Nigerian Content Act: Indigenous operators want stronger government backing

The Nigerian Oil and Gas Industry Content Development Act was developed by the Federal Government to increase the participation of indigenous companies in the oil and gas sector. However, indigenous players in the sector say government needs to do more for the law to have teeth , writes DAYO OKETOLA

The Nigerian economy has depended largely on its oil and gas resources for sustainability.

The sector contributes nearly 80 per cent of the country’s Gross Domestic Product and over 94 per cent of the total foreign exchange earnings.

With an average of 2.6 million per day of crude oil and condensate, experts say the opportunities available in the sector for economic development are enormous.

However, the low participation of indigenous companies has continued to be a source of worry to many stakeholders, despite government efforts to bridge the gap with the Nigerian Content Policy.

The Chairman, Tricontinental Group, an indigenous oil sector player, Chief Olabintan Famutimi, says, “We all know that the oil and gas sector is the 80 pound gorilla of the Nigerian economy. Though, there is so much to do in the industry, it has been dominated by the International Oil Companies.”

According to him, most of the contractors providing services for the big oil corporations operating in the country are also foreign.

“In view of this, virtually all the money spent in the industry went to foreign hands. It was such that out of every dollar spent in the industry, only about five cent stayed in Nigeria. That was because the Nigerian companies had low presence in the industry,” he says.

The Tricontinental Group Chairman explains that the apparent imbalance in the industry propelled the few indigenous operators in the industry to campaign for local participation.

To address the problem, the administration of former President Olusegun Obasanjo, initiated the Nigerian Content Policy to help develop local capacity and to enable Nigerians to participate actively in the oil and gas sector.

Experts say the thrust of the policy is to promote value addition to the local economy, increase local participation, build local capacity on the back of ongoing projects and generally improve the economy in general.

The Tricontinetal Group chairman says the Nigerian content policy was developed in order to stop capital flight and ultimately improve the country’s economy’s GDP.

According to him, Nigeria’s human and material resources will be utilised in the exploration and harnessing of the country’s natural resources adding that the Tricontinental Industrial Academy is geared towards training qualified manpower for the sector.

His belief is that indigenous operators will be able to recruit human resources from such training institutes without the immediate need to bring in expatriates.

However, despite the good intention of the government and high hopes of local players and expectations for economic growth, indigenous operators lament that the policy has not been properly implemented.

Famutimi says, “It is a good thing that the Federal Government promulgated the Nigerian Content Development Bill into law and set up the Nigerian Content Development Board. It is not an easy thing to make pronouncements and expect them to work immediately. The IOCs of course are not in the business to satisfy and keep the local operators happy. They are in the business to protect their investments and even promote their country’s interest.”

Famutimi says though the Nigerian Content Board has done a lot to ensure that the IOCs obey the policy, he adds that there are still a lot to be done and the board could not be given 100 per cent score yet.

He also says many of the indigenous companies are individualistic and operate as small operators. This, according to him, affects them in the area of capacity for some jobs.

In the same vein, the Managing Director, Peacegate Group, an oil and gas service provider, Mr. Ayo Adedoyin, says the Nigerian content policy has not been effectively implemented.

He says, “As with all policies in Nigeria, we have good intentions, but most times we place the ‘cart before the horse’. The oil industry is highly capital intensive, with an average project threshold of $25m. The first question we need to ask is; are the Nigerian financial institutions ready/capable of financing the projects long term? The answer is no!.

“Nigerian financial institutions tie you to a contract tenure, to the extent that assets worth over $10m will have to be paid back within the contract duration. What this does in the short-term is to make local players expensive, as opposed to foreign owners with funding tenures of 10-20yrs.”

Adedoyin adds that the Nigerian content law unfortunately seems to have been arrived at in a vacuum, without considering all the players in terms of regulation, implementation, monitoring, fiscal conditions, infrastructure, training and national goals.

He laments that a blanket target of 70 per cent has been set for Nigerian content, bemoaning the situation where the focus of the target is not clarified, whether for onshore activity, shallow offshore or deep offshore.

“Each terrain has different requirements and technology, where do we currently have enough local capacity? How much are we placing into R&D, training? How do we monitor effectiveness?” he asks.

He says that Nigeria, through the Nigerian National Petroleum Corporation and the IOCs, are required to both agree on projects to be conducted and the equipment to be used among others.

“The problem we have noticed is the lack of capable individuals to determine whether the requirements are skewed against local players, we also must understand that the IOCs are first and foremost “for profit” corporations fully supported by their governments. They are not looking to place business in our hands at the expense of the corporations they have built long term relationships with over decades,” he adds.

Adedoyin, however, says local operators have every reason to commend the government for the policy, as any movement is better than standing idle.

“It certainly is a policy with far reaching economic benefits to the nation, as well as holding the possibility of turning us from an import dependent nation to a net exporter, should we encourage entrepreneurs,” he says.

“ The Brazilian government through its national oil company,PETROBRAS, is guaranteeing the oil service contracts, and has set up a fund to actualise this, Nigeria needs something like this,” he advises.

The Executive Secretary, Nigerian Content Development and Monitoring Board, Mr. Ernest Nwapa, in an email response to our correpondent’s enquiry, says the implementation of the Nigerian Oil and Gas Industry Content Development Act in the last one year has been driving the creation of human capacity, infrastructure, facilities and other areas required to execute increased activities in Nigeria thereby retaining higher value in Nigeria from industry operations.

He adds, “In this way, the implementation of the Act is bringing back Nigerian jobs which have been exported to foreign economies for a very long time at the expense of our national economic development.

“By insisting on doing more in Nigeria, we are also creating opportunities for training knowledge sharing and technology transfer; opportunities for investment in tab yards, facilities to support industry operations; opportunities for Nigerians to own equipment, marine vessels and Rigs and other equipment used in Industry. These opportunities are key to rapid and sustainable growth of the Nigerian economy.”

According to him, there is measurable and continuous growth in quantum of work being placed in Nigerian yards, contracts awarded to Nigerian companies, increasing awareness by Nigerians and indoctrination on mindset change in the short time of implementing the Act provisions by the NCDMB.

He notes that in the short span of its implementation, there are already clear indications that the law is driving rapid progress in this direction.

The Jiangsu Yulong Steel Pipe of China is partnering NCDMB in a pilot model to establish a 250,000 tonne Longitudinal Submerged Arc Weldedpipe mill in Nigeria, he adds.

According to him, Exxon Mobil recently laid the first ever set of made-in-Nigerian oil and gas grade pipes at its Edop – Idoho Offshore field.

“This major milestone is worthy of celebration because it has neutralised all previous excuses and unlocked opportunities for utilisation of locally made pipes. Consequently Shell, Agip and Chevron have placed orders for about 100 kilometers of line pipes in the SCC plant located in Abuja,” he says.