Valuechain’s Yange Ikyaa, Eddy Ochigbo, Saidu Abubakar and Gideon Osaka, take a critical look at how NCDMB’s successful interventions have strengthened indigenous capabilities in the Nigerian oil and gas sector over the years, and how such brilliant initiatives could also be replicated in other key segments of Africa’s largest economy.
In the year 2010, the Nigerian Oil and Gas Industry Content Development Act came into being, serving as the enabling law by which the Nigerian Content Development and Monitoring Board (NCDMB) was established. Its aim is to generally oversee Nigerian content plans developed by industry operators and to ensure their strict compliance with same, while also setting guidelines and minimum content levels for projects across the oil and gas value chain in Nigeria.
The oil and gas industry takes a prime position in Nigeria’s economic life, as it contributes about 65% of government revenue and 88% of Nigeria’s foreign exchange earnings. This is the reason why the sector has received enormous attention from the government in order to ensure that the revenues earned from it must finance other aspects of the local economy and increase national productivity.
In pursuit of this vision, the Nigerian Content Development and Monitoring Board (NCDMB) was established in 2010 through the enactment of Nigerian Oil and Gas Industry Content Development (NOGICD) Act. NCDMB is vested with the mandate to make procedures that will guide, monitor, coordinate and implement the provisions of the NOGICD Act signed into law on April 22, 2010.
Its key functions include to review, assess and approve Nigerian Content plans developed by operators, set guidelines and minimum content levels for project related activities across the oil and gas value chain, engage in targeted capacity building interventions that would deepen indigenous capabilities, such as human capital development, infrastructure & facilities, manufactured materials and local supplier development.
Others include to grow and manage the Nigerian Content Development Fund, establish, maintain and operate the Joint Qualification System (NOGICJQS) in conjunction with industry stakeholders, and to monitor Nigerian Content Compliance by operators and service providers in terms of cumulative spending, employment creation and sources of local goods, service and materials utilized on projects and operations.
With the NCDMB in place, a lot has so far been achieved, especially with the launch of its “10-year Strategic Roadmap,” that was launched in 2018 with a view to attaining 70% Nigerian content in the oil and gas industry. After its fourth year in operation, the Roadmap has a total of 96 initiatives, out of which 56 initiatives are on track, while 24 initiatives are ongoing and 16 initiatives are not yet due. Overall, 75% of the roadmap initiatives are on-track in aggregate terms, according to figures in an NCDMB document seen by Valuechain.
The document also shows that the Board has delineated five areas that are monitored in the evaluation process of Nigerian content in oil and gas projects around the country, namely engineering, procurement, fabrication, project management, and services.
A closer look at the numbers shows that a total of $20.4 billion was spent on these five categories between 2016 and 2020. Further analysis shows that the top three of the categories in industry spending were documented as $8.07 billion on fabrication, representing 39% of expenditure; $4.74 billion on engineering services, representing 23% of spending, and $5.67 billion on procurement of manufactured materials, representing 28% of spending; while the lowest spending figures were $1.18 billion on services, representing 6% of expenditure; and $746 million on project management, representing 4% of spending.
On the level of Nigerian content performance in these five categories, engineering services took $4.2 billion out of $4.7 billion, representing 89% Nigerian content; project management took $427 million out of $746 million, representing 57% Nigerian content; services took $441 million out of $1.12 billion, representing 37% Nigerian content; procurement of materials took $1.5 billion out of $5.7 billion, representing 27% Nigerian content; and fabrication services took $1.98 billion out of $8.07 billion, representing just 25% Nigerian content.
Based on the above data, the aggregated level of Nigerian Content across the five categories is established as 42%. It is also pertinent to note that while Nigerian content performance in engineering, as one of the top-3 spend areas is already above the 70% target, there is need to focus on the other two areas of fabrication and procurement of materials, if the country is to realize the 70% aggregate target in all the five categories by 2027.
