The Way forward: Local Content Development in Nigeria

By Ahmed Achimugu

Introduction

The Nigerian Content Act was signed into law on the 22nd of April 2010 by the President of Nigeria with the goal of increasing Nigerian participation in the oil and gas sector, building local capacity, creating linkages to other sectors of the economy which would then result in improvements in key indices of the country’s financial system. 

The law on its own part is revolutionary and if properly implemented could usher in a new era of empowerment to the locals in an industry that is dominated by foreign and multinational companies. Be that as it may, the law is not perfect and is certainly a work in progress hence the need to get all stakeholders involved in getting it to a form that would accelerate the development of the country as a whole. 

Key Challenges and Solutions 

Some of the targets set by the Nigerian Content Development and Monitoring Board (NCDMB) are either unrealistic or behind schedule. Take for instance, the goal of building enough capacity to be able to fabricate 150,000 tonnes of fabrication works while achieving over 6 million project management man hours by 2020 might not be met, as the necessary instruments to facilitate this initiative are either nonexistent or overwhelmed (e.g. road networks, power infrastructure etc). It is thus necessary for the federal/state government on its part create the enabling environment by providing the necessary infrastructure, security and the right policies that would ease the burden of entrepreneurs investing in these areas. In another example, it is known that a key component of the Oil and Gas industry are pipes and they are mostly made from steel. Nigeria as a country has a huge deposit of iron ore and with the right policies Nigeria could become a hub for steel manufacturing. 

The result of some of these initiatives would be an addition of thousands of skilled/unskilled, direct and indirect labor to the economy, additional revenue to the Government both from concessions and taxes, development of infrastructural needs for the areas of operation and an enhanced public image of the country. 

It is imperative to put in policies that would aid in easy access to financing & credit, better tax rates for indigenous operators/producers. Contracting processes should be different (by lowering some requirements) for indigenous/marginal/sole risk operators from their multinational/IOC counterparts. The multinationals are lot bigger, better organized and financed so it is a bit unreasonable to assess both categories on the same platform. 

In addition, the government must ensure that the necessary mechanisms are put in place to protect the interest of the local communities in which these businesses are located. A suggestion would be their enhanced participation in contracts as it would be seen as a means of giving back to the communities from where these resources are explored. That would in turn create an atmosphere of cooperation these communities. 

Another challenge the Law needs to address is the habit of tagging local companies as being bad performers. As we all know, not all local companies lack the technical knowhow; some partner with foreign companies to build their capacity and are more than capable in executing some of these contracts to world class standards. 

Finally, the practice of restricting indigenous operators’ access to potential acquisitions of producing marginal fields in addition to what they own needs be reviewed. The experience garnered from their operations would be of added value to the producing fields been invested in and vice versa and that would in turn lead to the development of the sector by the exchange of knowledge and expertise.