Nigeria in Fresh Drive for 100% Local Content
The Nigerian Oil and Gas Industry Content Development Act (NOGICD) 2010, years after its passage, has brought about some significant gains in the nation’s local content drive in her oil and gas sector and its value chains. However, industry checks has shown that there is still much ground to cover as local content currently ranks at 35 per cent with only a minimal percentage of jobs in the oil and gas sector given to indigenous companies and local contractors. This article, Godspower Ike highlights the many plans and efforts of the Federal Government, National Assembly and private businesses to increase indigenous participation in key sectors of the Nigerian economy.
Several years after taking the critical steps in promoting indigenous participation in key sectors of the Nigerian economy, the President Muhammadu Buhari-led administration has kick-started the process of deepening the country’s local content initiative.
This is aimed at encouraging an increased number of local operators to make significant contribution towards growing the Nigerian economy. Before now, a number of initiatives had been introduced, mainly in the Nigerian oil and gas industry which had helped boost the fortunes of indigenous producers.
As a result of these initiatives, the Nigerian Content Development Monitoring Board (NCDMB) recently announced that indigenous participation in the nation’s oil and gas industry had increased to about 35 per cent in the past six years; rising from less than 5 per cent before 2010 to 14 per cent in 2014 and 35 per cent by 2015.
According to NCDMB, these initiatives are expected to increase local content levels to 50 per cent by the end of 2017, and that contracts awarded by operating companies to Nigerian service companies had also increased from about 40 per cent of total contracts before 2010 to 75 per cent in 2015 while the target is to achieve 85 per cent by 2017.
In the last few years, the Nigerian Content Act had helped the government and Nigerian people to achieve a significant percentage in reversing capital flight in the form of personnel, materials, equipment fabrication and engineering designs in the industry.
The Board, relying on Section 104 of the Nigerian Oil and Gas Industry Content Development Act also introduced the Nigerian Content Development Fund, NCDF, which is being funded through the one per cent deduction from the value of all upstream contracts.
The fund was designed to provide partial guarantees and 50 per cent interest rebate to service companies that obtain facilities from commercial banks for asset acquisition and projects execution. The Act provides that the funds be used for capacity development in the oil and gas industry.
Since inception, the NCDF had grown significantly to about $600 million and has been accessed by a few indigenous companies for their capacity development.
Another intervention introduced by the NCDMB to attract investments and stimulate domiciliation of manufacturing activities is the Equipment, Components Manufacturing Initiative, ECMI, which was developed to promote the local manufacturing of equipment, components, spare parts and other accessories for the Nigerian oil and gas industry.
So far, the NCDMB has issued about 1,430 certificates, translating to an investment commitment value to the tune of about $2 billion. Other initiatives that the Board has put in place to stimulate domiciliation of manufacturing and other value-adding activities include the establishment of the oil and gas park that will serve as the manufacturing hub for equipment and the provision of funding support for local manufacturers of the LPG cylinders.
Others include the pilot pipe mill being developed at Polaku, Bayelsa State, the Oil and Gas Industrial Park Development – artisanal training programme being organised by the Board in conjunction with the Federal University Utuoke, amongst others.
To show its renewed commitment to the local content initiative, Acting President, Yemi Osinbajo, recently issued an Executive Order in support of local contents in public procurement by the Federal Government.
In the order, the Federal Government stated that henceforth, all Ministries, Departments and Agencies (MDAs) of the Federal Government shall grant preference to local manufacturers of goods and service providers in their procurement of goods and services.
It added that any document issued by any MDA of the Federal Government for the solicitation of offers, bids, proposals or quotations for the supply or provision of goods and services (Solicitation Document), shall expressly indicate the preference to be granted to domestic manufacturers, contractors and service providers and the information required to establish the eligibility of a bid for such preference. The order which came into effect from May 18, 2017, also required that all solicitation documents shall require bidders or potential manufacturers, suppliers, contractors and consultants to provide a verifiable statement on the local content of the goods or services to be provided.
The Federal Government also declared that Made-in-Nigeria products shall be given preference in the procurement of certain items and at least 40 per cent of the procurement expenditure on these items in all MDAs shall be locally manufactured goods or local service providers.
The items include uniforms and footwear; food and beverages; furniture & fittings; stationery; motor vehicles; pharmaceuticals; construction materials; and information and communication technology.