Current infrastructural achievements include the 5,000bpd Waltersmith Modular Refinery, which was commissioned by President Muhammadu Buhari in November 2020, the 2,500bpd Duport Modular Refinery at Egbokor in Edo State, which was commissioned in 2021, advanced works at the NOGaPS sites in Bayelsa, Delta, Ondo and Cross River States, despite of the COVID-19 pandemic.
The Board is now collaborating with Chimons to build a 5,000MT LPG loading and receiving terminal in Koko, Delta State and has teamed up with Butane Energy Limited to build LPG storage/bottling plants, as well as depots in Kaduna, Bauchi, Katsina, Kano, Nasarawa, Niger, Plateau, Gombe, Zamfara, Jigawa and Abuja. The first 100MT storage and bottling plant in Katsina has already been completed and was commissioned in late 2021. Yet, in partnership with Brass Fertilizer, NCDMB is developing a 10,000 tonne per day methanol production facility at Brass Island, Bayelsa State.
NCDMB is committed fully to implementing modalities to extend the Nigerian Content Intervention Fund or NCIF to some targeted stakeholder groups in the industry. So far, the size of funds for the NCIF has been expanded from $200 million to $400 million, with $350 million from NCDMB and $50 million from NEXIM Bank, which is meant to solely benefit indigenous Nigerian companies or companies operating in the country with at least 53% ownership by Nigerians.
There are also better administrative and regulatory conditions attached to the fund that have made it possible for an upward of 53 companies to be financed from it within a very short time of less than three years. This followed a review that was aided by the signing of seven regulations by the Minister of State for Petroleum Resources for the purpose of easing credit transactions, among other industry proceedings. These seven regulations have also been fully gazetted.
Automotive sector
These successes of local content domestication in the oil and gas sector could also be replicated in other industries that are lagging behind in Nigeria, such as the automotive industry. Nigeria, along with Ethiopia, are the largest importers of used cars in Africa.
In August 2021, the Minister of Finance, Budget and National Planning, Zainab Ahmed said that 400,000 vehicles were imported into Nigeria between 2015 and 2020. This, she said, had set the country back by N1.8 trillion. Imported vehicles into the country are mostly already used, with some even damaged or “accidented.”
Targeted at improving local content in assembly plants in Nigeria, the Federal Ministry of Industry, Trade and Investment in September 2021 launched a two-week intensive training for 18 engineers on designing components for the automotive industry in Nigeria. They were trained on having a grasp of automotive design software in order to produce Semi-Knocked Down (SKD) or Complete Knocked Down (CKD) components rather than the usual reliance on importation to assembled vehicles in the country.
The National Automotive Design and Development Council (NADDC), has maintained that the Federal Government remains keen on encouraging assembly plants in Nigeria to improve their local content footprint and to be able to produce components that can replace those coming from abroad.
According to the Council, “these components they will design can be sold to the original equipment manufacturers in Nigeria, those assembling vehicles in Nigeria. They can also sell to the Council because we also do prototype vehicles. They can sell to the global automotive industry, global players like General Motors, Ford, Toyota, Honda, Mazda, Mitsubishi and the likes.”
Nigeria’s entry into automobile manufacturing dates back to the early 1960s, with the establishment of factories by companies such as UAC, Leventis, SCOA, BEWAC, and RT Briscoe, which produced through Complete Knocked Down (CKD) or Semi knocked Down (SKD) parts.
However, as part of its policy for Import Substitution Industries, in the early 1970s, the Federal Government, in partnership with auto manufactures in Europe, facilitated the establishment of some auto factories in Nigeria such as Peugeot Automobile Nigeria Limited (PAN) Kaduna; Volkswagen Nigeria Limited (VWON), Lagos; Anambra Motor Manufacturing Company (ANAMCO), Enugu; Styer Nigeria Limited, Bauchi; National Truck Manufacturer (NTM), Kano; and Leyland Nigeria Limited, Ibadan.
