The Bank of Industry (BOI) says interest rate on the $200M Nigerian Local Content Intervention Fund will not exceed five to eight per cent.
Its Managing Director, Olukayo Pitan, said this on Thursday in Abuja at the Memorandum of Understanding (MOU) signing ceremony on the Implementation of the $200M Nigerian Local Content Intervention Fund.
The MoU was between the BOI and Nigeria Content Development and Monitoring Board (NCDMB).
Pitan said that the decision to lower the interest rates was to reduce loan burden on contractors as well fast track the development of the oil sector in the country.
He said that the BOI had taken into consideration the different categories of the contractors to come up with moderate single digit interest rates.
Pitan said that the BOI’s response to loan requests under the fund would be within 45 days.
He said the loans would be for a period of five years.
“In summary form, the fund can be used to acquire assets for those in oil and gas who have contracts that they have to execute for major industries.
“There is a single obligor limit for that type of facility which will not exceed $10M and the interest rate of it will not exceed eight per cent per annum.
“Also, we have taken into account community contractor for people who are in the community because this fund is also trying to ensure that they are brought along and in a easier way.
“For community contractors, they can access up to N10m and the interest rate of that will not exceed five per cent,’’ Pitan said.
He said that for contractors into manufacturing for big companies such as Dangote could access the facility not exceeding $10 million.
He said that the fund, with tenure of five years, could also be used to finance contracts.
Pitan said that the BOI was aware that before the intervention fund was operational most of the contractors approached banks with agreement to pay up to 15 to 16 per cent per annum in dollar.
For the contracts that were qualified, but already working with other commercial banks, Pitan said that the BOI would find a modality to co-opt them into the scheme to reduce their burden arising from high interest rate.
The bank executive said that the BOI would dedicate a team made up of experts from both banking and the oil and gas industry so that contactors could easily access the fund.
“We are going to do this so that if you bring project that we are not familiar with, we will get expert to work with. We also get people in the board that will be looking at what you have sent to us.’’
He expressed optimism that the $200m fund would lead to greater capacity of local players in the industry.
“It will generate employment; it will block leakages that will as well lead to the growth of the industrial sector.
The Executive Secretary of NCDMD, Mr Simbi Wabote,said that the essence of the MoU was to facilitate the implementation of the 200 million US dollars of Nigerian Local Content Intervention Fund.
Wabote said that the 200 million dollars intervention fund was owned by NCDMD, adding that the fund was given to Bol by NCDMD to disburse to contractors that would be in need.
Wabote said that over 35,000 jobs had been created through the implementation of Local content Act Act.
He said that a key eligibility requirement to borrow was that applicants must have been contributing to the Nigerian Content Development Fund.
“We have developed a robust governance framework covering the funding structure and management, equity contribution, collateral, credibility reviews, and other operational guidelines to ensure the fund’s sustainability.
“The intervention fund will help to improve the capacity in oil and gas sector,” he said.