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Nigeria Oil & Gas Local Content Law: Beyond passing the Bill

Okechukwu Onwuka
The Nigerian Oil & Gas Industry Content Bill (2010) has just been signed into law by the Acting president, Dr. Goodluck Jonathan. The Bill directs that henceforth, priority should be given to indigenous service companies.

“The Bill for the Act to provide for the development of Nigeria Content in the Nigerian Oil and gas industry, for Nigerian content plan, for supervision, coordination, monitoring and implementation of the Nigerian content and for matters incidental thereto, 2010” seeks to ensure ownership of the equipment, Nigerian personnel and capacity to execute jobs and makes indigenous participation in the industry obligatory.

The Acting president was also quoted as saying “Henceforth, there shall be exclusive consideration to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian Personnel and capacity to execute jobs.

Therefore, all regulatory authorities, operators, contractors, subcontractors, alliance partners and other entities involved in any project, operation, activity or transaction in the industry shall consider Nigerian content as an important element of their overall project development and management philosophy for project execution”.

Without doubt, the signing of this bill into law is very good news. For many, this is long overdue. It indicates that there’s Government will to force compliance by companies operating in Nigeria. As widely reported in the media, there are many associated potential benefits which all translate to retaining a good portion of the industry spending within Nigeria.

For many who have experience in the industry, there are valid fears regarding the potential for success. Even without oil and gas sector experience, it is common knowledge that enacting a law does not necessarily translate to compliance.

To achieve the objectives, there must be adequate plans to enforce compliance given the prevailing conditions. The plan must address the issues of non-compliance and effective penalties as one way to discourage willful disobedience. We’ll look at some of the challenges to effective implementation.

History: There are many laws and bills in Nigeria that have never really achieved the design objectives. We all know that there is a ban on importation of textile materials and clothing. The goal remains to encourage profitability and growth of Nigerian Textile companies. Unfortunately, the local textile industry has continued to suffer huge losses in the face of continued importation of the banned goods.

Imported shoes, suits, shirts, briefs, trousers can be bought from almost any shop in the country. The influx of the very cheap products from China has dealt a very heavy blow to the sector.

For custom officials, it’s very good news any time there is a new law banning the importation of certain goods. This is driven not primarily by the desire to help make Nigeria better but because an added avenue has been created to make plenty of money from smugglers.  Imported poultry, we all know is banned yet we have several outlets where imported chicken and turkey are sold openly.

Prevailing attitudes: It is one thing to see an opportunity created. It is another to see the opportunity in the context of the opportunity definition. The Nigerian Content bill will surely force some companies to award contracts to Nigerian companies. The problem is that quite a number of Nigeria business owners will prefer to “partner” with foreign companies and take a percentage of the contract fees and allow the foreigners perform all the work.

There’s nothing wrong with partnerships but when the platform of partnership negates the value system that created the opportunity, it becomes not only wrong but constitutes a betrayal of trust.

For the majority who are sold on quick profits, the regular process that involves hard work, proactive learning on the job and continuous improvement are considered very boring. Ultimately, the bulk of the money still leaves the country in the form of expatriate wages, accommodation, travel expense, importation, etc.

The major tragedy is the lost opportunity to truly develop local competence and lost jobs. With the widespread corruption at all levels, how can anybody guarantee that expatriate quota violations will be reported? Another attitude problem is that even Nigerian’s do not have confidence in the ability and competence of fellow Nigerians. As a result, we find those in leadership positions in Multinational corporations championing efforts to sidetrack the award of jobs to Nigerian Companies. This problem is not helped by the shallow mentality of some of our professionals.

Foreign contractors understand the importance of deep processes, excellent documentation and presentations. For Nigerian’s to take full advantage of this opportunity, there must be a definite attitude change. We must be committed to go the extra mile to deliver exceptional quality services at competitive rates.

Top Quality Professionals: Our top technical graduates are currently employed in the multinational corporations, banks and similar organizations where their skills and abilities rarely get fully utilized. We need the very best of our human resources to lead the way in our drive to technological advancement. Parents and guardians should not discourage their children from pursing their dreams and aspirations either through direct entrepreneurial efforts or by joining not-so-big companies who are primed to become the giants of tomorrow.
High labour costs, low productivity and infrastructure limitations: Singapore and other Asian countries have become the hub for Oil & Gas industry manufacturing and fabrication. This is primarily based on the high work performance efficiencies, productivity, sophisticated and reliable infrastructure. Companies do not patronize Asian companies because they love them. It is only natural that business owners or leaders will choose locations that produce quality products at low costs. If Nigerian companies and workers can develop comparable performance standards, multinationals will save costs and delays associated with importation by using Nigerian contractors. But we have to demonstrate this capacity together with the local content bill to optimize the chances of success.

Technology Transfer: There is no such thing as technology transfer. Technology is either aggressively “stolen” or acquired. No country or company will willingly transfer special knowledge or ability to another.

Nigerian companies and business leaders must be ready to pay the hard price to develop core competencies. It will not happen overnight but perseverance, commitment and dedication to excellence has never failed anybody. We cannot afford to disappoint our children any further. Today, we lay the foundation for their future.


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