Shell Companies in Nigeria, supported by the Nigerian National Petroleum Corporation (NNPC), has signed Memoranda of Understanding (MoU) with eight Nigerian banks under the revised Shell Contractor Support Fund, the latest milestone in an effort to improve access to finance for Nigerian vendors and suppliers in the oil and gas industry.
Under the MoUs signed in Lagos, Access Bank Plc, Skye Bank Plc, Zenith Bank Plc, Stanbic IBTC Bank, First Bank of Nigeria Limited, Standard Chartered Bank, First City Monument Bank (FCMB), and Guaranty Trust Bank Plc have set aside $2.2 billion for contract execution by Nigerian firms.
According to a statement by Shell, 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 revised version is in response to market realities and will offer loans faster and at cheaper rates.
The Managing Director of The Shell Petroleum Development Company of Nigeria Ltd (SPDC) and Country Chair, Shell Companies in Nigeria, Mr. Osagie Okunbor, said at the signing ceremony in Lagos that supporting SMEs under this scheme was for the mutual benefit of all the parties.
“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 clientele base, in addition to the comfort of domiciliation of payments,” Okunbor said.
Also speaking, Shell’s Finance Manager, Nigeria and Gabon, Guy Janssens, added that funding is key to enable contractors deliver and grow. Janssens also urged the banks to make the scheme work.
Commenting on the MoUs, the Managing Director of Shell Nigeria Exploration and Production Company (SNEPCo), Mr. Bayo Ojulari, advised the contractors to perform in order to build trust and grow.
The Group General Manager, National Petroleum Investment and Management Services (NAPIMS), Mr. 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), Mr. 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, urged the banks to ensure that the rates charged are comparable to credit sourced from overseas so that Nigerian firms could compete with foreign firms in bidding for jobs.
The 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 $1billion to over 220 vendors. In 2015, 93 per cent of all contracts awarded by Shell Companies in Nigeria were undertaken by Nigerian companies amounting to $900 million.