TEN YEARS OF LOCAL CONTENT IMPLEMENTATION IN NIGERIA: SUCCESSES, CHALLENGES AND THE IMPERATIVE OF EXPANDING BEYOND OIL AND GAS __ ISMAIL KHADIJAT MOROMOKE

Abstract

Local content is just a means not the goal . ‘Nigerianization’ of the oil and gas industry has helpful to improve the indigenous participation in the oil sector and has yielded positive results in terms of improving the nation’s economy though some challenges that have been encountered within the decade just concluded show that there is a long way to the attainment of the desired goals of local content implementation in the sector which are but not limited to improved economy, high standard of living and developed nation.

1.0 Introduction

Most African countries, at post independence, recognized the need for their indigenes to take ownership and control of their natural resources for exploitation and transformation into economic growth . In order to achieve this goal, various policies and laws have been pursued by the government .

The oil and gas industry was not immune from these government policies . In a bid to ensure that the control, ownership and transformation of crude oil as one of the natural resources in Nigeria, are annexed for economic development in the nation, the local content policy was adopted which became more formalized and well pronounced with the enactment of the Nigerian Oil and Gas Industry Content Development Act 2010 (“The Act”).

The Act, which has been in force in Nigeria for a decade especially as at April 22nd, 2020, contains some vital provisions particularly its general provisions under Section 3, which enhance local content implementation in the oil and gas industry. But for the challenges faced and which the oil industry is still facing, there would not have been any imperative in expanding the scope of local content beyond the wall of oil and gas sector.

2.0 The Idea of Local Content in Nigerian Oil and Gas Industry

The Nigerian Oil Industry was originally the exclusive domain of the International companies such as Shell, Esso and BP . Intervention by the Federal government through various local content policies, regulations and legislation resulted in the nationalization of assets of the major oil players .

However, what actually connotes local content within the lens of the nation is not yet ascertainable as a company that maintains a local branch office that is simply a conduit for bringing in goods and services from outside the country may not realize the desired local content policy objectives . On the other hand, a foreign-owned firm entering a joint venture, consortium or taking ownership positions in local firms could make an important contribution to local economic capital .

Although, many countries such as Ghana, Uganda, Tanzania, define the local content policy based on their individual peculiarities, the meaning ascribed to local content within the ambit of the Act is in line with the definition of Nigeria Content. Section 106 of the Act defines Nigerian content to mean: “the quantum of composite value added to or created in the Nigerian economy by a systematic development of capacity and capabilities through deliberate utilization of Nigeria human, material resources and services in the Nigerian Oil and Gas Industry”.

3.0 Ten Years of Local Content Implementation in Nigeria

3.1 Successes

Local content policy has been implemented in Nigeria as early as 2001 and passed into law in April 22nd, 2010 during the regime of President Good luck Ebele Jonathan . The policy has helped in building the capacity of indigenous firms by awarding onshore and offshore oil blocks to Nigerian entrepreneurs through competitive bidding.

It also provide more opportunities for participation of local companies such as Total, Mobil, and other emerging oil companies in oil industry which was formerly the exclusive domain of international oil companies.

The targets of the local content policy in increasing local content development were set progressively-45% local content in 2007, 70% in 2010 and more than 80% by 2020 which are achieved within the span of a decade.

It has helped in Nigeria in taking a full control of their oil resource and has blocked all possible loopholes for exploitation by foreign oil companies. Local content implementation helps to increase government revenue which are used for development projects such as infrastructural development.

3. 2 Challenges

Despite the seemingly progress narrated above, the “Nigerianization” process of the upstream has been comparatively negligible . Research done in 2008 concludes that although the oil and gas industry accounts for 90% of Nigeria’s revenue, it contributes less than 38% to the Nation’s GDP.

In real terms, the upstream industry has for decade functioned as an enclaved economy with minimal impact on the wider economy of Nigeria . Challenges to the effective implementation and success of local content policy in Nigeria include:

• Low-skilled labour force; this is because requiring foreign companies to use local workforce when the existing workforce lacks the capacity to perform the required task is anti-investment .