The Order stated that, “Within 90 days of the date of this Order, the heads of all MDAs of the FGN shall: assess the monitoring, enforcement, implementation, and compliance with this Executive Order and local content stipulations in the Public Procurement Act or any other relevant Act within their agencies;
“Propose policies to ensure that the Federal Government’s procurement of goods and services maximises the use of goods manufactured in Nigeria and services provided by Nigerian citizens doing business as sole proprietors, firms, or companies held wholly by them or in the majority; and submit such findings to the Honourable Minister of Industry, Trade & Investment.”
It also stated that “Within 180 days of the date of this Order, the Minister of Industry, Trade & Investment in consultation with the Director-General of the Bureau for Public Procurement shall submit to the President, a report on the Made-in-Nigeria initiative that includes findings from paragraph 4 above. This report shall include specific recommendations to strengthen the implementation of Local Content Laws and local content procurement preference policies and programmes.
“For the purpose of this Order, ‘local content’ means the amount of Nigerian or locally produced human and material resources utilised in the manufacture of goods or rendering of services.”
In addition to the Executive Order, Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, also announced plans by the Federal Government to replicate the Offshore Technology Conference, OTC, in Nigeria.
Kachikwu stated that the government would no longer be expending state funds in sponsoring delegates to the OTC, starting from 2018.
According to him, state-sponsorship from the Federal Government from now on, would be strictly for technical experts within the government agencies in the oil sector.
In his words: “Nigeria would be hosting an OTC-like event of its own. We will however work to build an OTC that the world would buoyantly come to the same way we buoyantly come to yours. The idea has already garnered the backing of some African oil ministers.”
The Federal Government is also seeking to encourage indigenous participation in crude oil refining through the modular refineries initiative. In the modular refineries initiative, the Federal Government is seeking to encourage oil-producing communities to build modular refineries and also inculcate illegal refiners into the initiative.
The modular refineries’ initiative which was first proposed by Kachikwu was essentially the outcome of the Presidential interactive engagements in several oil-producing states led by Acting President Yemi Osinbajo.
The initiative would see all illegal refiners and local communities in the Niger Delta integrated in the proposed modular refineries concept of the Federal Government as they would not be left to operate on parallel basis.
Under this plan, the Federal Government would supply crude oil to the local refineries at a reasonably considered price, as an incentive to stop the current practice whereby the illegal refiners vandalise and steal crude oil. This concept is expected to work against environmental degradation that the spills often cause to the trunk lines. It is also proposing that marginal field operators supply crude to the new modular refineries that would have the illegal refiners integrated.
Another important component of the plan under consideration is the proposed involvement of the current illegal refiners and their communities as shareholders while the Niger Delta Development Commission (NDDC) and the Nigerian Sovereign Investment Authority (NSIA) would also hold substantial holdings/equity sufficient to make the smaller refineries operational as a business and a going concern.
To facilitate effective community engagements, the initiative envisage that a Memorandum of Understanding ( MoU) would be signed with the affected communities determining the communities share, while the Federal Government would supervise the implementation, which would be driven largely by industry operators and the communities.
Kachikwu also announced plans by the Federal Government to launch ‘Project 100’, a concept introduced by his ministry to provide financial assistance to competent Nigerian companies in the execution of projects, formerly handled by foreign companies. The Minister said that work are ongoing in developing the concept, the parameters around it and also put in place the team to work on it, noting that within the next 90 days, they would come out with a position on the project and hopefully, get Nigerians that would be on the project for training.
On his part, Emeka Okwuosa, Chairman, Oilserv Limited, an oil and gas pipeline and facilities company, expressed support for the concept, stating that project 100 would guarantee jobs for indigenous companies, in place of briefcase contractors.
He said, “Project 100 as mentioned by the Minister of State for Petroleum Resources is a very good idea because some of us have been saying this in different ways. Some of us that have built capacity all the years have to be sure that it will be utilized.
“There has to be a process of guaranteeing jobs for companies that have invested. It is not only Oilserv, there are quite a few other companies who have invested and taken the risks. It is important that going forward, there would be guaranteed jobs, instead of trying to give contracts or opportunity to briefcase contractors.
“Project 100 concept will help address that because they will look at few companies with capacity and help them raise fund for business and this will enable us employ more people. But don’t forget, as we get the details, we know how to move into them, he said.
