The Nigerian Content Journey – Lessons Learned Five Years After
By Gods Power Ike
The Intrigues, Controversies, Gains, Pains, Successes And Challenges Recorded In The Nigerian Content Journey, Five Years After The Enactment Of The Nigerian Oil And Gas Industry Content Development (NOGICD) Act, Have Thrown Up A Number Of Lessons That Have Far-reaching Implications For The Nigerian Economy.
The intrigues, controversies, gains, pains, successes and challenges recorded in the Nigerian content journey, five years after the enactment of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, have thrown up a number of lessons that have far-reaching implications for the Nigerian economy.
Key among the lessons to be learnt from the Nigerian Content initiative, according to stakeholders, includes the fact that with persistence, willingness and proper planning, a lot can be achieved in a short while.
Another lesson is that the Act, in spite of its enormous potential for economic growth and development has only been able to achieve just a little, due to a number of factors militating against its success.
Over the years, Nigeria’s Local Content law has received numerous accolades the world over and has become a model for a number of countries. The main thrust of the NOGICD Act was to ensure that indigenous skills and resources are deployed in local projects, creating jobs and deepening the local supply chain.
The Local Content Act was designed to enhance local content in the oil and gas industry and it has in the last couple of years been helping to develop indigenous skills across the value chain, promote indigenous ownership of assets and use of indigenous assets, promoting the establishment of support industries and creating customised training and sustainable employment opportunities currently.
Mrs. Diezani Alison-Madueke, Minister of Petroleum Resources, had a couple of months ago, announced that the Local Content Act had enhanced job creation and indigenous expertise, and had grown local content generally from between three to five per cent to a significant 12 to 18 per cent.
On the other hand, the Nigerian Content Development Monitoring Board, NCDMB, disclosed that more than $5 billion (about N1 trillion) new investments have been made by indigenous oil servicing companies in Nigeria in the last four years, while over 10,000 jobs have been created within the period.
Following successes recorded with the Local Content Act, the Federal Government is considering expanding the initiative into sectors of the economy, such as in the power sector, building and construction industry and the lubricants sector, among others.
In addition, the Nigerian Content Development Fund (NCDF) was set up to guarantee lending to Nigerian service companies and for infrastructure and training investment led by the NCDMB.
The NCDF reached $350 million at the end of 2014 and is projected to hit $700 million over the next five years.
The fund is to be used as interventions in the area of project finance, asset acquisition finance and as security for under-financed indigenous companies.
Some key lessons to be learnt from all these are the fact that despite the many achievements of the Local Content Act, a number of factors still serve as hindrances to the deepening of local content in the country, ranging from lack of financial capacity to undertake big ticket transactions and inadequate infrastructure and lack of technical capacity among others.
In his presentation titled, ‘Nigeria’s Local Content Marathon – Key Strides, Forward Steps and Challenges,’ Mr. Igo Weli, General Manager, Nigerian Content Development, Shell Petroleum Development Company of Nigeria Limited, explained that building domestic capacity in a technical industry like the Nigerian oil and gas sector takes time to mature.
According to him, Nigerian companies need to build their skills and expertise progressively, adding that from time to time, operators will need waivers, until the domestic capacity is in place.
He said, “The alternative is to delay projects, erode value and lose revenue. And building that capacity requires developments on many fronts, in lock step with each other – not an easy task.
“Key challenges there include the dearth of research and development institutions in Nigeria, limited access to technology, state of supporting infrastructure and industries and import duty regimes among others.”
Also speaking, Jean Balouga, a Research Assistant in the Economics Department of the University of Lagos, stated that over 70 per cent of the contracts awarded to Nigerian companies are executed overseas, thereby defeating the primary objective of Nigerian content development which is to develop in-country capacity by executing contracts in Nigeria using Nigerian local resources.
Balouga, in his article, titled, Nigerian Local Content: Challenges and Prospects,’ published in the journal of the International Association for Energy Economics, blamed this partially on the fact that a number of Nigerian banks lack the financial base to make any meaningful impact on local content development.
According to him, the biggest Nigerian banks are tiny banks when it comes to energy financing, adding that most Nigerian banks operate in dilemma-laden territory as most indigenous contractors have no proper business structure. “Others are not really in the business because more often than not the person who gets the contract is not the one looking for finance,” he explained.
Other hindrances identified to local content development are a thin industrial base, lack of adequate power, water and other infrastructure to support an expanded manufacturing base, lack of small and medium-sized enterprises and an underdeveloped capital market.
Balouga further stated that other problems of local companies revolve around executive capacity and critical mass with technical and financial wherewithal, stating that most local companies are small, fragmented and incapable of packaging or attracting loans.
He said, “Few of them can deliver turnkey projects without resorting to some form of partnership agreement for equipment, expertise or technical support.
There exists the so-called ‘Knowing-Doing gap’ in Nigeria, that is the disconnect that exists between policy formulation and policy implementation. This term describes the absence of a critical link between strategy and action. Public policy initiatives and actions in Nigeria have persistently been incapacitated by this gap, with many government programmes and projects ending in downright failure.
“Inadequate think through, weak institutional capacity, lack of political will to carry through change, inconsistency in government policies, lack of support from relevant stakeholders and corruption are some of the causes of this gap. The implication of this is that the future of the Nigerian people is currently being controlled by foreigners whose main objective could be to post better returns on investment.”
However, Balouga advocated the adoption of sustainable local content development practices by both policy makers and upstream oil and gas operators, stating that this will help in guaranteeing a better future for the industry.
According to him, technological development does not occur just by chance; rather it is a product of a nation’s sound economic management, policy re-engineering, good governance and a social value system that rewards hard work and creativity.
“Having a few companies committed to Nigerian content and pursuing local content programmes is not enough. Support for local content policies must be nation-wide. It must be accepted by all and should become embedded in every operator’s business philosophy,” he said.
Ernest Nwapa, Executive Secretary, NCDMB, however, identified key lessons to be learned from the implementation of the NOGICD Act to include the fact that local content, despite its benefits of transforming a country from importer to producer, will certainly be resisted globally and locally.
Nwapa, in a presentation at a World Bank forum, titled, “Nigerian Content Development,” further stated that the NCDMB was able to achieve the much it could over the years due to the fact that the programme was championed from the top and tied to the country’s transformation agenda.
Nwapa also noted that the NCDMB was able to adopt a structured consistent approach, adding that it was aware that showing results of some of the actions taken helped in reducing resistance to the initiative.
Other lessons, according to him are the fact the NCDMB, “Focused more on development and less on regulations, as it was aware that collaboration with stakeholders will help achieve the desired results; created enabling data management systems to handle information and analysis and creates linkages to the other sector.”
In addition to the above lessons, Julian Nichol and Nicholas Kendrick, in an article titled, ‘Nigeria: Local Content Update for the Oil