Nigerian banks raise low-interest fund to develop oil and gas

Dec 24, 2006 01:00 AM

A consortium of 10 Nigerian banks led by the United Bank for Africa (UBA) has boosted efforts by the Nigerian National Petroleum Corporation (NNPC) to accelerate the Nigerian content in the oil and gas industry by floatation a $ 350 mm single-digit interest Nigerian Local Content Fund.
The fund which was launched by the Minister of State for Petroleum, Dr Edmund Daukoru, in Abuja, recently will enable indigenous oil and gas services companies to access funds for contracts they could not handle in the past. Dr Daukoru disclosed that already 50 indigenous oil and gas services companies had applied for various sizes of loan facilities, even before the formal launch and therefore expressed optimism that the fund would almost immediately deepen the activities among Nigerian operators in the sector.

Under the fund deal, UBA Global Markets and BGL Securities would act as the Mandated Lead Arrangers and Financial Advisers to the NNPC. The initiative will provide a pool of local funds for the execution of oil and gas projects in the country, thereby gradually reducing the dependence on foreign financial institutions for such funding and also helping to stem capital flight in the industry.
The other banks involved in the initiative include Stanbic, Fidelity, First Bank, Oceanic, Diamond, Guaranty Trust, Bank PHB, and Zenith. Citigroup would act as trustee.

All multinational oil industry would also contribute to the fund. For years, stakeholders in the Nigerian oil and gas industry have been brainstorming on the issue of improving local content in the industry. The NNPC had given a deadline of 2008 for the proportion of Nigerian content in the financing and contracting of oil and gas-related activities to be increased to at least 45 %.
Speaking at the launch, the managing director/CEO of UBA Global Markets, Mr Sonnie Ayere, stated that Nigerian oil and gas companies would soon be relieved of the burden of sourcing funds from abroad for their projects with its attendant huge costs on operators and the nation.

"This is the first time Nigerian investment banks are providing advisory services and arranging funds via innovative financing structures for the NNPC to benefit indigenous oil and gas operators," Mr Ayere said.
He added that "Nigerian banks, with UBA taking a lead role, are growing and playing in areas that hitherto were the exclusive preserve of JP Morgan, Merill Lynch, CSFB and other foreign investment banks."

Source: Vanguard
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