On April 22, 2010, Dr Goodluck Jonathan, then Nigeria’s Acting President, signed into law the Local Content Bill 2010 (now Act), a piece of legislation designed to increase participation of Nigerian ventures and workforce in the oil and gas sector. The Local Content Act is a vital instrument that empowers Nigerian Companies to contribute tremendously towards the development of the Nigerian economy by encouraging value addition, job opportunities, and the award of different oil contracts and undertakings.
The Act which established the Nigerian Content Development and Monitoring Board (NCDMB) with the mandate to oversee the implementation of the provisions of the law, is seen as a revolutionary step towards enhancing Nigeria’s launch into the league of technology-driven economies spurred by the huge opportunities in the oil and gas industry.
Jonathan had stated that the Board “shall make procedures to guide, monitor, coordinate and implement [the Act] to ensure and enforce measurable and continuous growth of Nigerian content in all oil and gas operations in the country.” The Board thus becomes the Local Content ‘Policeman’ who ensures that, whenever possible, operators will hire Nigerians for all the jobs in the field.
In practical terms, the Act provides for preferential treatment of local ventures and workforce who should be given the first consideration in the award of oil blocks, oil field licences, oil lifting licences and shipping services. Additionally, all projects for which contracts are to be awarded in the Nigerian oil and gas industry shall be treated with preference for Nigerian indigenous players.
PRE-LOCAL CONTENT ENVIRONMENT
Nigeria was besieged by scavengers from Europe, America and Asia (India precisely) who posed as oil and gas experts before the Local Content Policy inculcated the desired sanity into the industry. It was common then for well-placed Nigerians, including top military and government officials, to pose as agents and representatives of overseas manufacturers whose products and services are used in the industry. The so-called principals, sometimes collaborated with corrupt insiders to inflate their prices. This helped to accommodate certain interests and the commissions of the so-called agents who added no value to the system. At the time, only a few Nigerian companies were interested in capacity building and training of their employees to do what the Local Content Policy now advocates.
Technical areas like installation and servicing of Metering system, construction of Loading Bay, LPG installation, Tank Farm construction, installation of Actuators, Columns, Mechanical Seals, Valves, Steam Trap and other process equipment sercved as conduit for forex drainage. In some cases, the manufacturers sign agreement with Nigerian agents to supply equipment that were at the verge of being phased out, only for the Nigserian party to realise shortly that the spare parts had become obsolete.
Process equipment like metering were phased out so frequently that the manufacturers had to send their experts to install, fix and service the new ones at a huge cost. Only a few focused EPICOM (Engineering, Procurement, Installation, Construction, Operation and Maintenance) Nigerian companies played the patriotic role of sending their technical employees abroad for training in the manufacturers’ facilities. Turn Around Maintenance (TAM) of the refineries was a bazaar season. At a time, persons from all walks of life: cattle rearers, furniture makers, mechanic workshop operators, teachers and traders became agents and representatives of oil and gas equipment manufacturers. All that mattered was the commission money. Little transfer of technology or skill acquisition was achieved. In one case, the chief executive of a refinery was alleged to have ordered materials in excess of what was required to do the TAM. The excess warehoused equipment and materials remained unused as no TAM was held for years after.
ERA OF LOCAL CONTENT
The last 12 years has revolutionised the oil and gas sector by strategic capacity development in a way that has positively impacted on the nation’s GDP through job creation, skill acquisition, tax revenue and economy. It also enhanced the absorption of local communities who now take ownership of the projects in their communities.
“We have expanded our business beyond measure; we now do virtually everything locally without the help of expatriates,” a Port Harcourt-based oil and gas service operator who would not want his name published “because of these tax people”, told THEWILL. He applauded the NCDMB’s role in its monitoring of the industry.
Credit goes to the man at the helm of affairs at NCDMB, Engr Simbi Wabote, who assumed office as the Executive Secretary in 2016. In a recent interview with THEWILL Downtown, Wabote stated that the Board had recorded significant milestones. “The idea is that in Nigeria, we’ve made a lot of progress with regard to the local content development in the oil and gas sector. Before we started, the oil industry used to spend about 21 billion dollars year on year in our activities and less than 5 billion of that remained in the country.
“Today as we speak, we’ve taken that ‘less than 5%’ to about 42% Nigerian participation. It is a 10-year plus strategic plan.” He revealed that his predecessors had raised the local content to 25% before his appointment in 2016. “From 2016 till now, we’ve moved it from that 25% up to 42%. Ninety-eight percent of the contracts given out in the oil and gas industry are given out to Nigerians. All the activities between the land and swamp are set aside for Nigerian companies. Today, in oil servicing, almost 99% of oil service activities are done by Nigerians. These are guys who open their shop, taking advantage of the Local Content Act.”
Industry operators who spoke to THEWILL maintain that the success of the Local Content Policy hinges on capacity building, especially in the aspect of human capital development. They argue that oil and gas is technology-driven and is transforming rapidly to another level where less emphasis is on fossil fuel. . Edwin Amali, an Engineer running an oil and gas business in the Niger Delta area said NCDMB should develop a plan for the absorption of young engineering and related graduates and attaching them to field operators. “What matters is human capital. The local content initiative goes beyond riding big cars and building big mansions. Otherwise change will overtake us,” Amali said.
The Supervisor, Media and Publicity at NCDMB, Obinna Ezeobi, confirmed that the Board is serious about capacity building. He referred to the research centres of excellence established in five universities by the Board. Engr. Wabote had disclosed in 2021 that the Board had established a $50 million Research and Development Fund to support research findings that have practical utilisation and capability of being commercialized and applied to solve critical problems in the Nation’s economy.
Engr. Wabote who stressed that no country develops sustainably without focusing on research and development also disclosed that the Board had signed a Memorandum of Understanding to establish Research and Development, R&B, Centers of Excellence in five universities, including Federal Universities of Technology, Minna, Akure and Owerri, Niger Delta University, Amasoma and Modibbo Adama University of Technology, Yola.
The Act has been fundamental to the promotion and development of indigenous capacity in Nigeria’s oil and gas sector. Now, in combination with the Petroleum Industry Act, which will complement it, it is expected that the 2027 target for 70 per cent Nigerian content will remain on course. By 2027, Nigeria expects to achieve 70% local content. Some players however also lament over the Indians and Chinese being hired by some indigenous firms to do the work that Nigerians can do, especially in the downstream sector, thereby jeopardising the Local Content Policy.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
