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The Impact Of Nigerian Content Law: Taking A Cue From The Successes In The Nigerian Oil And Gas Industry

Being Lecture delivered By Engr. Simbi Kesiye Wabote, Executive Secretary, Nigerian Content Development And Monitoring Board (NCDMB), Reprrsented By Naboth Onyesoh (Esq), Head, Directorate Of Legal Services, NCDMB At The 5TH Edition Of VALUECHAIN Magazine Annual Lecture And Awards In Abuja On 25th July 2022

Distinguished ladies and gentlemen, it is a great honor and privilege for me to be invited as the lead speaker at this year’s annual ValueChain Lecture and Awards, being the 5th edition in the series, convened by MBdotCOM Media Associates, the publishers of one of the foremost Africa’s energy magazines, The Valuechain.

I am particularly excited about the topic, “The Impact of Nigerian Content Law: Taking a Cue from the Successes in the Nigerian Oil and Gas Industry”, which I will return to shortly.

Before I speak on the topic, let me begin by commending the publishers of The Valuechain magazine, for convening this public lecture, and more particularly for their exceptional vision, tenacity, and leading example in the art of solutions journalism in the Nigerian media landscape.

This magazine was launched on the 10th of July 2018 here in Abuja and for five years running, it has continued an upward trajectory, publishing print and electronic copies every month. This is no mean feat in an industry that is associated with high mortality of print magazines in Nigeria.

The remarkable success of The ValueChain magazine is rooted in its vision, mission, and the impact it has had on the oil and gas industry stakeholders and its general readership.

In his inaugural speech at the launch of the magazine, the Publisher and Editor-in-Chief, Bashir Usman hinted on the mission of this platform, when he said, “Our main objective is to contribute to the growth of a vibrant Oil and Gas sector that can compete favourably with its peers all over the world in terms of investment opportunities, ease of doing business, human capital development, and mainstreaming of environmental preservation in all of its business models”.

 “Part of our mission”, he added “is to uncover and present to the public, especially   the local investors, all the opportunities that are abundantly available across the petroleum value chain, particularly those that still remain untapped after almost about six decades of petroleum exploration and production in Nigeria”.

In five years of its existence, The Valuechain magazine has made significant impact on the media landscape and the oil and gas sector. It identified the problem of lack of competitiveness of the Nigerian oil and gas sector, relative to other hydrocarbon producing jurisdictions, and carved a niche for itself by taking up the task to provide solution by presenting credible information and education to empower Nigerians to participate more in the oil and gas industry.

The story of The Valuechain magazine resonates with us at the Nigerian Content Development Board (NCDMB) because it tells of the positive impact of a small organization within a relatively short period of time, which is very much like the Cinderella story of NCDMB and its successful implementation of the Nigerian Content Law that has produced ground-breaking results in a country often associated more with high rate of failure in the implementation of public policies and laws.   

NCDMB is therefore proud to partner with Valuechain magazine. Our partnership with this platform is evidence that we endorse and recommend its approach of solutions journalism to other media organization in Nigeria as the right strategy to contribute to fixing the various social and economic challenges facing our country, including insecurity, energy deficit, inflation, rising cost of living, increasing national debt and dwindling revenue, and scarce foreign exchanges.

Thus, the topic of this year’s lecture, “The Impact of Nigerian Content Law: Taking a Cue from the Successes in the Nigerian Oil and Gas Industry” is quite apposite and I am happy to talk about it, not to brag about what we have done, but to show how the Board has used pragmatic implementation of the Nigerian Content Law in the oil and gas industry to support in the critical task of nation-building and for the actualization of some of the federal government’s policies and initiatives under President Mohammadu Buhari GCON, particularly the drive for job creation, decade of gas, ease of doing business, diversification in the context of the economic recovery and growth and plan (ERGP) as well as the economic sustainability program (ESP), launched after Covid-19 lockdown, which consists of fiscal, monetary and sectoral measures designed to enhance local production, support businesses, retain and create jobs and provide succor to Nigerians, especially the most vulnerable.

To begin with, I agree completely with the statement by Jackie Robinson (the black American Professional Baseball player who broke color barriers in his country in 1947) that “Life is not important except in the impact it has on others”. At NCDMB, we believe that the main purpose for our existence is to impact Nigerians through the implementation of the Nigerian Content law in the oil and gas sector. Indeed, we are convinced like, Kelvin Kruse that “Life is about making an impact, not making an income”. Hence, most of our programs and interventions are oriented to extract in-country value for Nigeria and Nigerians, which ultimately translates to more sustainable revenue for the country.

