Five years ago, the Nigerian Oil and Gas Industry Content, NOGIC Act, came into force with the sole objectives to not only encouraging the participation of more Nigerians in the petroleum industry, but also increasing the c ontribution of the industry to the nation’s gross domestic product, GDP. Sebastine Obasi sought to find out how well these lofty objective have been realised and how the law can be strengthened to achieve better results for the benefit of all.

“I will give them a pass mark because something is better than nothing and the NCDMB has done something. “I know some of my colleges who were involved in some of their trainings in conjunction with Saipem and they were going to employ some of them.

Some of them did training in collaboration with Chevron, and some other companies did the same thing with the NCDMB too. I think it is laudable. However I feel that a lot more efforts should be put in. I will give NCDMB a pass mark but more should be done.”

These were the comments by Mr. Olisemeka Ojieh, the Chief Executive Officer, Petrocarbon Engineers Ltd, an indigenous oil servicing company, and mirrors the activities of the Nigerian Content Act, since it became effective. The Act seeks to increase indigenous participation in the oil and gas industry by prescribing minimum thresholds for the use of local services and materials and to promote the employment of Nigerians in the industry.

When the Nigerian Content came into being on April 22, 2010, not many Nigerians gave it a chance to succeed. In fact, some people were sceptical that it would be another Nigerian project, laced with bright ideas, but lacking in implementation. However, five years down the line, how has the Local Content fared? Has it achieved the purpose for which it was established?

The immediate past Executive Secretary, Nigerian Content Development and Monitory Board, NCDMB, Mr. Ernest Nwapa, said that over $5 billion worth of investments have been made in Nigerian yards since the signing of the Nigerian Content Bill into law by former President Goodluck Ebele Jonathan in 2010.

He also said that about $191 billion (N3.8 trillion) investment had been retained in-country and hundreds of thousands of jobs in manufacturing, engineering, sciences and technical services could be created. According to Nwapa, about $10 billion (N200 billion) worth of investments is being expected in the Nigeria oil and gas sector through the local content development policy between 2015 and 2016.

He hinted that over $1billion had been invested in the Nigerian oil and gas industry to create capacity and execute Nigerian Content scopes provided on the Egina deep water project. Nwapa also noted that the acquisition of key oil and gas assets and the establishment of critical facilities by local and foreign investors will help guarantee the continued implementation of the Nigerian Content Act.

He explained that Nigerian investors and their partners had demonstrated their resolve for the policy to continue by building immense capacity over the past five years, acquiring hi-tech industry equipment and creating employment opportunities for thousands of young Nigerians in their assets and facilities.

According to Nwapa, “policy statements issued by the in-coming government had indicated that it will continue to support indigenous participation and Nigerian Content. It is very important that the international community gets that message clearly and that Nigerians who are investing continue to do so believing that government is a continuum and will always support them by continuing with good policies they have initiated.”

Also speaking, Chairman Africa, Schlumberger, Mr. Sola Oyinlola, said that Nigeria has become a force to reckon with in the petroleum industry through the support of the Nigerian Content Act.

According to him, the success of the national content agenda, with its ability to create massive multiplier effects in other sectors of the economy, which needed to be diversified away from oil and gas, has influenced thoughts to expand the initiative to other sectors such as power and telecommunication.

Oyinlola however identified the lack of in-country financial capacity to undertake big ticket transactions and inadequate infrastructure, including the deplorable state of supporting industries, for prototyping or manufacture or assembly of any locally engineered solutions as major challenges facing the local content policy.

He listed other challenges to include the lack of technical capacity; dearth of research and development institutions and culture; and the limited access to technology limiting the possibility of innovation and domestic technological creativity. For the policy to achieve its full potential, he said: “The critical missing link between strategy and action must be addressed to avoid the persistent incapacitation the public policy initiatives and actions many government programmes and projects have suffered.

“The board must actively collaborate with development partners including the International Oil Companies, IOCs, and multilateral agencies, to implement identified solutions to the myriad problems catalogued above. For instance, I would be curious to know how the tax payer funded Nigeria Content Development Fund, which could help solve the financial capacity constraint above, is going to enable small scale enterprises to finance their joint initiatives.

“The Buhari administration has its work cut out for it and the industry awaits with bated breath any new policy directions, but we are all optimistic that challenges would be tackled expeditiously to provide a new dynamic investment destination.” The Managing Director, Tolmann Allied Services Company Limited, Mr. Emmanuel Onyekwena, attributed the successful construction of the first deepwater simulation theatre, DST, in Africa located in Port Harcourt to the opportunities created by the Nigerian Content policy.

He said the local content law had enabled more Nigerians to access oil and gas contracts. “The major development that the industry has continued to celebrate is the Local Content Law, which is empowering Nigerians,” he added.

