The Nigerian Content Act may have begun delivering on its promises of promoting local participation in the oil & gas industry and reducing capital flight. From less than five per cent job retention in the industry, the implementation of the Act, which came into being in 2010, has forced a 28 per cent job placement for Nigerians. Also, the industry’s greater spending is now domiciled in Nigeria. Experts, however, say despite these achievements, a holistic overhaul of the industry is necessary to achieve the Act’s overall objectives, AMBROSE NNAJI reports.
Prior to the implementation of the Nigerian Content Act in 2010, the oil & gas industry was said to have lost an estimated $380 billion in capital flight. It also retained less than five per cent jobs for Nigerians, as all fabrications, engineering, procurement as well as training were done overseas.
Main One Chief Executive Officer Ms Funke Opeke painted a gloomy picture of the industry before the Act came into force. She recalled, for instance, that Nigerian companies lacked the skills to play in the industry, while the government was not doing enough to give indigenous operators the right incentives to compete with their foreign counterparts.
Ms Opeke, who regretted that the situation gave rise to local services being more expensive, advised the government to focus more on enabling local participation in infrastructure to enable in-country service delivery. She noted that in advanced countries large companies exist with the incentives provided to them by the government to compete globally.
Interestingly, Opeke’s yearnings and, indeed, other industry experts’ in the area of enabling local participation, may have been met to a large extent, following the commencement of the implementation of the Local Content Act. The initiative is said to have resulted to an increase in job placement for Nigerians, while capital flight in the industry has significantly reduced.
For instance, it was learnt that more than 28 per cent job placements are now available for Nigerians in the sector, on the strength of the Act. This is against the less than five per cent job retention in the country before the act was signed into law on April 22, 2010, following presidential assent by the then Acting President, Dr. Goodluck Jonathan.
Petroleum Technology Association of Nigeria (PTAN) Chairman Mazi Bank-Anthony Okoroafor said although the industry now spends about $20 billion annually, the annual spend was still huge.
That is not all. Okoroafor also said with the Local Content Act in place, the country has the capacity to fabricate up to 60,000 metric tons of equipment and tools, even as Nigerians now have 36 per cent ownership of marine vessels as well as drilling rigs in the industry.
The PTAN chairman added that, currently, there are Nigerians operating throughout the entire industry value chain, a development which, he said, was not possible before the Act was signed into law. According to him, virtually all processes were hitherto domiciled outside the country.
The Nigerian Content Act targets the promotion of local participation in the oil and gas industry. The Act provides exclusive consideration for indigenous service companies, which demonstrate ownership of equipment, Nigerian personnel and the capacity to execute jobs in the oil and gas industry.
The Act provided that all regulatory authorities, operators, contractors, sub-contractors, alliance partners and other entities involved in any project, operation, activity or transaction in the Nigerian oil & gas industry shall consider Nigerian content as an important element of their overall project development and management philosophy for project execution.
The Nigerian Content Monitoring Board (NCMB) was established as the regulatory body responsible for monitoring, co-ordinating and implementing the provisions of the Local Content Act. The NCMB was also given the mandate to certify companies to ensure compliance with the Local Content Act.
NCDMB Director, Planning, Research and Statistics, Mr. Patrick Obah, explained that the case for local content was all about technology transfer, local employment, capital flight reduction, local ownership and control of assets.
Others are poverty alleviation drive, increased production and utilisation of locally made goods, and sustainable economic growth.
Noting that before now, the emphasis was on how much money Nigerians could get from the activities in the oil and gas value chain, revenue generation, taxes as well as being able to produce first oil, Obah said with the enactment of the Act, the emphasis has shifted to in-country manufacturing and skilled manpower.
He listed other areas of emphasis to include job creation, technology development, revenue retention, research and development, value retention, technology linkages and industrialisation.
Obah, who spoke on behalf of the Board’s Executive Secretary, Mr. Simbi Wabote, however, observed that despite its achievements, the practical aspect of the Act was still missing. He, therefore, said to go forward, there is the need to focus on the practical aspect of the Act.
According to him, what the Board has done is to explain to people how the Act works, but that the time has come to allow them have a feel of it. In doing so, he said, there was a need to get the right statistics and capacity to know where to improve upon.
Noting that the Nigerian content law was about the domiciliation/domestication of value adding activities in the oil & gas industry, Obah emphasied the need to develop local capacities and capabilities and then monitor compliance and enforcement.
“There must be standardisation in the way we do things. If we don’t do that, of course, we cannot get a clear direction towards development. We should be able to bring in specialisation into all these things, standardisation is key,” he said.
Nigerian Maritime Administration and Safety Agency (NIMASA) Director General Dr. Dakuku Peterside agreed with him. He said this was why the agency was working to ensure the domestication of value-adding activities, develop local capacities, monitor compliance and enforce research and development.
He, however, pointed out that the challenges confronting the effective implementation of the local content initiative, particularly under the Coastal and Inland Shipping (Cabotage) regime, include inadequate infrastructure, skills gap and uncooperative attitude of financial institutions in the country.
Peterside pointed out, for instance, that the unwillingness of financial institutions to invest in the maritime sector was a major challenge in the maritime and oil and gas industry. While noting that financial institutions prefer short term facilities instead of long term facilities, he said shipping is capital intensive and as such banks should not shy away from it.
He also said the skills and capacity to man vessels by Nigerians is still lacking. He, however, said the agency has embarked on sea farers development training programme for Nigerians, adding that over 2, 000 Nigerians have been trained in first class maritime institutions for capacity building.