The quest to make impact in the Nigerian energy landscape through effective and pragmatic implementation of the Nigerian Oil and Gas Industry Content Development Act 2010 (“the Act”) has been the driving force behind all our programs and strategic interventions since inception.

Distinguished ladies and gentlemen, permit me to say a word of two about the concept of impact. The word “impact” has both positive and negative connotations. In the positive sense, it connotes “a marked effect or influence”, or “footprint”, or “results”; and in the negative sense, it may evoke the feeling or “the action of one object coming forcibly into contact with another” hence a collision, crash, clash or smash. However, the sense in which it is used in this topic and thus my frame of reference in this speech is in the positive sense of the footprint or results and influence of the NOGICD Act in the Nigerian oil and gas sector. 

Theoretically, impact evaluation follows three key methods, namely, descriptive, causal, and evaluative models. The descriptive model shows the way things are or were. The causal model shows how the programs have caused things to change; and the evaluative model indicates the value of changes that have occurred.

This presentation adopts the descriptive model because it helps me to delineate the situation in the industry before the Act, shows the current situation, that is what has been achieved and then points out the changes from 2010 to 2022.  I will allude to some testimonials from stakeholders, which combine to reinforce the advocacy or call for extension of Nigerian Content Law to other critical sectors of Nigerian economy.

