The local content policy seeks to increase indigenous participation in the oil & gas industry. Nearly five years into its implementation, stakeholders say although the policy has made some progress, government must demonstrate enough political will and commitment to address the gray areas in its implementation, particularly the abuse of expatriate quota by foreign operators, if it must stimulate growth of indigenous capacity, reports Assistant Editor CHIKODI OKEREOCHA.
The Nigerian Oil and Gas Industry Content Development (NOGID) Act 2010 signed into law by President Goodluck Jonathan on April 22, 2010, was received with so much enthusiasm and expectations by stakeholders across the sectors. The law was seen as providing the needed impetus to build local capacity and adding value to the economy. It was supposed to help Nigerians have greater access in the management of the nation’s natural resources, which have been in the hands of foreign multinationals.
Essentially, the NOGID Act seeks to stimulate the growth of indigenous capacity by increasing local participation in the lucrative oil and gas industry by prescribing, among others, minimum thresholds in relation to the utilisation of local manpower, services and goods as avenues of adding value to the economy. In other words, the law is expected to promote the ownership and employment of Nigerians through a paradigm shift in the way service and maintainance contracts, as well as jobs are dished out to non-Nigerians or expatriates by oil and gas operating and service companies, and halt the resultant huge capital flight, which acted as drain tothe economy.
About five years down the line, the question remains unanswered whether the NOGID Act has attained its set objectives.
This is the crux of the matter, as the assessment of the policy’s performance has become a subject of heated debate amongst stakeholders. While the Nigerian Content Development and Monitoring Board (NCDMB), the ombudsman for the local content policy, including Immigrations Department of the Ministry of Interior, Department of Petroleum Resources (DPR), the Navy and the Marine Police, among others, say the policy has made significant progress, some stakeholders’ assessment of the initiative is unflattering.
For instance, an Abuja-based Oil & Gas Consultant, Ifeanyi Izeze, is piqued by what he described as the flagrant abuse of expatriate quota by foreign operators. He decried the rate at which oil and gas operating and service companies flout the local content laws, especially in the area of expatriate quota, insisting that it is largely responsible for the increasing rate of unemployment in the country. Izeze, a Geologist, told The Nation that the implementation of the Act is skewed in favour of foreigners to the detriment of Nigerians.
He said the International Oil Companies (IOCs) and other foreign operators have been observing the aspect of the Act that deals with personnel only in the breach and by so doing short-change Nigerians. He said the IOCs have taken advantage of government’s lack of political will to monitor, implement, and enforce the Act to bring in expatriates to take over jobs meant for Nigerians with all the benefits that accrue to the positions, while Nigerians, who in most cases are better qualified are denied such opportunities.
Although, the oil & gas expert described the policy as ‘a laudable initiative aimed at building local capacity and adding value to the economy’, he expressed fears that all the institutions involved in the monitoring, implementation, and enforcement of the Act, especially the aspect of expatriate quota , have been politicised. He said they have all been working at variance with the provisions of the Act by granting all sorts of waivers to the detriment of the nation’s interest.
The alleged that the abuse of expatriate quota has also not gone down well with the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN). Its President, Comrade Francis Johnson, observed that non-adherence to the principle of expatriate quota and the absence of a definitive provision for job security in the NOGID Act, are major defects that have hampered the efficasy of the law.
Johnson, who spoke after he emerged President of the Association at its 4th Triennial National Delegates Conference in Abuja, noted that the Act was framed within the context of growth of Nigerian entrepreneurship and the domestication of assets to fully realise Nigeria’s strategic developmental goals.
“How do we derive maximum benefits from oil and gas operations through optimal use of local competences and resources as practiced in Indonesia, Brazil, Norway and Venezuela, for example? Although these countries started oil exploration and production activities after Nigeria, they have recorded remarkable success in their efforts to grow their local content in this strategic industry, he said, wondering why Nigeria’s case is otherwise.
For Obiora Akabogu, a Lagos-based lawyer and public affairs analyst, the answer lies in corruption, which he said was the response for the lack of will and commitment by the government agencies and institutions to implement the Act. “The labour leadership has been compromised; relevant committees of the NASS have been compromised and they looked the other way. It’s still part of that general corruption, which will go when the polity is sanitised,” he told The Nation, adding that it takes a lot of political will to achieve genuine local content.
He, therefore, called on the oversight committees of the NASS, which enacted the Act, including labour leaders and the Federal Government, to monitor and implement the overseas training aspect of the policy. According to him, Nigerians need to be sent abroad for training before they can take over from expatriates. He said most of the jobs in the industry require specialised skills and trainings and Nigerians are supposed to undergo apprenticeship for sometime before they can master the jobs.
Akabogu urged that Nigerians should be patient and carefully understudy the expatriates to acquire the specialised skills. He said within the Nigerian business environment, an average apprentice undergoes apprenticeship for at least five. “But in this case we are talking about complex technology, which most Nigerian universities don’t offer in their curriculum. Besides, the onus is on the investor to hire hands they deem necessary and such hands are mostly expatriates with the necessary skills. So, it goes beyond economic nationalism,” he said, adding that it is only when Nigerians acquire the necessary skills that adequate sanctions could be meted out to the multinationals where they fail.
