The African Export-Import Bank (Afreximbank) has announced plans to set up a $1 billion oil service financing facility in Guyana. The announcement was made by Prof. Benedict Oramah, President and Chairman of Afreximbank, at the Guyana Energy Conference and Supply Chain Expo, held from February 18 to 21. The initiative aims to strengthen local participation in Guyana’s growing oil sector in line with the government’s local content policies.
The financing facility will be deployed directly to eligible corporate clients or through a factoring line via local banks. This will enable local financial institutions to fund invoices from Guyanese contractors involved in the oil service industry.
Guyana’s oil reserves and local content development
Guyana’s oil reserves are estimated at 12 billion barrels. President Oramah underscored the need for strategic management of these resources, emphasising their potential to drive economic transformation.
He stated, “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%.”
He called for policies that enable local entrepreneurs to play a greater role in the oil value chain. The proposed financing facility is expected to support local companies in securing contracts and strengthening their capacity to provide services within the oil sector.
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Risks of oil dependency and need for diversification
Drawing on Afreximbank’s experience in supporting commodity-dependent economies, Oramah highlighted the risks associated with relying on oil revenues. He pointed out the volatility and cyclicality of the global commodity market, warning that dependence on crude exports as a primary source of government revenue could expose Guyana’s economy to price fluctuations.
“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,” Oramah said.
He advised the government to secure long-term off-take contracts with oil service companies. Such agreements would provide market stability and mitigate the impact of price swings.
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Strengthening Afri-Caribbean partnerships
Afreximbank is looking to strengthen partnerships between Africa and the Caribbean. Oramah noted that experienced oil service firms from Ghana, Egypt, and South Africa are prepared to collaborate with Guyanese businesses.
“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 said.
He also pointed out the lessons learned from decades of financing oil and gas operations in Africa. The experience shows that policy decisions play a crucial role in determining whether an oil-rich economy benefits from its resources.
“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,” he said.
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Implications for Guyana’s economic growth
Afreximbank’s financing facility is expected to help Guyana retain more value from its oil industry. By providing funding solutions for local contractors, the initiative aims to create business opportunities, generate employment, and drive economic growth.
The bank’s approach aligns with Guyana’s efforts to implement local content policies that ensure greater participation by its citizens in the oil sector. The initiative also highlights Afreximbank’s broader commitment to fostering economic resilience in emerging markets through financial support and strategic partnerships.
The Guyana Energy Conference and Supply Chain Expo served as a platform for discussions on sustainable resource management and economic diversification. Afreximbank’s engagement underscores its role in promoting financial solutions that enable countries to maximise the benefits of their natural resources while reducing economic risks.
