The passing into law of the Nigerian Oil and Gas Industry Content Develop-ment Act (“the Act”) in 2010 was a welcome development greeted with high hopes from different quarters. Major stakeholders, including local companies and the teeming human resources, look forward to benefitting from the opportunities which the Act creates.
In simple terms, Nigerian content envisages building the capacity of Nigerians to gainfully participate in the oil and gas industry. The Act provides for many benefits, such as giving indigenous independent operators ‘first consideration’ in the award of oil blocks, licences ; ten percent price advantage in favour of indigenous companies in bid evaluations, amongst others.

The Nigerian Content Develop-ment Monitoring Board (NCDMB) is charged with implementing the provisions of the Act. The implementation effort of the Board has so far been commendable. However, more work is required.

The erstwhile Minister of Petroleum Resources and former Chairman of the Governing Council of the NCDMB, set short term targets for 2015. The targets include retention of $10 billion out of the $20 billion average annual industry spend, creation of over 30,000 direct employment and training opportunities; development of one or two dockyards and utilisation of dockyards, among others. It, however, remains to be seen whether these targets have been achieved.

With the recent change in the leadership of the NCDMB, the expectations of the stakeholders are high and reflect a readiness of Nigerians to take over the reins of the industry in earnest. One major expectation is that the “problematic” issue of 50 per cent ownership of equipment by “Nigerian subsidiary” be further clarified. The Board issued a clarification on the provision of the Act in August, 2011.

However, this issue remains unsettled and local companies have been left disadvantaged. On the face of the Act, the provision applies to the subsidiaries of International (IOCs) or Multinational companies (MNCs), however, companies that are not subsidiaries of IOCs are expected to comply with the provision.

This has become a burden to local companies as it is difficult to get for instance, an owner of a drillship worth several millions of dollars, financed by and mortgaged to a consortium of international financiers, to transfer 50 per cent ownership to a Nigerian company for compliance purposes. Was it really the intention of the legislature to prevent Nigerian companies, which are not subsidiaries of IOCs, from winning or executing contracts in Nigeria except they own 50 per cent of the equipment to be utilised for the contract execution?

The Act made provision for biennial review of the Schedule to the Act by the Minister of Petroleum Resources or the Board with the approval of the Minister, with a view to ensuring a measurable and continuous growth in content in all projects and activities in the industry. It is more than five years since the coming into being of the Act, a review of the Schedule is yet to be seen.

It is noteworthy that some provisions of the Act require review. For instance, the Act mandates operators to submit succession plans for positions not held by Nigerians and the plan shall provide for Nigerians to understudy each incumbent expatriate for four years after which the position will become Nigerianised. However, such Nigerianised position shall attract the salaries, wages and benefits provided for in the operator’s conditions of service for Nigerian employees.

This provision (Section 31(2)) seeks to perpetuate the unfair and inequitable dichotomy in the Nigerian oil and gas industry which exists between expatriates and personnel on the conditions of service.

Expatriate personnel of the same qualification and experience have better salaries and benefits than their Nigerian counterparts. This is unjustifiable and should not be perpetuated in our own laws. That provision hardly reflects the spirit of content and should therefore be reviewed.

The Minister was empowered to consult with the relevant arms of government on appropriate fiscal framework and tax incentives for foreign and indigenous companies that establish facilities for carrying out production and manufacturing or for providing goods and services otherwise imported into Nigeria.

Tax incentives, which would encourage the establishment of such facilities in Nigeria, are yet to be seen. It is without doubt that such tax incentives will attract investment, which will in turn have a positive impact in the economy.

The Act established the Nigerian Content Development Fund into which one percent of all contracts awarded in the upstream sector of the Nigerian oil and gas industry, is paid. The Board is charged with managing the Fund and the Fund is to be employed for projects, programmes and activities directed at increasing content in the oil and gas industry. It is expected that the Board will come up with transparent policy guidelines for local contractors and companies to access the Fund.

The amorphous nature in which appraisals, compliance monitoring and implementation of the provisions of the Act are carried out may be counterproductive. A good example is the provision in Section 53 of the Act that mandates that all fabrication and welding activities must be carried out in Nigeria.

In reality, this cannot be attained instantly. It is clear that operators and contractors will require waivers to carry out some of such activities outside the country. There needs to be clear laid down criteria, guidelines and precedents to deal with such situations.

The Board is charged with the responsibility for organising public education fora to further the attainment of the goal of developing content. In furtherance of this obligation, an effective help desk platform should be established to enable stakeholders get answers and clarification in real time, as information is a major key to compliance and effectiveness.

Nigerian content in the oil and gas industry remains a pacesetter in the Nigerian economy and its success will galvanise its replication in other sectors. It is hoped that the new leadership will rise to the occasion and take Nigerian content to the future envisaged by stakeholders.

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