THE LOCAL CONTENT ACT 2010 AND THE NIGERIA OIL AND GAS SECTOR, BEING A PAPER PRESENTED BY OREBIYI TE

PREAMBLE

This paper is not an academic discourse, it is basically to tease out the content of the law, its genesis and also an attempt at highlighting some challenges for the purpose of stimulating discussion.

BACKGROUND

The passage into law of the Nigerian Local Content Bill is one of the significant developments in localizing management and control of the oil and gas industry. The bill received presidential assent on the 2nd of April 2010 and created a law to provide for a framework towards indigenous content in the Nigerian oil and gas industry. The law also establishes the Nigerian Content Monitoring Board which is charged with the responsibility to manage the coordination, monitoring and implementation of local content law.

Simply put, the local content Law specifies that Nigerian independent operators should be accorded “first consideration” in the award of Oil and Gas related contracts and that Nigerian service companies should also be given “exclusive consideration” for contracts and services. Indeed experts believe that an agreeable scenario will be where Nigerian Companies are allowed to participate along International Oil Majors. This is commendable in view of the previous limited attempts by government at developing a local content frame work for the industry. This explains the fanfare associated with the enactment into law of the Nigerian Local Content Bill.

Nigeria is the world’s eight biggest oil exporter and relies on crude as its main foreign exchange earner. The industry accounts for over 40 percent of Nigeria’s gross domestic product and is associated with over a billion dollars worth of investment annually. There is however, a marked absence of indigenous players in these transactions, where about 90 percent of the equipment and personnel used in the industry are imported. The local content law seeks to increase indigenous participation by prescribing a minimum threshold for the use of local services and promoting the employment of Nigerian staff in the industry.

From an analysis of the sector, the local content Act seems to have made very little impact. There is very limited local participation in this vibrant sector that has the potential to improve the standard of living and provide gainful employment for many. This is an unhealthy situation considering the fact that Nigerians have both the expertise and skills needed to perform effectively and efficiently in the sector. Unlike what obtains in other countries such as Saudi Arabia, Venezuela and Kuwait, the implementation of the local content law in Nigeria has been hindered by artificial barriers which militate against indigenous companies and personnel managing and controlling the sector.

CONTENT OF THE LAW

Briefly, the Nigerian oil and gas industry seeks to increase indigenous participation in the sector by prescribing a minimum threshold for the use of local services and materials and to promote transfer of technology and skill to Nigerians in the industry. To actualize this, a Nigerian Content Development and Monitoring board (The Board) has been established and vested with the responsibility of implementing the provisions of the Act, making procedural guidelines and monitoring compliance by operators within the industry.

The Local Content Act can be divided into several segment set out below.

  1. GENERAL OBLIGATIONS: The purpose of the Act is to set out general obligations which are applicable to

  2. Open actors and participants in the oil and gas industry

  3. Activities taking place in the oil and gas industry

The provisions of the Act which are of general application are contained in section 3, section 7 and section 11 of the Act. These general provisions are developed in the body of the Act by providing further details of steps, procedures and obligations imposed on operators or on the activity performed.

  1. OVERALL POLICY OBJECTIVES: The local policy objective and overall obligation imposed in respect of transactions in the oil and gas industry are set out in section 3 of the Act.

  2. MINIMUM NIGERIAN CONTENT SPECIFICATIONS: Section 11 of the Act states that the minimum Nigerian content in any project to be executed in the Nigerian oil and gas industry shall be consistent with the level set out in the schedule. The schedule in question lists out various activities that are carried out in the oil and gas industry and sets out the desired level of Nigerian content in accordance with various units of measurement.

  3. NIGERIAN CONTENT PLAN: Section 7 states that, “in the bidding of any license permit or interest and before carrying out any project in the Nigerian oil and gas industry an operator shall submit a Nigerian content (plan) to the board demonstrating compliance with the Nigerian content requirements of the bill.”

  4. BID EVALUATION: In order to promote the Nigerian content, the Act makes provisions allowing for the consideration of Nigerian content in the evaluation of bids and for advantage to be conferred on bidders on the basis of the level of Nigerian content. The general provisions in this regard are contained in sections 14, 15 & 16 of the Act.

  5. PROJECT OFFICERS: Sec 25- 27 sets out the provisions of the Act in regard in regard to the maintenance of a project office by the operators or any organization submitting a Nigerian content plan.

  6. EMPLOYMENT AND TRAINING: The promotion of Nigerian content is dealt with in section 28- 35 of the Act

CHALLENGES IN ENFORCING THE NIGERIAN CONTENT ACT

The Practical Nigerian Content meeting (PNC) is an annual event that brings together government and industry stakeholders to discuss and debate key issues surrounding the local content Act. The event started in 2010, and is delivered in partnership with the Nigerian Content Development and Monitoring Board (NCDMB) the body instituted by the Nigerian content Act to enforce the provision of the Act in the Nigerian oil and gas industry. The primary organizer of the event is CWC group, a UK based global company that has, for over a decade, been providing top quality information and opportunities for government and industry players to come together and promote commerce and develop relevant skills. However, a pressing question still remains: How practical is the Nigerian Content Forum?

It is worthy to note that the Nigerian Oil and Gas Industry Development Act was signed into law in 2010 and has since continued to guide the development of local content in the Nigerian Oil and Gas Industry. Reports from regulators and feelers from some of the indigenous oil companies is that, so far, the Act has been successful in encouraging development of local content , though a lot more still has to be done in enforcement. Firstly, the said organizer of the event, CWC Group, is not a Nigerian company, it is a UK company with headquarters in the UK. Secondly, the registration fee for the event 1, 890 pounds, is in foreign currency. Obviously, the money would be paid into a UK based account contrary to section 52 of the Nigerian Oil and Gas Industry Content Development Act.

The NCOMB itself, which ought to enforce the provisions of the Act and the whole idea of the local content in the country’s oil and gas sector, has not done so. This raises doubts regarding the ability of the board to carry out its mandate as stated in the Act.

CONCLUSION

Keeping the above scenario in mind, it is obvious that the Board needs to take a closer look at its lapses and perform its statutory duty as the custodian and enforcer of the local content in Nigeria. For a start, the body should compel the CWC Group to comply with the Nigerian Content Act in all its activities in Nigeria.

Temitope Orebiyi is a Legal Officer with Lawyers Alert

#InternationalOilCompaniesinNigeria #OilandGasSector #NigerianOilIndustry #LocalContentAct2010 #NigerDelta

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