TEN YEARS OF LOCAL CONTENT IMPLEMENTATION IN NIGERIA: SUCCESSES, CHALLENGES AND THE IMPERATIVE OF EXPANDING BEYOND OIL AND GAS

1.0 INTRODUCTION

Seated in the Lekki peninsula of Lagos is a refinery and petrochemical project undergoing furious construction. This facility is predicted to, upon completion, be the largest oil refinery in Africa and the largest single-train facility in the entire world. The Dangote Oil Refinery, owned by the Nigerian-based Dangote Group, is believed to double Nigeria’s refining capacity and assist in increasing domestic demand for fuel, while concurrently utilizing exports to generate foreign exchange. This milestone was, however, not accidentally clinched. Rather, it was a delivery result of the Stakeholder Management and International Coordination priority, following the Nigerian Oil and Gas Industry Content Development (NOGICD) Act in 2010, to promote local content implementation in the sector. The key-phrase ‘Local Content’ can be described as the comprehensive whole involving local skills development, employment of local labour and manufacturing processes, and oil and gas technology transfer, without foregoing health, quality, environmental and general safety. The Act is a crucial procedure that will enable the Nigerian economy be the primary profiteer of the Oil and Gas industry, which is dominated by international and multinational companies). Priorities to advance this Act were set out under the “7 Big Wins” umbrella, and comprised Policy and Regulation; Business Environment and Investment Drive; Refinery and Local Production Capacity; Gas Revolution; Niger Delta Security; Transparency and Efficiency; and Stakeholder Management and International Coordination, in the industry.

2.0 SUCCESSES OF LOCAL CONTENT IMPLEMENTATION

The Stakeholder Management and International Coordination priority of the “7 Big Wins”, earlier stated, has, in recent times, engineered the installation of the Egina deep-water oilfield. This Total Upstream Nigeria Limited project would be the deepest offshore development carried out in Nigeria. It was predicted to add 200,000 barrels per day to Nigeria’s oil production, while furthering local content policy by increasing job opportunities, technological transfer, capacity building, economizing cost, reducing capital flight and pulling petroleum hubs to Nigeria. The Gas Revolution Priority, likewise, led to the enactment of the Gas Policy and Gas Flare Regulation, known as the Flare Gas (Prevention of Waste and Pollution) Regulations 2018; hence, reducing environmental and social impact caused by the flaring of natural gas, and creating social and economic benefits from gas flare capture.

However, the Refinery and Local Production Capacity Priority led the Nigerian Content Development and Monitoring Board (NCDMB) and the Bank of Industry (BOI) to launch a $200 million Nigerian Content Intervention Fund (NCIF). The purpose of these funds being to make loans accessible for Nigerian companies that are players in the oil and gas industry.

Finally, the NCDMB, in partnership with an indigenous civil constructions company – Megastar Technical and Construction Limited – constructed a 17-storey ultramodern office complex in Yenagoa, mostly utilizing locally-sourced materials. This project provided jobs to over 250 employees, and will be providing power supply to a number of areas within the State, following the installation of its 10MW independent gas-powered plant.

3.0 CHALLENGES TO LOCAL CONTENT IMPLEMENTATION

Nonetheless, even with the track record of successes, within over 10 years of local content implementation, a host of challenges has been encountered.

3.1 High Ratio of Capital to Labour

Extractive industries have an uncommonly high ratio of capital to labour, compared to other industries. This implies that they hire fewer job seekers per investment. This can be saddening for those that overestimated the hands that will be needed on deck, upon establishment of an extraction site.

3.2 Criteria for Employment

The criteria needed for employment into the Oil and Gas industry is specialized and can only be developed through targeted pedagogy. The Nigerian educational system lags behind, as regards this. The training facilities in the Nigerian educational sector are inadequate, as a result of poor government funding. Hence, the acquisition of technical education and research initiatives is compromised. There is no substantial Research and Development (R&D) collaboration between the foreign oil companies and the local educational institutions due to these deficiencies, and it becomes difficult for these companies to employ locales.

