Afreximbank to Set up $1 Billion Oil Service Financing Facility in Guyana
In a significant announcement at the Guyana Energy Conference and Supply Chain Expo being held from, February 18 - 21, Prof. Benedict Oramah, President and Chairman of the Board of Directors of African Export-Import Bank (Afreximbank) (www.Afreximbank.com), declared the multilateral Bank's intention to establish a $1 billion oil service financing facility in Guyana. This initiative aims to enhance local participation in the country's fast growing oil industry, in alignment with the government's local content policies. The Bank will deploy the $1 billion facility directly to qualifying corporate clients or through a factoring line via local banks, enabling them to finance invoices from local contractors.
President Oramah highlighted the transformative potential of Guyana's estimated 12 billion barrels of crude oil reserves. Emphasising the transformative power in proactive resource management, he advised Guyana to aggressively harness and build capital from its oil resources.
He said, "Given the level of oil production in Guyana and its offshore location, I estimate that the oil service sector would amount to 5 to 8 billion US dollars annually. But where will it go? Most of it would be paid to oil service companies abroad, if Guyana does nothing to avoid that. A 50% retention in Guyana would increase Guyana's GDP by 29% to 47%.” As such, he called for robust local content policies that would enable Guyanese entrepreneurs to become significant players in the oil value chain.
Based on Afreximbank's rich history of supporting commodity-dependent economies, President Oramah shared insights to complement the ongoing efforts of the Guyanese government. He acknowledged the inherent risks associated with dependency on a single commodity and laid stress on the importance of diversification.
He cautioned, “The commodity market is prone to volatility and cyclicality; hence, the reliance on crude revenues as a primary source of government funding could expose the national economy to volatile commodity markets." As such, he advised the government to secure long-term off-take contracts with oil service companies, which will enhance market access and price stability.
In the spirit of deepening Afri-Caribbean partnership, President Oramah remarked that skilled oil service companies from Ghana, Egypt, and South Africa, are "ready and willing to support Guyanese... And of course, Afreximbank is there to underwrite the marriage.”
He added that: “These measures are necessary if Guyana and other new entrants in the Caribbean and Africa are to avoid the painful "Dutch Disease. We make these suggestions based on the three long decades of financing oil and gas activities across Africa. We have witnessed oil-dependent economies transform for better or worse through these periods. In all these, the difference reflected the policy choices the leaders made.”
Distributed by APO Group on behalf of Afreximbank.
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Vincent Musumba
Communications and Events Manager (Media Relations)
Email: press@afreximbank.com
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About Afreximbank:
African Export-Import Bank (Afreximbank) is a Pan-African multilateral financial institution mandated to finance and promote intra-and extra-African trade. For over 30 years, the Bank has been deploying innovative structures to deliver financing solutions that support the transformation of the structure of Africa's trade, accelerating industrialization and intra-regional trade, thereby boosting economic expansion in Africa. A stalwart supporter of the African Continental Free Trade Agreement (AfCFTA), Afreximbank has launched a Pan-African Payment and Settlement System (PAPSS) that was adopted by the African Union (AU) as the payment and settlement platform to underpin the implementation of the AfCFTA. Working with the AfCFTA Secretariat and the AU, the Bank is setting up a US$10 billion Adjustment Fund to support countries effectively participating in the AfCFTA. At the end of December 2023, Afreximbank's total assets and contingencies stood at over US$37.3 billion, and its shareholder funds amounted to US$6.1 billion. Afreximbank has investment grade ratings assigned by GCR (international scale) (A), Moody's (Baa1), Japan Credit Rating Agency (JCR) (A-) and Fitch (BBB). Afreximbank has evolved into a group entity comprising the Bank, its impact fund subsidiary called the Fund for Export Development Africa (FEDA), and its insurance management subsidiary, AfrexInsure (together, "the Group"). The Bank is headquartered in Cairo, Egypt.
For more information, visit: www.Afreximbank.com