BEFORE THE NOGICD ACT

  1. The situation in Nigerian oil and gas industry before the enactment of the NOGICD Act 2010 was appalling. Over ninety percent of the estimated $20 billion (USD) spent yearly in the industry moved out of Nigeria. It was so bad because a large chunk of those contracts was executed outside Nigeria by foreign companies. Only few indigenous services companies could participate in oil and gas tendering process in the industry due to inadequate capacity.
  2. The situation was worsened by the fact that government seemed to be more interested in royalties and taxes. Consequently, Nigeria suffered estimated loss of over $380bn (USD) to capital flight, 2 million jobs within a 50-year period and lost the opportunity cost for in-country capacity development and value addition. Hence, the cumulative Nigerian content level before the creation of the Board was less than five percent.
  3. The sudden realization of the huge losses propelled the Federal Government of Nigeria to put in place a Local Content Policy for the oil and gas industry as part of industrial development strategy for national economic growth and development. The policy gave impetus to the issuance of the 16 Directives in 2005 and later 23 Directives in 2006 by the NNPC to drive local content practice in the oil and gas industry. 
  4. The Directives raised local content awareness in the industry, but they could not move the needle significantly in terms of growing in-country value adding activities across the oil and gas value chain. Since there was no law backing the Directives, compliance by industry operators was based on “best endeavor” and enforcement by NNPC was only through moral suasion.
  5. Determined to give legal bite to the Directives and provide an all-encompassing legal framework for the development of Nigerian Content in the oil and gas industry, the NOGICD Act was enacted in 2010 and signed into law on 22nd April 2010 by the then President Goodluck Ebele Jonathan. The Act created the NCDMB as the sole agency of the Federal Government responsible for driving Nigerian Content in the oil and gas industry.
  6. The mandate of the Board basically comes down to two functions, namely, to develop the capacity of local supply chain for effective and efficient service delivery to the oil and gas industry, without compromising standards; and to implement and enforce the provisions of the Act 2010.
  7. Distinguished ladies and gentlemen, I consider it expedient also to highlight, even though in passing, some of the key provisions of the Act that have enable us to develop and grow Nigerian content in the oil and gas sector.
  8. I refer in particular to sections 3, 12, and 28 of the Act, which provide that first consideration should be given:
    1. to Nigerian operators in the award of blocks and licenses. 
    1. to Nigerian goods and services in the evaluation of bids; and
    1. for the employment and training of Nigerians in any project executed in the Nigerian oil and gas industry.
      1. . Also, sections 20, 21, and 22 of the Act that prescribe the role of the Board in tendering and our touchpoints during pre-qualification, bidding, and award stages of the oil and gas tenders. These sections help the Board to ensure that Nigerian content requirements are not circumvented by operators.
      1. . Finally, section 104 of the Act, provides that the sum of one percent of every contract awarded to any operator, contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity, or transaction in the upstream sector of the Nigeria oil and gas industry shall be deducted at source and paid into the Nigerian Content Development Fund (NCDF). The Fund enables the Board to finance strategic interventions and project that are critical to the implementation of the Act.
      1. Through pragmatic application of these provisions, the Board has recorded various landmark achievements in the oil and gas industry within 12years of its existence and grown Nigerian content level from 5% to 42% as at December 2021.
      1. The landmark achievements under the Nigerian Content Law leave visible footprints in the production records of indigenous operators, in-country capital retention, development of infrastructure, vendor development and supply chain efficiency, engineering and technical services, fabrication capability, human capacity development, job creation, asset ownership, procurements, manufacturing of critical oil and gas tools and components, and most importantly a paradigm shift in project execution philosophy of operating and service companies in Nigeria.  
  • On Production, the Act has re-energized the participation of indigenous operators such as SEPLAT, AITEO, EROTON, and others to move from small producers to the point where they now account for 15% of oil production and 60% of domestic gas supply in Nigeria.
  • On Capital Retention, out of the estimated annual industry spend of $20 billion (of which very little or nothing was retained in-country), the picture has changed completely. Under the Act, about $8billion (USD) of the annual spend is now retained in-country.
    • On infrastructure, the footprint is visible and remarkably compelling. Implementation of the Act has spurred the establishment of several important oil and gas plants and facilities, including two (2) world-class pipe mills and five (5) modern pipe coating plants. These facilities have helped to reduce our import dependency on foreign pipes, or coated pipes in the industry.
    • Contrary to the sad situation before the Act regarding projects like USAN, Agbami, Erha, and Bonga, which offered limited access to indigenous service companies and left behind no legacy infrastructure, under the NOGICD Act, an FPSO integration yard was constructed on the back of Total’s Egina project. It was in this facility that the topsides of the Egina FPSO hull were integrated in the Ladol Free Zone in Lagos. As at today, this is the only FPSO integration facility in Africa.  Similarly, there are also four (4) active dry-docking facilities in PH, Onne, and Lagos.
    • In terms of asset ownership, the Act also triggered phenomenal change. From less than 5% ownership of marine vessels prior to 2010, over 40% of the marine vessels used for oil and gas operations now are owned by Nigerians. Marine vessel ownership by Nigerians, helps to claw back significant portion of the industry spend in this sub-sector.
    • In all aspect of engineering, the industry is doing exceedingly well. Unlike before the Act, Front-End Engineering (FEED) and Detail Engineering Designs are now done in-country. In fabrication, Nigeria has witnessed unprecedented rise in fab yards establishment and capability upgrade. Currently, more than 250,000 tonnes/per annum of fabrication can be carried out in-country.
    • Although we are yet to attain the desirable level of manufacturing in-country, there are some heartwarming report of manufacturing enterprises in-country, catalyzed by the Act. For example, all cables required in the oil and gas sector can now be manufactured in-country. Also, all the paints used for the Egina FPSO was manufactured in Nigeria and exported to Korea.