• International agreements such as the General Agreement on Tariffs and Trade (GATT), Agreement on Subsidies and Countervailing Measures(ASCIM), Agreement on Trade-Related Investment Measures (TRIMs), stand in the way of effective implementation of the local content policy to the advantage of Nigerian Oil companies.

• Community content and Demand for resource control by local communities such as the Niger Delta agitation for resource control in the middle belt of the country.

• Transportation issues in the country; bad nature of roads has discouraged the localization of industries in remote areas of the country.

3.3 Expanding beyond Oil and gas

Just like a timely bomb though not for negative effects, the Nigerian Local Content Development and Enforcement Commission Bill( “the Bill”) 2020 is like savior at this material time.

The most applaudable initiative of the bill which is presently at the National Assembly is the expansion of the scope of local content which is also refer to as Nigerian content to all areas of the Nigerian economy particularly petroleum, solid minerals mining, construction, power, Information and Communication Technology (ICT), manufacturing and health sectors .

There is abundant of sun in Nigeria particularly in the northern where solar power can be derived from the solar energy from the sun.

This type of energy is renewable and inexhaustible, unlike the mineral oils and natural gas Nigeria is placing heavy reliance on. It will no way improve the economy of the country and make Nigeria more developed as that is one of the major sources of revenue in India today Also, agriculture, has no doubt, continue to be the sector that has contributed greatly to the Nation’s GDP.

It is high time the scope of Nigerian content is expanded to the agricultural sector of the country since in the early 1960s, the country had a leading position across several of its export crops, in particular, groundnut, cocoa, cotton and palm oil in which its share of world agriculture exports was in excess of 1% .

4.0 Conclusion and Recommendations

It has been a journey so far with the enactment of the Nigerian Oil and Gas Industry Content Development Act 2010 into law in April 22nd, 2010.

Ten years of local content implementation in Nigeria oil and gas sector is highly commendable as the extent in which local participation in oil activities is really astonishing.

However, the setbacks in the full realization of the local content objectives as highlighted in this essay should be looked into hence, the following recommendations:

• Various research activities should be initiated as it is a vital tool for national growth and development.

• Qualitative education especially in areas of creativity and innovations

• Training programmes for local workforce

• Good governance to promote infrastructural development and eradication of corruption in order to enhance the effective implementation of local or Nigerian content policy.

• Swift enactment of the Bill into law as the new hope now lies in diversification.

References

1. Olsen, Willy(2008) Local Content Development: What Will It Take? Presentation prepared for United Nations Development Program Conference, Cambodia (PowerPoint Presentation)

2. Akindelano Legal Practitioners, ‘Review of Nigeria’s Local Content Legislation’ available at <www.akindelano.com>

3. Ibid

4. Ibid

5. Ibid

6. Ibid

7. Ana Maria Esteves et al, ‘Local Content Initiatives: Enhancing the Subnational Benefits of the Oil, Gas and Mining Sectors’. A policy paper, July 2013 pg. 3 8. Ibid

9. Ovadia,J.s 2013, The Nigerian ‘one percent’ and the management of national oil wealth through Nigerian content. Sci. Soc. 77(3), 315-341

10. Nigerian Oil and Gas Industry Content Development Act 2010, section 14-16 11. Ihua a, U.B. et al, 2011. Entrepreneurial implications of Nigerian’s oil industry local content policy perception from the Niger Delta Region.

12. Bakare, A.S., 2011. Local content policy in oil sector and the capacity utilization in Nigeria manufacturing industry.

13. Akindelano, op.cit.

14. Ibid

15. Ibid

16. KPMG, ‘Commentaries on the Nigerian Local Content Development and Enforcement Commission Bill 2020’. February 2021, pg.1 <home.kpng/ng>

17. PwC Nigeria(2016), ‘Nigeria: Looking Beyond Oil’. Pg.24