“The essence of the training was to ensure that we have the capacity to man vessels so as to effectively take over from the foreigners so that the oil majors here will not continue telling us we don’t have the capacity,” Peterside said, adding that some Nigerians, who have benefited from the training abroad are already working in the country.
Stressing that before the advent of the Act, the Nigerian maritime space was dominated by foreigners, he said the story has changed today. According to him, the use of foreign vessels and foreigners participating in the Nigerian coastal trade have been restricted through promotions, enforcement, financial assistance as well as encouraging Nigerians to go into joint venture partnership.
Peterside said enforcement was being done in collaboration with the NCDMB because the board has direct interface with the oil majors, who give out these contracts. NIMASA, he added, had also recently conducted a capacity audit of the shipping sector to determine what was lacking so as to fill the gap.
The NIMASA boss, who added that very soon another exercise in that regard will commence, said the agency was committed to providing incentives such as giving tax waivers to Nigerians, who import maritime-related equipment, so that they can favourably compete with their foreign counterparts.
Indeed, Nigerians have not been competing favourably with their foreign counterparts in the lucrative maritime business. According to experts, most vessels prefer to go to other countries instead of coming to Nigeria because port fees are so expensive, making it difficult for ship owners in Nigeria to survive.
To get round the problem, experts are of the consensus that Nigeria must look at the efficiency of its ports, the state of equipment, the experience of workers of port regulatory agencies, as well as the nation’s dilapidated port infrastructure.
Okoroafor, who admitted that there have been some improvements in the local content drive, however, urged the government to ensure that the right infrastructure, including roads in and around the Nigerian ports, are in place to harness the potential in the oil industry.
The Nigerian Chamber of Shipping President, Mr. Andy Isichie, could not agree less. “We need to fix these port infrastructures,” he insisted, pointing out, for instance, that poor port road infrastructure affects ships’ turnaround.
Isichie said ships are not meant to wait for days and weeks before they empty their cargoes. He said because of poor access roads to the ports, it takes a truck over two weeks to get to the Nigerian ports to pick or drop a container.
He, therefore, challenged the government to immediately improve road infrastructure, noting that this will encourage investors to build more ports. He also stressed the need to dredge the port channels as some ports are currently underutilised.
“So, we need to constantly dredge the channels; we need to invest, we need to take care of the ports infrastructure, physical surrounding of the ports, Isichie said, adding that the industry should also focus on training experienced sea farers.
Other options to drive the Act
Principal Consultant, Lonadek Inc, Dr. Ibilola Amao, said for Nigeria to achieve her local content objectives, there has to be increased focus on talent retention, training and development. She urged the government to look at what other nations are doing and where exactly Nigeria could play at a competitive scale.
Dr Amao said there are global players in the oil and gas industry, who have core competencies, decades of experience and expertise Nigeria could learn from. She added that for Nigeria to be globally competitive there’s the need to look at how it is going to engage as many Nigerians as possible.
The expert also said looking forward to where exactly Nigeria wants to play in the next 20-50 years when probably the country would have run out of oil and gas, emphasis should be on renewable energy and other sources of energy.
“We are looking at the oil and gas industry solving the problem of the tip of the pyramid, whereas Nigeria’s problems should be solved more at the base for national development and social economic transformation.
“We have large numbers at the base, we should be looking at the vocational, technologies, and the technocrats more than the professionals, who are not at the top of the pyramid,” she recommended.
Amao recalled that Nigeria was left with the pattern of providing raw materials to the international space by the colonial masters. She regretted that the country has practically stayed with the mentality and continued to export raw materials and play at the periphery of the high technology industry.
She noted that the oil and gas industry is a multi-billion dollar one, where the highest technologies are deployed, and the highest level of capability and competencies require very few numbers.
The expert, therefore, said for Nigeria to meet these requirements, “she must begin to prepare the curriculum from primary, secondary and tertiary institutions”. According to her, sustainable development, which such requirements enable, is most critical to the nation at the moment.
Dr Amao also said Nigeria could achieve the objectives of the local content drive through partnership and collaboration. According to her, Nigeria can acquire years of experience, which she doesn’t have by partnering, collaborating and forming strategic alliances and joint venture consortia with people who have years of experience
She said team work and soft skill collaboration, cooperation and co-ordination and core competencies will make the change. She said the country can become a leader by harnessing its natural resources to create value and more jobs for Nigerians.
Dr Amao and indeed, other experts and stakeholders, believe that a holistic overhaul of the entire oil and gas industry that would address gaps in infrastructure, the shipping sector, the Nigerian ports, skills advancement, funding challenges, science and technology including the ICT among others, was paramount.
According to them, there should be massive investment in local capacity development and capability, quality service delivery, goods and services, stability and simplification, as well as collaboration among industry operators and the academia.
They also recommended that the country should move away from short term focus to long term planning and commitment, promote made in Nigeria campaign to benefit local investors, and create jobs for the teeming youths.
Ms Opeke advised the government to focus more on enabling local participation in infrastructure to enable the country deliver services. She noted that in the advanced countries, large companies exist with the incentives provided to them by the government to compete globally.
While noting that the country is increasingly witnessing companies selling a lot of virtual services to Nigerians with no presence, no tax and no employment, Ms Opeke asked, “how are we going to keep our own useful population employed? How are they going to gain the necessary skills?”
According to her, all the value added offshore, and the little the country gets here are just the logistic delivery from the airport to homes or offices.