Before they were eventually privatized in 2007, all the automobile firms combined had the capacity to produce 108,000 cars, 56,000 commercial vehicles, 10,000 tractors, 1,000,000 motorcycles and 1,000,000 bicycles yearly. But the assembly plants could not survive Nigeria’s harsh economic environment, notably inadequate local component supply, energy supply, forex squeeze, lack of technology ownership as well as excessive preference for car imports rather than local patronage, thereby forcing the auto-making plants to collapse.
Consequently, the nation’s leading auto component manufacturers, including Dunlop and Michelin, also crumbled despite respectively establishing rubber plantations in Calabar and Benin for sourcing local raw materials. The farms are still in existence and producing raw materials, but unfortunately for export to feed other factories located outside Nigeria.
Yet, opportunities abound for local car manufactures, if they can have the right business environment to function and thrive. For instance, Oilserv Limited has taken it upon itself to use locally manufactured vehicles in its operations. To this end, its management has entered into partnership with Nigeria’s first indigenous vehicle manufacturing firm, Innoson Vehicle Manufacturing Company, located at Nnewi in Anambra State.
In August 2020, the Chairman of Oilserv, Engineer Emeka Okwuosa, said his firm has absolute confidence in the ability of Innoson to drive local content development hence the need to support the firm. He said Oilserv, which builds pipelines in Nigeria and other parts of Africa, has already placed order worth N600 million for the supply of various types of vehicles produced by Innoson.
Manufacturing sector
Generally in the manufacturing sector, it undoubtedly appears that Nigeria’s glorious days are consigned to the history books. The textiles industry is one sector that has suffered the greatest setback, with virtually all the textile mills, especially those in Kaduna, becoming moribund.
Kaduna used to proudly house Arewa Textiles, Kaduna Textiles, United Nigerian Textiles Ltd (UNTL), Nortex and Norspin, but their premises are now dens of dangerous reptiles and an eyesore. Majority of the workforce of those textile firms were locals, even though not much of the companies’ implements could be locally sourced. The textile mills’ demise has manifestly led to less revenue accruing to the government, job losses, lack of skills/technological know-how transfer, high cost of products and over-dependence on foreign countries, which also translates to national security challenges.
It is therefore tempting to say that, perhaps, had the Nigerian Content Law been promulgated to encompass the entire manufacturing sector all of the aforementioned textile mills could not have folded up.
Valuechain findings revealed that the textile industry competes in a global textile market that was valued at $ 993.6 billion in 2021 and is expected to grow at a rate of 4.0% from 2022 to 2030. Once the African continent’s leader, Nigeria spends an average of $4 billion a year to import textiles that it could have produced itself.
Nigeria’s cotton production has fallen due to weak demand and poor yield as a result of low-quality cotton seeds. Cotton in Nigeria yield fell from 602,400 tonnes in 2010 to 51,000 tonnes in 2020. In the 1970s and early 1980s, the country’s textile industry had 180 textile mills employing over 450,000 people, supported by about 600,000 cotton farmers.
By 2019, there were 25 textile mills with several thousands of workers. Given the figures above, the analysis leaves no one in doubt of the need to expand the Nigerian Oil and Gas Industry Content Development (NOGICD) Act scope to capture other industries and add weight to the Nigerian Content Act.
Kaduna city also houses other industries like Dagazau Carpets that is yet to be commissioned since it was built close to three decades now. There is also the Kaduna Furniture and Carpets Company (KFCC). Others are like the Northern Cables Processing and Manufacturing Company Ltd. (NOCACO) and Indomie Processing Company.
In the years past, textile mills in Kano, Funtua and Zamfara were all producing alongside their contemporaries like Asabatex and few others in the southern part of Nigeria.
That expansion of the scope of the Nigerian content law and models could be a significant step, not only for the growth of the nation’s economy but to also discourage the domination of core economic sectors by expatriates which is to the detriment of Nigerians.
