…$200m inaccessible to indigenous companies

By Sebastine Obasi

The concept of local content in Nigeria’s oil industry has been applauded. Since its inception in 2010, the local content policy, no doubt may have made impact in the nation’s fledgling industry. However, new odds have continued to trail the very implementation of the policy.

Oil men at work

Inaccessibility to the National Content Intervention Fund, NCIF, by indigenous companies has been a minus in the policy. Though the fund was recently raised to $200 million from its initial $100 million, Nigerian companies have not been able to access it. According to Simbi Wabote, Executive Secretary, Nigerian Content Development and Management Board, NCDMB, non implementation of the local content policy fully has retarded its progress. “Before my appointment, when I was on the other side of the industry, I used to wonder what was happening that people were unable to access the fund.

“Regrettably, I like to report that only three Nigerian vendors have been able to access the fund so far. For me, not being able to put that fund to use is a failure.

“Second, not being able to check the use of the fund is also a failure on our part. That is why we are trying to take stock, by conducting a baseline study on Nigerian content implementation; to know where we are today in the implementation of the Act in the past six years.

“Sincerely, we have not been able to implement the Act in its totality in line with the intent of those who wrote the law.

“We will press pause to review how far we have been able to implement the Act; know where we made progress; identify the gaps and where we need to up the game. I believe until we do that, we cannot beat our chest and say these are areas we have really succeeded,” he said.

Wabote’s worry is exacerbated by the downward trend in the industry globally, occasioned by low oil price and low level of investment in the industry. According to an industry insider, who chose to remain anonymous, the lull in operations in the industry and the fall in price of oil has affected the local content policy of the federal government.

He said, “Within the period of slump, there has been very little industry activities, as operators and government were finding it difficult to fund new projects, while existing contracts were being renegotiated downwards. Without ongoing and new projects, there hardly can be talk about Nigerian content. Also, in terms of how the banks are leveraged to make funds available to local companies, that have remained a big challenge.”

Another stakeholder in the industry, who would not want to be mentioned, explained that local content policy has not really started to work effectively as people have not understood how to participate in it to reap the benefits.

According to him, “While the buzz of local content continues to build up, the alleviation of the effects of Dutch Disease” has not been realized as expected in the Nigeria. Nigeria has claims of increase in GDP and standard of living but when you approach an average citizen he will make a sigh and say: “it is only the few rich that continue to get richer. This shows that local content policy has not really started to work effectively and the people have not understood how to participate in it to reap the benefits.”

He also explained dearth of jobs and unemployment is still rife in Nigeria, just as in many African countries with unemployment rate reaching a 22 percent average.

He further explained that local content has not achieved the required success due to the reliance on foreign companies to execute jobs meant for indigenous companies.

“Local contractors are not well equipped with the level of training, expertise, and technology to carry out certain jobs. Reliance on foreign companies is still high and only those who have been able to break forth and get into partnership with international companies have gained access to the arena.

“Problem of attracting loans is another big cog in the wheel. Local banks are either not liquid enough to give loans or are caged with multifaceted wrangling that disabled them from granting good loans.   Despite all odds, local content is been visualized by many industry insiders and local players as the potential vehicle that will transform the national economy and maximize benefits of resources. However, there are some levels of pessimisms due to the nature of political volatility and instability in most African nations that the execution of some aspects of local content policies might suffer arm-twisting thereby making it an El-Dorado of a kind,” he added.

London – based Royal Institute of International Affairs, also known as Chatham House, in its report recently released, identified what it termed some common pitfalls of poorly designed local content policies in Nigeria and select countries to include: Lack of strategic direction: It reported that policies that fail to consider long-term objectives in regard to industrialization, economic diversification and strengthening of value creation may focus on the easy ‘low hanging fruits’ of local content activities and miss out on opportunities to create in-country value.

Priority may be given to low value added activities with limited capabilities for transfer into other sectors. These opportunities often cause short-term local economic booms that tend to be more disruptive to the local population in terms of a surge of consumption and localized inflation, and create community resentment toward those employed in the temporary oil activities.