Shell Companies in Nigeria, supported by the Nigerian National Petroleum Corporation (NNPC), has signed Memoranda of Understanding (MoUs) with eight Nigerian banks under the refreshed Shell Contractors’ Support Fund, the latest milestone in efforts to improve access to finance for Nigerian vendors and suppliers in the oil and gas industry.
Under the MoUs signed in Lagos in November, Access Bank, Skye Bank, Zenith Bank, Stanbic IBTC Bank, First Bank, Standard Chartered Bank, First City Monument Bank and Guaranty Trust Bank have set aside $2.2 billion for contract execution by Nigerian firms.
The scheme provides support for contractors to enable them finance projects executed for Shell Companies in Nigeria in line with the aspirations of the Nigerian Content Act. To access these funds, the contractors must have a valid purchase order and meet the banks’ risk assessment criteria. This refreshed version is in response to market realities and will offer loans faster and at cheaper rates.
“Supporting SMEs under this scheme is for the mutual benefit all the parties,” said Osagie Okunbor, Managing Director of The Shell Petroleum Development Company of Nigeria Ltd (SPDC) and Country Chair, Shell Companies in Nigeria at the signing ceremony in Lagos. “While the scheme reduces the pressure from requests for advance payments from contractors on us, it also ensures optimum delivery by our contractors, leaving the banks with a de-risked client base in addition to the comfort of domiciliation of payments.”
Finance Manager, Nigeria and Gabon, Guy Janssens, added that funding is key to enable contractors deliver and grow. He also urged the banks to make the scheme work.
Managing Director, Shell Nigeria Exploration and Production Company (SNEPCo), Bayo Ojulari, advised the contractors to perform in order to build trust and grow. The Group General Manager, NAPIMS, Dafe Sejebo, who was represented by Bunmi Lawson, implored the banks to make the loan facilities available to the vendors when they come for them. In the same vein, the Chairman of the Petroleum Technology Association of Nigeria (PETAN), Mazi Bank-Anthony Okoroafor, enjoined the banks to be realistic in their demands in order to engender easier access to the funds.
Responding, one of the contractors, Moritz Abazie of Strides Energy and Maritime Limited, requested that the rates charged should be comparable to that for credit sourced overseas so that they could fairly compete with foreign firms in bidding for jobs.
The idea of a Contractor Funding Scheme started in 2011 with the Shell Kobo Fund, which gave rise to the Shell Contractor Support Fund in 2012. The scheme has been redesigned to address the current economic exigencies and to align it with stakeholder needs by merging the two initial initiatives. To date, the six participating banks have disbursed a total of $1 billion to over 220 vendors.
In 2015, 93% of all contracts awarded by Shell Companies in Nigeria were undertaken by Nigerian companies amounting to $0.9 billion.