3.3 Infrastructural Challenges

Steady power supply, smooth transportation, top-notch network connectivity, among others, are lacking in Nigeria. When the needed power supply for the manufacture of certain items to be used by the industry, for example, is lacking, importation of these items is unavoidable.

3.4 Inadequate Funds

The oil and gas sector is one that requires a lot of capital. Access to capital is one advantage that multinational companies have over indigenous ones. These indigenous companies lack access to funds that can enable them actively and efficiently participate in the market. Sadly, Nigerian banks do not have the required wherewithal to render any significant assistance, as most of them are midget banks when it comes to energy financing.

3.5 Corruption

The most dangerous challenge to local content implementation in Nigeria is corruption. From the political cum socio-economic top to the bottom, corruption has burrowed so deep into Nigeria’s national framework. This canker-worm stifles accountability and transparency, even in the oil and gas industry, hence, resulting in economic subversion, among others. For instance, local content requirements to partner with local companies led to corrupt schemes in which political elites established shell companies to profit from the law.

4.0 IMPERATIVE OF EXPANDING BEYOND OIL AND GAS

In view of the aforementioned, and coupled with the fact that it can be detrimental to give greater economic focus to extractive industries, since extractive resources are finite, it behooves the Nigerian economy to expand beyond oil and gas. There are three core reasons for this: first, to cushion the dangers of focusing on a single-commodity; secondly, to provide more job opportunities, hence increasing standard of living and thirdly, to prepare for a life outside the ‘oil money’ dependency. The Agricultural Sector, the Telecommunications Sector and the Constructions Sector are auspicious sectors that the Nigerian economy can expand into.

Nigeria’s Agricultural Sector, in the few years following Independence, by exporting cash crops (groundnut, cocoa, cotton and palm oil), held a leading position in the world. However, following petroleum eureka in commercial quantities, the country shifted its focus to oil and thus, the agricultural sector suffered a drastic collapse. The agricultural sector, however, remains a major Nigerian sector, and employer of labour by contributing an average of 24% to the national GDP, since 2013 to 2019; and employing over 36% of the country’s labour force. Unfortunately, the sector is majorly plagued by inadequate funds. Local content implementation in this sector will make funds easily accessible for its players. More so, since the sector is more labour-intensive than the oil and gas sector, a great number of citizens will find decent employment.

Secondly, the Telecommunications Sector has immensely contributed to the Nigerian economy, in recent years, and can be exploited. The players at the forefront are South-African based multinational company, MTN, with a market share of 37.21%; Indian-based multinational telecommunications, Airtel; Nigerian multinational company, GLO and 9mobile. Since the Nigerian media scene is the most vibrant in Africa, the telecommunications sector is bound to see greater growth, in coming years. It will therefore be a smart move if local content is implemented in this sector by making indigenous companies the leading players, promoting local participation, employment of locales and national economic development.

Finally, the construction sector is a sustainable one, as construction never ends. Howbeit, the sector is assailed by a general shortage of man power, funds and modern equipment. Local content can be implemented within the sector by making funds and loans more easily accessible; and by special government-aided partnerships between companies in the industry and educational institutions, in the country, for targeted student training and assistance. This will definitely bring about increased employment opportunities, economic development and a greater suitability of the country for investment and growth in other sectors of the economy.

5.0 CONCLUSION

Over ten years since the enactment of the Local Content Act, a host of successes has been recorded, contributing to the growth of the Nigerian economy, and arousing further hope that more development is still to come. In a country where most of its priorities and policies are misplaced and preposterous, the Local Content Act, for a change, is one that is reasonable, promising, needed and thriving. The act does not impede foreign investment; rather, it welcomes international operations in the sector, as long as they comply with its provisions. The challenges in implementing the act can be easily fixed if proper attention is given to infrastructural development; the educational system is revisited and restructured; the financial organizations are better equipped to provide energy-focused financial aids; and corruption is generally kicked against, in the country. Besides, to avoid putting all the economic ‘eggs’ in one basket, it is crucial that the Nigerian Economy expands beyond oil and gas. Possibilities in the promising Agricultural, Telecommunications and Infrastructural Sectors can be explored. If all these are done, there is nothing that can stop Nigeria from stepping into her reality as the African Giant.