Emefiele’s CBN agenda: The Nigerian content option

At his maiden World Press Conference, the 11th Governor of Central Bank of Nigeria, veteran banker and former boss of Zenith Bank Plc, Mr. Godwin Emefiele was emphatic that his vision was to create a Central Bank that is professional and people focused.

“My vision for the bank would be anchored on 10 Agenda which would help the apex bank reduce poverty, create jobs and ensure macroeconomic stability.”

To achieve this vision of poverty reduction and job creation, Mr. Emefiele has identified exchange rate stability and shoring up of the nation’s foreign reserves as one of the policy planks of his tenure at the apex bank.

To discerning observers of the nation’s macroeconomic indicators, particularly in the last couple of years, the CBN boss vision is a tall dream that will require a truly focused and determined CBN governor to bring about.

The scenario currently is anything but cheery.  The unemployment queue continues to lengthen as tertiary and other institutions of learning produce tens of thousands of graduates yearly.  According to the National Bureau of Statistics, Nigeria’s urban unemployment stood at 29.5 percent in 2013.  The unemployment rate is expected to increase by 2 per cent this year.

Nigeria’s foreign reserves which had fallen to about $40 billion by January, continues to fall freely, having declined to about $36 billion as at now.  This unfavourable situation has put undue pressure on the exchange rate of the Naira to the US Dollars.

Reversing these ugly trends of massive unemployment and foreign reserves decimation is the task Emefiele has set for CBN under his leadership.  The big posers informed by this self imposed task are:  How does Emefiele intend to achieve his goal, what are the things he can do differently.  This writer attempts to offer some suggestions which could help in making the arduous task ahead a bit easier.

To reduce unemployment and deepen foreign reserves through cutting down on capital flight, one area the CBN Governor would need to focus his search light is the Nigeria Oil and Gas Industry Content Development, Act of 2010 better known as the Nigerian Content Act, and its implementation.

The Nigerian Content Act basically was enacted to empower Nigeria and Nigerians to truly take control of their oil and gas industry, particularly the upstream sector.

Of course, the importance of the oil and gas sector cannot be over emphasized as the federal government derives 95 per cent of its foreign earnings and 80 per cent of revenue from the sector.

The Nigerian Content Development and Monitoring Board NCDMB, the board saddled with the responsibility of superintending the implementation of the Act estimated that Nigeria lost about $380 billion in capital flight between 1956 when oil was discovered and 2006 when the Nigerian content policy was initiated.  Some two million jobs which would have been offered Nigerians were also exported during the same period under review. 

But these trends of capital flight and job exports, from all indications, are now being reversed in the last four years since 2010 when the Nigerian Content Act was enacted.

Giving a breakdown of what the Nigerian Content Act has achieved thus far, during the Oil and Gas Forum in Abuja last October, the Executive Secretary of NCDMB, Engr. Ernest Nwapa disclosed that through the implementation of the Act, the Federal government has attracted $5 billion worth of investments into the economy and created 38,000 jobs.

According to Nwapa, the implementation of the Act has ensured that most industry services were being executed in country and not taken abroad as was the case in the first 50 years of oil exploitation and production in Nigeria.

Now, to a CBN governor desirous of deepening foreign reserves and creating jobs, this must be a good music to the ear.  But the posers that should engage the attention of Emefiele and his team are: Is this the best we can get from the Act? Can we make it work better? How can the Act retain more earnings locally and boost employment?

Analysts are firm in their position that if the CBN Governor works with the operators and regulators in the oil industry, more earnings could be derived through the Act while its faithful implementation could further provide hundreds of thousands of jobs for Nigeria’s large army of skilled and semi skilled unemployed youths.

One area they contend the CBN could make positive impact is to work with regulators to ensure that Nigeria is not shortchanged by the international oil companies and foreign contractors who have continued to demonstrate their discomfort with the letter and spirit of the Nigerian Content Act as they consider the provisions of the Act inimical to their own national interest, an interest they have serviced over the years at the expense of Nigeria’s national interest.

These analysts readily commend the NCDMB for wielding the big stick last March against Total Exploration and Production Nigeria by stopping the company’s Ofon 11 project.

The Board also went ahead to ban Italian Engineering, construction and drilling contractor, Saipem as well as Hyundai Heavy Industrious (HHI) of Korea from participating in the ongoing and future tendering process in Nigeria’s Oil and Gas Industry.  HHI was particularly accused of running foul of the Nigeria Content Act 2010 by flooding its vessel – Jascon-31 which is working for Total on the Ofon 11 project with expatriates who do not have approval from the Board and whose roles can easily be performed by Nigerians.

The contention by informed observers is that the CBN could encourage regulators such as NCDMB to take such firm and punitive positions against other contractors who have been complying with the Nigerian Content Act in the breach.

These observers readily cite the Samsung/Ladol case and insist that Samsung equally deserves the big stick so as to ensure that Nigeria is not shortchanged and made to lose millions of dollars and thousands of jobs which would have accrued to Nigerians.

The story of Samsung and Ladol needs a recap for the public and, particularly, the CBN new leadership to appreciate why it needs to be involved.

In order to win a major contract for the construction of an offshore oil production facility in Nigeria whose contract value is put at $3.1 billion, it required the partnership of a Nigerian firm as stipulated by the Act.  Ladol was chosen by Samsung.  After the two firms had committed their hard earned assets, time and expertise into the process, Samsung won the Contract.  Part of the agreement was that the actual construction of the platform would be done in Nigeria in Ladol’s facilities; secondly Samsung would do a legacy project, in this case, the upgrade of the fabrication and integration facilities at LADOL.  These two strands of the agreement were capable of ensuring over 50,000 direct jobs for qualified Nigerians and tens of thousands of indirect jobs for others.

The contract, if implemented as originally intended would retain millions of dollars in country thereby boosting the nation’s foreign reserves.

But what happened thereafter?  Samsung claimed to have got a copy of a letter purportedlywritten by the Nigerian Ports Authority NPA to Ladol that its (Ladol’s) facilities were not suitable for such project.  On the basis of this letter, Samsung pulled out of site and relocated to Korea and now decided to handle the fabrication and integration in its home country (Korea).  Not even NPA’s intervention and clarification that such letter never emanated from it (NPA) and another letter written by NPA in February, confirming that Ladol was good for the project could persuade Samsung to go back to site.

On matters like this, which borders on national interest, on deepening our foreign reserves and on boosting employment, the new CBN helmsman will have to be actively involved on the side of Nigeria if his vision of being people focused must be realized.

For Emefiele and his team, Nigeria’s interest must be protected and defended at all times, no matter whose ox is gored, if his tenure will be truly adjudged as people focused  and if he must realize his dream of poverty reduction, employment generation and boosting of foreign reserves.

ADEDOYIN ADEMOLA