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Extending the local content law to other sectors of the economy

THE Nigeria local content Act is the mandatory regulations made for any foreign-owned company seeking to carry out operations in the oil and gas sector in the country. To monitor this policy is the Nigerian Content Development and Monitoring Board (NCDMB) established in 2010 by the Nigerian Oil and Gas Industry Content Development (NOGICD) Act. 

The Act was created to encourage greater participation of Nigerians in the oil and gas industry with the aim of improving the social and economic wellbeing of the players in the sector and serve as the gateway for the use of local services and materials.

The key highlights of the regulation is to give Nigerian independent operators first consideration in the award of oil blocks, oil field license, oil lifting license among others. Also, it says there shall be exclusive consideration of Nigerian indigenous service companies that demonstrate ownership of equipment, Nigerian personnel, and capacity to execute such work to bid on land and swamp operating areas.

Local content is the value that an extraction project brings to the local, regional or national economy beyond the resource revenues. In other words, it is the value brought to the national, sub-national or regional economy

What are some interesting implementation success stories?

Since the implementation of the Act started 11 years ago, there have been positive results. According to the former Executive Secretary of the NCDMB, Denzil Kentebe, Nigeria has seen many firsts on several projects. These projects include the completion of the largest topside module, fabricated and fitted at Nigerdock’s Fabrication Yard on Snake Island, Apapa, Lagos. So also is the recently completed Sonam Development Project by Chevron. It is a natural gas and production field which commenced production in 2017. The Sonam field is located in shelf concession OML 91, Escravos Area, offshore Nigeria. The project was successfully completed in 2016. The scope consisted of the installation of a 32km 20inch pipeline between the Sonam and Okan fields as well as a Pig Receiver Platform, a jacket and bridge at the Okan end of the pipeline.

Implementation challenges!

The local content act isn’t without challenges. Some of the common and apparent challenges in its implementation include: corruption, local fronting, engagement of foreign labour, poor access to capital, lack of requisite skills, poor training and human capacity and, managing expectations.

Unwholesome and corrupt practices by regulatory bodies — ministries, departments and agencies (MDAs)  — can bring various types of challenges; thus hindering progress.

There are also situations where local companies and individuals can collude with foreign firms to beat the system by fronting for them to meet certain requirements of the policy.

Insistence by some firms to use foreign labour to occupy certain positions despite the fact that people with such ability exist locally, can make the country and people not to get full value; such can sometime create a backdoor that enables them take hard currencies out of the country and reduces opportunities for local labour.

Access to capital — business-friendly capital or sectoral funds dedicated to growing the sector can be a challenge. As demand for local skills increases, getting personnel with the right skills and experience to fill certain roles can become challenging. This is capable of slowing the success rate of the policy.

The right training to build human capacity and manage expectations become paramount otherwise implementing the policy will face serious challenges.

The big question is, however, should content law act expand to other industries? Without an iota of doubt, yes!

Sectors that can easily benefit from the policy are; Information Technology, telecommunication, automotive, manufacturing and shipping. Expanding the policy to these sectors will, without doubt, promote the economy and social wellbeing of the participants in these industries. 

Local economies will be rejuvenated; so many highly skilled jobs and training opportunities will become available, innovation and creativity will be enhanced; the much-desired economic diversification will be catalysed; foreign exchange earnings will increase and be better managed; new opportunities will be created for foreign investors; tremendous increase in the transfer of technology will occur, etc.

These will eventually increase the standard of living of the citizens, general economic growth, and increase GDP/productivity and revenue. 

Examples from selected sectors.

Statistics from DataReportal shows that as at January 2021 there are 187.9 million mobile or SIM connections in Nigeria.

Mobile phone users, and e-commerce and mobile banking are both rapidly growing sectors within the country. As these markets continue to grow and attract investment, a domestic center for the production of the SIMs is long overdue.

Nigeria spends millions of dollars on the importation of SIM cards which can be easily produced locally. The same goes for other accessories within the telecom sector; some of which can be produced or assembled locally. The local content policy can instigate production of such accessories; and thus, bring increased benefits to the economy.

The establishment of a local manufacturing phone plant will, no doubt, create employment for local hands. A synergy with foreign counterparts will also increase the skills of many Nigerians. Deliberate policy to ensure some parts and accessories are produced locally will make even greater impact.

Research findings published on the automotiveproject.org revealed that the automotive industry has a profound and wide-ranging effect on urban communities. An automotive manufacturing facility located in an urban area has a jobs multiplier effect of 3.6, meaning that for every one job at the plant, there are an additional 2.6 jobs supported in the local economy.

A presentation by UBU Holdings listed some of the key global automotive industry benefits as: it facilitates domestic, and continental level industrialisation; it creates high quality job opportunities; it facilitates skills and technology transfer from established vehicle producing countries; it creates forward and backward linkages within an economy thereby catalysing further industrialisation; and it reduces the balance of payments burden that arises from importing all transportation requirements.

In conclusion, the local content Act has shown remarkable successes in Nigeria in spite of some challenges since the implementation started. Expanding it to other sectors is definitely the way to go despite some of its ups and downs. 

Bayo Ojulari, former MD SNEPCO said at a public forum recently that; implementation of local content cannot be achieved at the expense of quality and safety. It is better to have a system in place to manage both quality and safety. He further reiterated that, extension of the implementation of Nigerian Content to other industries like mines, power and information technology, will have more potential for success in such industries if the teachings from the pioneering example of the oil and gas industry are applied.

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