Also speaking on the initiative, Managing Director, Oil and Gas Free Zones Authority, OGFZA, Mr. Umana Okon Umana, said ‘Project 100’ would go a long way in supporting Nigerian entrepreneurs in the oil and gas industry who show potentials.
“I think it is a welcome development and it fits into the Federal Government’s plan of building local capacity. It is a way to support Nigerian entrepreneurs in the oil and gas industry who show potentials and who can become big players. I think that is the essence and it is welcome.
“The Oil and Gas Free Zones Authority, of course, is collaborating with other agencies like the Nigerian Content Development and Monitoring Board, NCDMB to ensure that we all work in harmony to deliver on our various mandates in the best interest of Nigeria,” he noted.
Not left out in the quest to deepen local content, the House of Representatives, represented by its Committee on Local Content also promised that the House would ensure that the bill extending the Nigerian Content Act to other key sectors of the economy would be passed. Chairman of the Committee, Hon. Emmanuel Ekon, said the bill had already passed first reading and is presently being fine-tuned.
On its own part, the Nigerian Content Development Monitoring Board, NCDMB, had already commenced plans to ensure that local content is extended to the construction, power, Information and Communication Technology and other critical sectors of the economy.
In addition to this, NCDMB Executive Secretary, Engineer Simbi Wabote, said the Board is gearing up to increase its engagements with industry stakeholders to develop new projects and domicile more work in-country.
To this end, the NCDMB, he said had already commenced visits to oil and gas facilities across the country with the aim of assessing capacities and confirming that Nigerian companies have firm footing in their areas of operations.
He further noted that information gathered from the visits would be used during tenders and in planning for capacity development. In his words, NCDMB would enlighten International Oil Companies, IOCs, and project promoters on existing in-country capacities and ensure their utilization during projects.
He maintained that experts in offshore designs, FSPO designs and detailed engineering were in high demand and local engineering companies must develop strategies to retain them so that their competences will not be lost.
Similarly, to increase national capacity in terms of local content, Wabote also disclosed that the NCDMB had adopted a number of strategies that is aimed at creating enabling environment to attract investors and protect investments made through compliance oversight.
One of the strategies, he said, includes stakeholder collaboration to overcome key challenges in the area of macro-economic issues, skills gap, weak sectoral linkages and weak manufacturing base, inadequate critical infrastructure and policy inconsistency, among others. Other strategies, Wabote said, include the fast-track establishment of five oil and gas parks and the organization of Nigerian Content Opportunities Fair to showcase available capacity in-country; showcase opportunities in upstream, midstream and downstream sectors and provide multinationals the opportunity to link up and utilize in-country capabilities.
He further stated that NCDMB is planning a series of Research and Development fair, intending to support the completion of ongoing third party investments, which he said, would have a number of positive impact in the area of job creation for teeming youths; increase in-country engineering and fabrication work scope, significantly; and bring down the cost of in-country manufacture/ assembly of equipment, component parts and spare parts.
He also stated that one of the strategies include streamlining the contracting cycle to six months, adding that it is setting a 100 days turn-around target provided documents are in compliance with the Act.
In addition, he noted that the tenth strategy involved undertaking an internal restructuring of the NCDMB, through the adoption of leading practices to transform NCDMB into a performance driven organization; and the adoption of a 10-year road map to institutionalize long term planning, among others.
Speaking further, Wabote highlighted some of the success stories of the Nigerian Content initiative to include in the areas of coating paints, line pipes, put at about 670,000 metric tonnes per annum; barite processing, engineering design, platforms fabrication and pipe coatings. Other successes recorded, he said, are in cable production, marine and pressure vessels, swamp rig, machine shop and training simulator.
He explained that the focus of the Board compliance monitoring team had been largely on the upstream sector operations of the industry, mainly because of the higher percentage spend in the sub-sector.
He also stated that the NCDMB had in 2017, reorganised its monitoring structures and would pay more attention to the implementation of Nigerian Content in the midstream and downstream sectors of the industry.
All these initiatives both by the Federal Government, National Assembly, NCDMB and private organizations, if fully implemented would no doubt go a long way in deepening the country’s drive towards achieving 100 per cent local content in the oil and gas sector and across key sectors of the economy.