    • On job creation, over 50,000 direct jobs have been created on the back of implementation of the Act. In addition, the Board has recorded over ten (10) million training manhours in our Human Capacity Development Programs. Which is why, at the peak of the COVID-19 pandemic lockdown, Nigerian local workforce was able to sustain oil production.
    • The Board has had to step in also to train Nigerians in skills that are critically required in the industry, including the training of 20 marine cadets, who have completed international sea-time experience with 40 currently undergoing the same training. The Board identified the criticality of certified NDT professionals and intervened to train 30 Nigerians to obtain the American Society for Non-Destructive Testing (ASNT) Level 3 Certification and in partnership with OGTAN and others to provide this level of training and international certification in-country since 2020.
    • Other tangible achievements include, completion and commissioning of a 17-storey headquarters building for the Board, known as the Nigerian Content Tower in Yenagoa, with 1,000-seater conference auditorium and multi-level car park. The Board also completed 10MW power plant to supply steady electricity to the headquarters building and the industrial park in Bayelsa State.
    • The Board also catalyzed the completion and commissioning of 5,000bpd Waltersmith Modular Refinery; the refinery is currently in operation with the products completely sold out. We are also actively supporting the development of additional modular refineries in Bayelsa and Edo State. This is the way the Board has intervened to translate the idea of modular refinery from mere buzz word to concrete reality.
    • On funding vendor development, the Board floated $350million NCI Fund to support supply chain efficiency and competitiveness. The NCI Fund is managed by the Bank of Industry; it has seven products lines, including Working Capital and bespoke products for Women in Oil and Gas and host community contractors. There is a separate fund of $50m (USD) each for R & D and manufacturing entities that would operate in the industrial parks being constructed by the Board in Cross River and Bayelsa. Both are stand-alone products, distinct from the other products under the NCI Fund.
    • We are actively supporting the incubation of 100 start-up services companies under Project 100. The arrangement offers these companies institutional and fiscal support to accelerate their growth and development. For examples, the Board sizes every available opportunity to sponsor these beneficiaries to local and international conference and exhibitions, organized technical training on subsea systems, project management, and business mentoring programs.
    • Through intervention in local production of barites, the Board has reversed industry dependence on imported barites and other drilling chemicals which are now mined around Benue State to meet industry need. To underpin the intervention, the Board issued a Public Notice in May 27, 2021 approving 4 firms for the supply of barites in the industry.
    • To stimulate interest in Research and Innovation and galvanize critical stakeholders, the Board has established a Research Council with a clear roadmap, founded on the Triple Helix model, compromising the Industry, the Academia and Government representatives with $50million (USD) R & D Fund earmarked to support applied research and innovation in the oil and gas industry. Also, the Board has established in its head office building, a Research Incubation Centre to take R & D from ideation to deployment. Similarly, the Board constantly organizes research, technology, and Innovation contests for young people under the NOGTECH HACKATHON and ENACTUS to nurture innovation among young Nigerians. These competitions yield high rewards for the winners.
    • In view of the centrality of ICT to emerging technologies in the world of work as well as in Science, Technology, Engineering and Maths (STEM) education, the Board has invested substantially into the establishment of 30 ultra-modern ICT Laboratories in 9 states traversing all the six geo-political zones of Nigeria. Driven by the same consideration, the Board sponsored GSM technology training for 1,000 youth in Kano State, with an additional training for 2,500 trainees still ongoing in Bauchi, Yobe, Kaduna, and Cross River States.
    • To help resuscitate technical and vocational educational training (TVET) as a vital pipeline for the supply of technicians and skilled artisans, to serve the oil and gas industry and linkage sectors, the Board has invested substantially to upgrade two (2) vocational Technical Colleges in Akwa Ibom and Enugu states as pilot for this initiative, with others Technical Colleges in other parts of the country under consideration for similar intervention.
    • In the area of gas utilization and LPG penetration, the Board has also weighed in strongly to enable investments across the country to make gas supply and LPG penetrate the nooks and crannies of Nigeria. Hence, the Board has rolled out aggressive establishment of LPG bottling plants and depots in ten (10) Northern States of Kaduna, Bauchi, Katsina, Kano, Nasarawa, Niger, Plateau, Gombe, Zamfara, Jigawa and Abuja. Similarly, the Board is also in partnership with Rungas to ensure local manufacturing of 1.2million composite LPG cylinders per year in Bayelsa and Lagos States. Lastly, the Board is in a partnership for the construction of 300MMscfd gas gathering hub for gas supply into the OB-3 pipeline in Edo State.
    • Due to our strict monitoring of expatriate quota needs and collaboration with the Federal Ministry of Interior, the demand and supply curves for expatriate personnel in the oil and gas industry is in steep decline.  To augment for skill gaps, we utilize Exchange Program and Understudy Program to develop required skills in the industry.
    • In the area of Enabling Business Environment, the Board stands out as the first agency to introduce Service Level Agreements (SLAs), way ahead of all MDAs. We executed SLA with OPTS, IPPG, and NLNG, covering about 98% of industry operators. These agreements have ensured that all the touchpoints in the placement of contracts in the industry are concluded within pre-agreed timelines. The benefit of the SLA was evident in the Board’s record-breaking timely approvals of the NLNG requests for the Train-7 project. Industry operators are aware of the 15-day rule in which they can take any request forwarded to us as approved if they get no response from the Board after 15 working days.
    • One can go on and go reeling out the litany of achievements of the Board within 12years of its existence, but time would not permit me. The main point is that the implementation of Nigerian Content Act has positively impacted the industry and Nigeria, with visible footprints of the Board on every part of Nigerian map, evidencing our resolve to bring our services close to stakeholders across the length and breadth of our country.
    • Lastly, I must mention that based on our 10-year strategic roadmap, which was launched in 2018 all the programs and interventions of the Board are geared toward growing Nigerian Content to 70% by 2027. Following recent review of the Board’s performance on all the five pillars and four enablers, which underpin the roadmap, the stars are lining up to meet the set target.