Incidentally, this is coming at a time some operators are making a case for the policy to be replicated in other sectors. For instance, the Trade Union Congress of Nigeria (TUC) called on the Federal Government to formulate and implement local content policy in the construction industry to check the expatriate quota abuse as it did for the oil and gas industry. Its President General, Comrade Peter Esele, decried the rate at which employers in the construction industry have continued to flout the country’s laws, especially in the area of expatriate quota. He lamented that the practice contributed largely to the increasing rate of unemployment in the country.
Similarly, President-General, National Union of Civil Engineering Construction, Furniture and Wood Workers (NUCECFWW), Comrade Amechi Asugwuni, accused the Federal Government of failing to prevail on Chinese construction companies to adhere to the expatriate quota policy. “The non-adherence to the provisions of the local content policy by Chinese construction companies has made human resources/industrial relations practice difficult,” he said, noting that this is why about 90 per cent of Nigerians in the employ of Chinese construction companies are casuals.
Operators in the automobile industry are also clamouring for increased local content. ThePresident/Chairman of Council, Institute of Business Development (IBD), Mr. Ifeanyi Obibuzor, noted that although, the National Automotive Policy (NAP) is a beautiful idea, there must be increased local content for it to have the desired impact. He told The Nation on the sideline of the association’s Business Development Week/Summit in Lagos, that if the auto policy must be implemented for the benefit of the sector’s investors and the economy, more Nigerians must be encouraged to participate.
“What is the local content of the auto policy? How many of our engineers are actually participating?,” he asked, pointing out that in some projects worth billions of naira, not many Nigerian engineers are understudying the process for them to take over. According to him, what obtains at the moment is that critical aspects of the jobs in the auto industry are usually done at odd hours when Nigerian engineers are not there to know what is happening or how the jobs are done. While insisting that the practice amounted to defrauding the economy, he said the “government must be awake to its responsibility.”
The Executive Secretary/Chief Executive Officer of NCDMB, Mr. Ernest Nwapa, said the fact that the telecoms sector is trying to copy not only the Nigeria Content policy, but the implementation model that was used to push it thus far, lends credence to its positive impacts on the industry. According to him, the same thing is happening in the power sector where the Board is in constant engagement with the Ministry of Power to see how to make things happen.
Citing Nigerian ownership of the foundation of the oil & gas industry, the exploration and production side of it, and other impacts, Mr. Nwapa, said the policy has been hugely successful. He said, for instance, before now, the nation’s marine sub sector of the oil industry relied completely on foreign vessels. But today, 60 per cent of the vessels operating in the waters are owned by Nigerians. While also noting that the number of Nigerians working in the industry has more than doubled over the years, he said there is a clear evidence that the engineering work being done in Nigeria by Nigerians has increased.
The level of investment has also increased. The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, disclosed recently that the Nigerian content implementation has attracted foreign direct investments worth over $500m (N78bn) in the manufacturing of equipment components for the oil and gas industry. She said the equipment components manufacturing initiative of the Board is an effective way to drive industrialisation and is already creating over 1000 skilled jobs in Nigeria. According to her, the initiative, which mandates original equipment manufacturers to partner with their representatives to set up facilities to manufacture or assemble equipment components in the country, ensures the retention of spend-within-the-economy on critical industry equipment such as valves, pumps, electrical and instrumentation products.
Between 1956 when oil was discovered and 2010 when the policy came into place, Nigeria reportedly recorded an estimated capital flight of $380 billion to foreign companies and contractors. This was because of lack of indigenous capacity in manufacturing, fabrication and engineering design of production platforms, marine vessels, drilling rigs and other equipment used in the industry. Virtually all categories of contracts in the oil and gas sector were executed by foreign firms. The engineering designs of production platforms were neither done in Nigeria nor manufactured locally.
Indeed, things are gradually looking up for the local operators. Already, a number of them are said to have acquired enough capacity to hold their own following the divestment of some International Oil Companies (IOCs) from Nigeria. The IOCs’ divestments are seen by some industry watchers as representing the single largest opportunity for Nigerian operators with the requisite expertise and capital to emerge as major upstream players. Already, a number of local oil companies have taken up the challenge, acquiring several oil blocks across Nigeria’s oil-producing regions.
Some local oil companies that have emerged formidable players, The Nation learnt, include Seplat Petroleum Development Company, an independent oil and gas exploration and production company incorporated and operating in Nigeria; Oando Plc, one of Africa’s largest integrated energy solutions providers; Spectra Energy Services Limited, a fully Nigerian owned oil and gas service company, among others. Seplat has since become a leading indigenous oil and gas operator in Nigeria with crude oil production capacity inching closer to 100, 000 barrels per day.
