that actually has multiplier impacts because just having this located in a place like this empowers hundreds of thousands of people in many ways. Apart from the national impact of adding to power generation basket, it also gives people around this facility a sense of hope and structured dependability to power and for harnessing the otherwise wasted resources. So, it is a very significant thing for us.

In what ways do you support indigenous operators to build something like this in terms of creating policies and good operating environment to encourage them to embark on ambitious projects like this?

The policy is always there. Philosophically, the policy of getting Nigerians to move into power generation; to industrialisation and other activities like this is there. That is one of the central policies of this administration. Beyond that, those policy ideas have been cemented and anchored on enabling laws like the Nigerian Content Act and so many other laws that support these things. Even in the Petroleum Industry Bill (PIB), these ideas are properly entrenched. The Ministry of Petroleum Resources, under the leadership of Mrs. Diezani Alison-Madueke is not only depending on these policies but creating practical and actionable frameworks, where any Nigerian investor or operator that makes a push for this kind of facility gets 100 per cent support from her ministry. So, the government will create that environment; the government will keep pushing people; but the government on its own is not going to start doing these things. What we are asking people to do is to step up; identify these opportunities in your own field; put your feet behind it and government will do the rest. If you talk to the owners of this facility, they will tell you that the government has supported their venture and government is also there for different ventures. This is just one of so many projects that are going on right now. As you know, from here, the president will go to so many other places; there is an industrial park; there is a pipemill in Edo State. So, these things are happening all over the place.