Afreximbank Advocates for Increased Local Participation in Guyana’s Oil Value Chain
In a landmark announcement at the Guyana Energy Conference and Supply Chain Expo, Prof. Benedict Oramah, President and Chairman of the Board of Directors of the African Export-Import Bank (Afreximbank), revealed plans to establish a $1 billion oil service financing facility in Guyana. The initiative, aimed at boosting local participation in the country’s rapidly expanding oil industry, aligns with the Guyanese government’s local content policies and seeks to empower Guyanese entrepreneurs to play a more significant role in the oil value chain.
The facility will be deployed directly to qualifying corporate clients or through local banks via a factoring line, enabling them to finance invoices from local contractors. This move is expected to strengthen Guyana’s capacity to retain a larger share of the economic benefits generated by its oil sector, which boasts an estimated 12 billion barrels of crude oil reserves.
President Oramah underscored the transformative potential of Guyana’s oil reserves, urging the country to proactively harness its resources to build capital and drive economic growth. He estimated that the oil service sector in Guyana could generate between 5billion and 8 billion annually, given the scale of oil production and its offshore location.
“A 50% retention of this revenue in Guyana would increase the country’s GDP by 29% to 47%,” Oramah stated. However, he warned that without robust local content policies, much of this revenue could flow to foreign oil service companies, leaving Guyana with limited economic benefits.
Oramah emphasized the importance of implementing strong local content policies to ensure that Guyanese entrepreneurs and businesses can actively participate in the oil value chain. He highlighted the need for capacity building, technology transfer, and partnerships with experienced oil service companies from Africa, such as those in Ghana, Egypt, and South Africa.
“These skilled oil service companies are ready and willing to support Guyanese entrepreneurs, and Afreximbank is there to underwrite this partnership,” Oramah said. He added that such collaborations would help Guyana avoid the pitfalls of over-reliance on foreign expertise and ensure sustainable development of its oil sector.
While acknowledging the immense potential of Guyana’s oil reserves, Oramah cautioned against the risks associated with dependency on a single commodity. He pointed out that commodity markets are prone to volatility and cyclicality, which could expose Guyana’s economy to significant risks if not managed properly.
“The reliance on crude revenues as a primary source of government funding could expose the national economy to volatile commodity markets,” Oramah warned. To mitigate these risks, he advised the Guyanese government to secure long-term off-take contracts with oil service companies, which would enhance market access and price stability.
Oramah also stressed the importance of diversification to avoid the so-called “Dutch Disease,” a phenomenon where heavy reliance on a single resource leads to the neglect of other sectors, ultimately harming the economy. Drawing on Afreximbank’s three decades of experience in financing oil and gas activities across Africa, he emphasized that policy choices play a critical role in determining whether resource-rich countries experience positive or negative outcomes.
“We have witnessed oil-dependent economies transform for better or worse through these periods. The difference reflected the policy choices the leaders made,” Oramah said. He urged Guyana to learn from these experiences and adopt policies that promote economic diversification, sustainable development, and inclusive growth.
The $1 billion financing facility is also a testament to Afreximbank’s commitment to deepening ties between Africa and the Caribbean. Oramah highlighted the shared historical and cultural connections between the two regions and expressed optimism about the potential for mutually beneficial partnerships in the energy sector and beyond.
The announcement of the $1 billion facility has been widely welcomed as a significant step toward empowering Guyana to maximize the benefits of its oil resources. By fostering local participation, promoting diversification, and leveraging international partnerships, Guyana has the opportunity to transform its economy and achieve sustainable growth.
As the Guyana Energy Conference and Supply Chain Expo continues, stakeholders are optimistic that this initiative will pave the way for a brighter future for Guyana and set a positive example for other resource-rich nations in the Caribbean and Africa