Building/Property Industry
In view of the significance of the local content law, the Nigerian Institute of Architects (NIA) has called for its enforcement and implementation in the construction industry. The body strongly believes that the construction industry is key to national development. According to the National Bureau of Statistics (NBS), the construction sector grew by 1.69% in Q1 2020 from 1.3% in Q4 2019. By contribution, the sector accounted for 4.08% of the total real GDP in first quarter of 2020. Although the contribution was lower than the 4.09% contributed by the sector in the same quarter of the previous year, it is an indicator that the sector is evolving at a very fast pace as it is creating employment, wealth and infrastructure.
However, the industry lacks proper central planning and coordination of all organizations, professional bodies and trade unions involved in the decision-making process at critical stages. This is occasioned by the lack of synergy by the bodies, and is exposing the industry to risks which include the influx of expatriates, even in circumstances where local expertise exits.
One analyst, who preferred not to be named, told Valuechain that the construction industry should aim to replicate the successes achieved with the Nigerian Content Act in the oil and gas industry under the strict supervision of NCDMB. This issue deserves serious attention because the infrastructure industry is regarded as the barometer for measuring the health of any economy because it gulps over 80 per cent of the capital budget of all tiers of government.
Unfortunately, in Nigeria, the industry has been dominated by foreign companies. But with the success recorded by Nigerian service companies in the oil and gas sector, it is believed that the construction industry could make more progress, if its regulators replicate NCDMB’s feat in the oil and gas sector by helping to correct the wrong impression that local companies are incompetent.
Proponents of local content contend that efforts must be geared towards giving jobs to local manufacturers and contractors, even as the NIA and NIQS, among others, say a local content bill in the construction industry modeled after the Nigerian Oil and Gas Industry Content Development (NOGICD) would be commendable.
President Muhammadu Buhari in 2018 signed an Executive Order on local content to ensure that jobs that can be undertaken by indigenous professionals are not given out to their foreign counterparts. He also advised indigenous professionals in the building and construction sector to initiate reforms to ensure that Nigerians occupy the commanding heights in the industry.
With the coming of the African Continent Free Trade Agreement (AfCFTA), there is renewed hope for the property development sector, as this could open up the market for indigenous companies to explore. To scale up this critical sector of the Nigerian economy, local businesses must be granted new opportunities regarding regional exports, with newly created supply chains that remain efficient and sustainable.
Speaking at the Inauguration of the Presidential Monitoring and Evaluation Council of the Executive Order 5 at the State House, President Muhammadu Buhari said: “The Federal Government will introduce Margin of Preference in National Competitive Bidding in contracts, in the evaluation of tenders, from indigenous suppliers of goods manufactured locally over foreign goods.
“All MDAs shall ensure that any professional practicing in Nigeria must be duly registered with the appropriate regulatory body in Nigeria. All MDAs shall ensure that for all consultancy contracts awarded to foreign companies, engineering drawings, necessary calculations and design are made available to their corresponding Nigerian partners, including arrangements with Small and Medium Enterprises (SMEs), as partners towards local production of needed materials.’’
Information Technology
In the area of Information and Communication Technology, the Nigerian Information Technology Development Agency (NITDA) is responsible for coordinating and regulating its industrial and individual applications, while ensuring that this sector of the national economy maximally benefits Nigerians. Since its establishment in 2001, NITDA has taken major steps which have resulted in positively impactful results within the Nigerian IT industry. Some of the achievements recorded by NITDA include the establishment of digital job creation centers, scholarship awards to deserving individuals in the field of information technology, capacity building activities, creation of NITDA information technology hubs, establishment of a virtual library, provision of e-learning facilities, and ensuring the possibility of a wider area network coverage. These are discussed in more details below.
NCDMB’s successes: basis for Local Content in ICT sector
Apart from the oil and gas industry, the Information and Communication Technology (ICT) sector is one other area where NCDMB’s implementation strategies can be visibly adopted.
Before now, the percentage of Nigerian involvement in the value chain in ICT business was abysmally low. At a time, the bulk of the business was dominated by foreign operators, thereby giving jobs that could have been done by Nigerians to foreigners. This situation, however, has taken an improved shape even though it could be far better than it is currently.