The industry, which was in the past the exclusive domain of the IOCs in areas such as exploration and production, has seen Nigerian companies now owning more than 100 blocks across oil-producing regions in the country, and at least 30 marginal fields.

According to Section 3, Sub-section 1 of the Act, “Nigerian independent operators shall be given first consideration in the award of oil blocks, oil field licences, oil lifting licences and all projects for which contract is to be awarded in the Nigerian oil and gas industry, subject to the fulfilment of such conditions as may be specified by the Minister.”

Head Ecobank Energy, Oil and Gas Research, Ms. Rolake Akinkugbe, noted in a recent report that “Local operatorship of divested assets as well as a corresponding boost in local production will be key to assessing the success of the government’s local content policy in the upstream sector. If the PIB is successfully passed, production growth for junior and indigenous companies is likely to increase.”

An energy law and policy expert and senior associate in the law firm, Banwo & Ighodalo, Mr. Ayodele Oni, said the idea of the enactment of the Local Content Act was a step in the right direction, as it was meant to reduce capital flight, provide more jobs for Nigerians and generally promote doing oil and gas business in Nigeria and by Nigerians.

“After five years, there have been modest achievements and an improvement in the overall Nigerian value addition to the oil and gas industry and certain Nigerian engineering and oil service companies have benefitted from it, as there has been an increase in the volume of in-country fabrication,” he said.

Noting that more needs to be done in order to enjoy more benefits of the law, Oni said there was need for capacity development, so that more Nigerians could truly benefit from the legislation. “From a legislative drafting point of view, there is also the need to make some of its provisions clearer; particularly how the Nigerian content levels under the Schedule to the Act would be fulfilled,” he added.

Also commenting, the Controller, Sub-surface, Peak Petroleum Industries Nigerian Limited, Mr. Emmanuel Usanga, noted that the local content had created incremental value in the industry, adding that “there are two broad challenges facing local players, financing and expertise. There has been a wide gap between Nigerian financial institutions and the oil industry.

“There is need for banks and other financial institutions to be more supportive of the industry. As regards capacity building, local companies need to partner with service providers, manufacturers and vendors abroad to bring them into Nigeria.”

Financing, which had been a major impediment to the participation of local contractors in the delivery of goods and services, may have been improved with the introduction of schemes by ExxonMobil Nigeria, Shell Petroleum Development Company, and Nigeria LNG Limited, in partnership with banks, aimed at increasing the capacity of indigenous contractors in the industry.

In his assessment of the NCDMB in the last five years, Chairman Petroleum Technology Association of Nigeria, PETAN, Mr. Emeka Ene, believed the Board has created an enabling environment for Nigerian companies to grow capacity.

He said, “Recognise that the NCDMB when it was formed, the policy makers did the right thing by not emphasising the monitoring part, but by emphasising the development part. Although the people in the industry were a bit concerned about the negative potential impact of the local content on the growth of business, the NCDMB went to a large extent to assure companies and emphasise the development of Nigerian capacity. That has expanded the scope of many companies.”

Ene however noted that there may have been abuses in the course of implementing the policy. “Of course, for any good thing there must be abuse. There has been a fair amount of abuse because one of the dangers of local content is the potential creation of toll gates, where no value is added. PETAN as an organisation frowns at such. We think that local content should be value-added. It should be competitive. People should make investments and not to seat back and collect tolls. That does not help to grow the industry. That is not local content.

“Nigerians have borrowed money and made investments. We expect that the NCDMB should support such companies so that they get their money back. What happens is that when they invest in equipment and capacity, people learn real things that they can apply. Nigerians are working across the globe now based on the skills they learnt from Nigerian service companies.

“The NCDMB has evolved. In the later part of the five years, the NCDMB started emphasising on monitoring. Monitoring aspect is very important. It allowed us to sieve the chaff from the real thing. It also helped to strengthen the institutional and regulatory role of the NCDMB. Above all, one area we think more should be done and more could have been done, is in the area of capacity building through fund access for local companies.

That was the purpose of the Nigerian Content Fund. Nigerian Content Fund was supposed to strengthen Nigerian companies, not necessarily contract financing, but to strengthen capacity growth. “If a company invests $100 million buying an ocean going vessel, and all he has to finance it is a two plus one year contract, whereas it takes 10 years to recover the cost of that investment, if you take away that contract, what happens to him? How does he make up?

How do you then encourage local content? It is then easier to lease a vessel from overseas and at the end of the contract, you leave that place. For us to develop local content, we must put money where our mouth is. We must support Nigerian companies with real capital, access to long term low cost capital, so as to deepen and grow their capacity in the real, not in the figurative and inconsequential way,” he added. From the foregoing, the issues raised are pointers for the Buhari administration to plug the loopholes in order to achieve the objectives of the content law.