Nine years after, the Nigerian Oil and Gas Industry Content Development Act has recorded some significant achievements and its regulator, the NCDMB has set ambitious targets, among them to create 300,000 jobs by 2027 amid gaps in skills and infrastructure.
The NOGICD Act was meant to increase the quantity and quality of skills and raw materials sourced within Nigeria for exploration and production activities in the oil and gas upstream. Nigerian content has grown from almost zero to 30 percent in 2018. And the Nigeria Content Development and Monitoring Board wants to move this needle further, to 70 percent in the next eight years.
“Local content is not Corporate Social Responsibility. It is Nigeria’s way of closing up gaps in the upstream oil and gas sector by building Nigerian competences and staying globally competitive” said Tunde Adelana, director Monitoring and Evaluation at the Nigerian Content Development and Monitoring Board.
French super oil major, Total Upstream floating, production, storage and offloading (FPSO), Egina, is to date the most visible testimony to the value addition position assumed by the Nigerian content philosophy. Six of the 18 modules integrated on the FPSO were built by local companies and contractors. But Nigeria’s content drive faces significant challenges.
The Board set out to achieve 60 percent Nigerian Content on the project but realised 50 percent, which Simbi Wabote, the Executive Secretary of NCDMB described as commendable because the execution of Egina set new benchmarks and domiciled new capacities and facilities in-country, one of which is the FPSO integration facility at the SHI-MCI yard located at the LADOL Free Zone, Lagos.
“If we are to implement the Nigerian Content Law 100 percent, we will have to stop oil production in Nigeria, develop non-existing capacity, and then start production again. The Board enforces the law with pragmatism” Wabote said.
Africa’s most populous nation spends $10 billion annually to hire certified welders into the country, Sunny Eromosele, managing director, Mudiame International Limited, stated in an interview early this year.
Ninety-five percent of construction in the oil industry is steel, yet Nigeria does not have a functional steel mill. This is a major drag on implementation of the Nigerian content law. The Ajaokuta Steel Complex has gulped $8 billion of public funds without producing one sheet of steel.
BusinessDay checks show that Ajaokuta Complex has the capacity to produce one million metric tonnes of steel, one million metric tonnes of coal, manganese and limestone, among others. Due to lack of operations at Ajaokuta Steel, Nigeria today imports steel valued at $3.3 billion every year.
The philosophy of Nigerian content was borne out of necessity. This arose because of the fact that there were some gaps. “Gaps with regards to what we can do in-country against what was obtainable in the industry”, Adelana said, “You cannot effectively enforce compliance when these gaps still exist. The focus is more on development now.”
According to a 10‐year Transformation Roadmap developed by the NCDMB (2017 – 2027), the Board seeks to be a catalyst for industrialisation of the Nigerian oil and gas industry and its linkage sectors through technical capacity development, compliance and enforcement, enabling business environment, organisational capability and sectorial and regional market linkage.
However, companies and operators who play in the oil and gas upstream sector are also seeking more clarity in the definition of some terms and sections of the Act. Particularly in light of the fact that it “enacted before government started talking about ease of doing business” Linus Okeke, partner and leader, Forensic and Integrity Services at Ernst & Young, Nigeria said.
Non-review of the law has generated some level of confusion. A company that provides aviation services to offshore oil rigs has found itself in a situation where the implementation of provisions of sector 104; sub-section 2 of the Act is making it pay more for aviation fuel than its competition.
The sub-section of 104 states: (2) “The sum of one percent of contract awarded to any operator, contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity or transaction in the Nigeria oil and gas industry shall be deducted at source and paid into the Fund.”
The Fund here refers to the Nigerian Content Development Fund, which was established for purposes of funding the implementation of Nigerian content development in the Nigeria oil and gas industry.