How investors can access CBN’s N250bn gas intervention fund

For potential investors willing to invest in Nigeria’s gas value chain, the Central Bank of Nigeria (CBN) has given guidelines on how to access N250 billion intervention fund for the National Gas Expansion Programme (NGEP).

The NGEP is seeking to promote gas as replacement fuel and also save the nation the much-needed foreign exchange expended on imported fuels by providing alternatives to petrol, diesel and kerosene.
In order to attract prospective investors, the CBN entered into collaboration with the Ministry of Petroleum Resources to set up a N250 billion intervention facility expected to stimulate investment in the gas value chain.

Eligible projects for loan

To qualify for a loan, prospective investors must know projects eligible for financing by the intervention fund, which is very vital in order to be shortlisted.

According to the CBN, the project includes the establishment of gas processing plants and small-scale petrochemical plants; establishment of gas cylinder manufacturing plants; establishment of Liquefied Compressed Natural Gas (L-CNG) regasification modular systems; establishment of auto gas conversion kits or components manufacturing plants and establishment of CNG primary and secondary compression stations.

The fund would also finance the establishment and manufacturing of Liquefied Petroleum Gas (LPG) retail skid tanks and refilling equipment; development/enhancement of auto gas transportation systems, conversion and distribution of gas infrastructure; enhancement of domestic cylinder production and distribution by cylinder manufacturing plants and LPG wholesale outlets.

Others are the establishment/expansion of micro-distribution outlets and service centres for LPG sales, domestic cylinder injection and exchange, and any other mid to downstream gas value chain related activity recommended by the Ministry of Petroleum Resources.

Terms of the loan

For Manufacturers, Processors, Wholesale Distributors:

According to the new guidelines, the CBN has set N10 billion as the maximum loan Manufacturers, Processors and Wholesale Distributor can access with working capital of N500 million per obligor.
Also, the loans shall have a maximum tenor of 10 years (not exceeding December 31, 2030) depending on the complexity of the project, while each project tenor shall be determined in relation to its cash flow and life of the underlying collateral.

Small & Medium Enterprises (SMEs) and retail distributors:

For the above category, the CBN shall not exceed N50 million per obligor with maximum of N5 million per obligor with a maximum tenor of five years not exceeding December 31, 2030.

Project tenor shall be determined in relation to its cash flow and life of the underlying collateral while term loans shall be allowed a maximum of two years moratorium on principal repayment only.

Working capital facility of one year with a maximum roll-over of not more than twice and subject to prior approval.

Other terms

For the two categories, the CBN notes that interest rate under the intervention will be at least 5 percent per annual till February 28, 2021, thereafter, interest on the facility will revert to 9 percent per annual effective from March 1, 2021.

Concerning repayment, commercial banks monthly interests on the facility will be amortised and transferred to CBN monthly while NIRSAL Microfinance Bank (NMFB) monthly interests on the facility shall be paid monthly after the moratorium period.

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The CBN also noted that the collateral acceptable for projects to be financed under the intervention will be as acceptable by the participating commercial banks under the Power and Airlines Intervention Fund (PAIF) while the collateral acceptable for SMEs will be as determined by the NMFB.

There will be periodic monitoring of projects financed under the scheme, which shall be conducted jointly by commercial banks, Ministry of Petroleum Resources and the CBN.

The CBN acknowledged that whenever a loan is repaid or the Facility is otherwise discontinued, the commercial bank would return the fund to the CBN within three working days, providing details of the credit facility.

With over 202 Trillion Cubic Feet (TCF) of gas reserves, Nigeria has in abundance the critical feedstock required to drive gas-powered vehicles. Analysts say good policies will drive private sector investment into conversion and building of filling stations.