Ensuring Compliance Of The Local Content Act
Two years after President Goodluck Jonathan signed the Local Content Act into law, most multinational oil companies operating in the country have continued to observe some provisions of the Act in breach.
The Act provides that Nigerian independent operators shall be given first consideration in the award of oil blocs, oil field licenses, oil lifting licenses and shipping services. It also stated that all projects for which contracts are to be awarded in the Nigerian oil and gas industry, subject to the fulfilment of such conditions as may be specified by the minister there shall be exclusive consideration for Nigerian indigenous services. The Act equally provides that the operators are expected to submit within 30 days of the end of each quarter, a listing of all contracts, subcontracts and purchase order exceeding $1 million. Again, the law provides that all projects or contracts whose total budget exceeds $100 million, shall contain a labour clause mandating the use of a minimum percentage of Nigerian labour in specific cadres while operators and companies in the Nigerian oil and gas industry shall employ only Nigerians in their junior and intermediate cadre or any other corresponding grades designated by the operator or company.
Professional and technical services such as fabrication and welding activities of the operators and contractors are expected to be carried out in the country. The law says that any entity engaged in any business or transaction in the Nigerian petroleum industry requiring legal services may only retain the services of a Nigerian legal practitioner or firm(s) of Nigerian legal practitioners whose office is located in any part of Nigeria. The operators are also expected to utilise Nigerian insurance companies and will only use offshore companies with the preapproval of the National Insurance Commission. It also provides that the operators, contractors and sub-contractors are required to maintain bank accounts within Nigeria retaining a minimum of 10 percent of the revenues accruing from the Nigerian operations.
Compliance of oil companies with the law has also been provided for with a Nigeria Content Monitoring Board, NCMB, established to “implement the provisions of this bill with a view to ensuring a measurable and continuous growth in Nigerian content in all petroleum arrangements, projects, operations, activities or transactions in the upstream sector of the Nigeria oil and gas industry.”
Other aspects of the law relates to the award of contracts, fiscal incentives, penalty etc.
As it has been argued elsewhere the objectives of local content within the Nigerian context are to increase value-added content, thereby contributing to national economic development as well as that of our stakeholders, partners, clients, companies, employees and contractors and the transfer of technology and develop local know-how.
A group known as the Niger Delta Indigenous Movement for Radical Change, NDIMRC is not happy at the poor implementation of the law by oil companies operating in the country. President of the group, Nelly Emma, called for sanction on multinational oil companies subverting the Nigerian content law. “We are still not comfortable with the way the multinational oil companies are treating our indigenous companies and the Nigerian Content. The time has come for the petroleum minister to read the riot act to them; they should not be allowed to derail the Nigerian Content….The Nigerian Content is a boost to local participation in the oil sector. Our findings have revealed that indigenous oil servicing companies have invested so much in capacity building in the last few years and they should be encouraged so that their huge investment in the Nigerian content will not be in vain,” Emma noted. He commended the minister of petroleum resources, Mrs. Diezani Alison-Madueke, for undertaking a tour of indigenous companies in the Niger Delta region but lamented that the “indigenous oil servicing companies in the region are not being encouraged by the multinational oil companies which still prefer to deal with Daewoo, Saipem, Acergy and OPI,” and the intention is to kill the Nigerian content.
Out of an average of N1, 240 trillion is said to be spent annually in the petroleum industry in Nigeria only about five percent is retained in the country. The proportion of local content in the oil and gas industry stands only at between five to 15 percent after over 50 years of petroleum exploration in Nigeria. It was this scenario that informed the decision of the federal government to enact legislation on local content. The local content seeks to enthrone legal measures within the context of the country’s international trade obligations to ensure a prompt increase in the percentage of local content in the industry. The Act (also known as Nigeria Oil and Gas Industry Content Development Act, is aimed at granting Nigerians “full and fair opportunities to participate and enhance the wealth and income benefits of the oil and gas industry for Nigerians, while ensuring international competitiveness of the materials, equipment and services provided by Nigerian companies.”