Today, ICT (the “tech sector”) is one of the fastest growing in Nigeria. In 2020, the sector contributed 15 per cent of the country’s gross domestic product (GDP), second only to agriculture, according to the World Bank. Nigeria is today regarded as Africa’s largest ICT market with 82% of the continent’s telecoms subscribers and 29% of internet usage, according to Nigeria statistics data. Of an additional subscriber enrollment of over 167 million projected in the next five years in Sub-Saharan Africa which is the fastest in the continent, Nigeria is expected to account for over 55% of this addition. This growth has positioned Nigeria as the largest tech market on the African continent, with the world’s largest tech giants—IBM, Microsoft, Google, and CISCO—all having presence in the country.
Nigeria aspires to become one of the top economies in the world and the country recognizes ICT development as critical requirements to achieve this vision. The federal government recognizes ICT as the enabler for developing other critical sectors including education, healthcare, agriculture, and manufacturing and key to diversifying the economy from oil and gas.
It is in realization of this that the NOGICD Act, in recognising the importance of ICT to the Oil and Gas sector, specifically in section 58 of the Act, mandated the Nigerian Content Development Monitoring Board (NCDMB) to set up Nigerian Content Consultative Forum (NCCF) in ICT to provide platform for information sharing and collaboration in the oil and gas industry. This is also bolstered by the Executive Order 003 of the federal government which mandated specifically all Ministries, Departments and Agencies (MDAs) to grant preference to local manufacturers of goods and service providers in their procurement processes for a number of items including ICT products. The Order mandates that about 40 per cent of all ICT goods and services consumed by all MDAs must be provided by Nigerian IT firms.
The idea of local content policy which originated from the oil and gas industry, triggered its application across the IT sector. In 2014, the National Information Technology Development Agency (NITDA) the regulator of the ICT space, released guidelines on Nigerian content development in ICT. The policy seeks to achieve a target of 50 per cent local content in the industry and requires all ICT companies to register Nigerian entities with predominant Nigerian representation.
Despite all these, experts in the sector continue to express dismay over the fact that majority of ICT goods and services consumed by MDAs are sourced by foreign companies and in foreign lands. The perceived growth in Nigeria’s tech market has not translated into jobs for Nigeria’s growing youth population. Nigeria’s aspirations to become one of the top economies using ICT as driver, however, remains far from being accomplished as several hurdles particularly the incomplete penetration of local content, have encumbered ICT expansion and investment opportunities.
Despite digital skills development being a key pillar of the country’s recently launched National Digital Economy Policy and Strategy 2020-30, it is still difficult for trainers to source training materials locally, often leaning on foreign vendors to provide these. The enterprise application software (EAS) market is currently dominated by products from Asia and Europe, with some imports from the United States.
The federal government recognizes ICT as the enabler for developing other critical sectors including education, healthcare, agriculture, and manufacturing and to diversify the economy from oil and gas, the government is encouraging partnerships between local ICT companies and foreign investors. To promote these partnerships and grow an entrepreneurial ecosystem in the technology sector, government has supported creating government – or private-sector led incubator hubs, youth innovation programs, and science technology parks. Just like the federal government, several states have begun to implement policies and ICT projects that may help to attract ICT investments and create an enabling business climate for their regions.
In June 2021, the Lagos State government announced its intention to construct West Africa’s largest technology cluster within the state. The measure is aimed at ramping up its promotion of technology infrastructure and expand the tech space to accommodate more startups. Similarly, Edo State (southern region) also announced in December 2020 that it is developing the Edo Tech Park, an extensive piece of real estate that will be a self-sustaining tech campus at maturity.
Valuechain reports that there’s no meaningful local participation that can guarantee economic growth if the several local content policies are sitting in silos. The earlier the local content policies across all sectors are harmonised, the better chance the country stands to benefit from local participations.
One of the numerous opportunities local content in the ICT sector presents, include extending skills for indigenous players to compete beyond the country’s shores and building capacity to attract foreign earnings and Foreign Direct Investment (FDI) to Nigeria as more indigenous firms will upscale capacity and export innovations.