CALL TO EXTEND NIGERIAN CONTENT LAW OTHER SECTORS

  • The record of the Board’s performance and achievements screams and revibrates across the African Continental and even beyond. In Nigeria, there is a preponderance of testimonials from oil and gas industry leaders confirming the phenomenal impact of the Nigerian Content Act in the oil and gas industry. The testimonials come from operators, service companies, and professional associations that play in this sector. Even the presidency and the 9th National Assembly unanimously agree to the successes achieved in the oil and gas sector through the implementation of the Nigerian Content Act.
    • Thus, the Presidency has continued to reinforce local content practice in the industry through his total support for the Board’s programs as well as the issuing of Executive Orders (EO: 3 & 5) that aim to promote local content in the public procurements and projects. In 2021, seven new ministerial regulations to prop up the implementation of the Nigerian Content Law were issued. These actions speak volume about executive support for local content agenda from highest level of authority down the line.
    • On the part the 9th National Assembly, the distinguished senators and honorable members of the House could not hold back their passion and patriotism to encourage the extension of Nigerian Content Law to other critical sectors of the economy. Which is why in October 2020 three different bills emerged in the National Assembly seeking to extend local content law to other sectors.
    • The three bills are the Nigerian Oil and Gas Industry Content Act (Amendment) Bill 2020 (58.417); the Nigerian Local Content Development and Enforcement Bill 2020 (58.419); and the Nigerian Oil and gas Industry Content Act 2010 (Repeal and Re-enactment) Bill 2020 (58.420).
    • The Local Content Development and Enforcement Bill seeks to amend the NOGICD Act 2010, sponsored by 9 members of the Federal House of representative, including the Speaker of the House, seeks to expand the scope of the current law to capture changes in the industry, create a Nigerian Content Council to be headed by the Vice President, deduct 2% from every contract awarded in Nigeria to develop local content amongst other provisions.
    • The Nigerian Oil and Gas Industry Content Development Act (Amendment) Bill 2020, sponsored by Distinguished Senator Teslim Folarin. Basically, the bill seeks to amend 38 Sections of the extant Act, while introducing six new sections. The essence of the bill is to bring the provisions of the sections to be amended in tandem with industry best practices.
    • The Nigerian Oil and gas Industry Content Act 2010 (Repeal and Re-enactment) Bill 2020 is essentially an amalgam of the two other bills.
    • There is no question about the imperative of extending local content law to other sectors. Interestingly, this patriotic desire is being expressed from different perspectives.  Each of bills have their merits and concerns; the concerns would require relevant stakeholder inputs and collaboration to sort out and to make progress. Thus, consultations are still ongoing.
    • Much as it does not lie only in our mouth as a Board to determine the shape or form the proposed legislative intervention would take, the Board strongly aligns with the call to extend the Nigerian Content Law to other sectors. However, based on our experiences in 12years of implementing the current law and the peculiarity of the oil and gas industry, we think that it would be more efficient and successful to adopt a bespoke approach, which would consider the peculiarities of the various sectors intended to be covered.
    • Taking about the need to take a cue from the oil and gas industry, Sir Winston Churchill, British leader, and statesman made a vital point about taking cue, when said, “Those that fail to learn from history are doomed to repeat it”. And he is not alone on this point. George Santayana, writer, and philosopher had expressed the same view much earlier, when he cautioned that, “Progress, far from consisting in change, depends on retentiveness. When change is absolute, there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, …  infancy is perpetual”. Thus, he concluded, “Those who cannot remember the past are condemned to repeat it”. 

Conclusion

  • I hope and wish that the transition or extension to other sectors would be guided by the lamp of experience, which currently resides in NCDMB.
    • Distinguished ladies and gentlemen, I believe that I have managed to deliver this message entrusted to me by Engr. Simbi Wabote, the Executive Secretary of NCDMB. Although I am not worthy to wear his large shoes and cannot pretend to be like him. Please accept my imperfections, knowing that I came in “a borrowed robe” as Shakespeare would say. I thank you for giving me your undivided attention even though I am not  Engr. Simbi Wabote.
    • Thank you again and may God bless Nigeria.

Engr. Simbi Wabote (FNSE, FIPS)

Executive Secretary,

Nigerian Content Development and Monitoring Board

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