The Federal Government has ruled out any intervention in form of provision of bailout funds for marginal oil fields operators in Nigeria.
Speaking at the Ministerial Platform in Abuja, Dr. Ngozi Okonjo-Iweala, Minister of Finance and Coordinating Minister for the Economy, said this is in view of the fact that the government cannot afford to provide support to all sectors of the economy.
According to her, the Federal Government’s decision not to provide funds for marginal field operators is due to the fact that the oil sector is normally regarded as having the ability of attracting investment into the sector.
Continuing, she said, “It is proper for the government to support certain sectors of the economy, for them to be able to thrive, and support them in a way that they can become competitive. However, if government keeps on supporting a sector, it means the sector is not viable, but we cannot support every sector.
“On the issue of marginal fields, I really want to say that the oil sector is normally regarded as having the ability of attracting investment. If we have up to 10 billion barrels trapped, that is a lot of trapped resources. The reason we don’t think of a bailout fund for the oil sector is because we expect the sector to be able to attract adequate investment from the private sector.”
Okonjo-Iweala, was responding to questions from Mrs. Catherine Ifejika, Chairperson/Chief Executive Officer, Britannia-U Nigeria Limited, on possible bailout for marginal fields operators, following their inability to access funds to carry out their operations.
The minister said to address the funding challenges confronting marginal field owners and other businesses, the Federal Government is setting up a development finance institution that will become operational by the end of 2014, to cater for the medium to long term financing needs of businesses in the country.
She said the institution will provide funding of between 10 to 15 years for businesses to help them meet their financing needs. She added that the government is partnering with the World Bank in this regard, and will provide loans to businesses at a reasonable rate of interest.
She said, “This is a new angle that just came up that even oil field operators need resources. I think we need to think in this country of how we need to make medium to long term resources available to our private sector so that they can borrow at a reasonable rate.
“That way, the government does not have to be doing bailout for every sector. We are working on it with a strong push from the Presidency; we are now embarking on setting up a Development Finance Institution that will provide 10 – 15 years money at reasonable rate of interest. The World Bank has ordered some institutions to support us, just as we are doing for housing.
“We didn’t mention that we are also working on a Mortgage Refinance Institution to allow some young people, as many as possible, to borrow money to buy a house. I think if we have this, some of this thing about bailout funds will disappear.”
She maintained that the development finance institution will address the issue of funding for the marginal field operators and other businesses.
She stated further, “It will take us about 18 months to be able to set up the long term financial institution, while by July to August; the housing fund will be ready. By the beginning of next year, the refinancing will start and people will be able to start accessing mortgaging.
“The Development Finance Institution will take us longer, perhaps till the end of 2014. We have started work on it, and when we have those institutions Nigeria will be better.”
Information from Vanguard was used in this report.