By Yange Ikyaa
On July 25, 2022, Valuechain, Nigeria’s leading energy magazine, held its 5th annual lecture and awards in Abuja, which for the past five years has been the hosting city for the annual event.
“The Impact of Nigerian Content Law: Taking a Cue from the Successes in the Oil and Gas Industry,” was the theme of this year’s lecture, which was delivered by the well-respected industry technocrat, Engr. Simbi Kesiye Wabote, Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB). This theme was informed by the achievements recorded in the oil and gas industry through the implementation of the Nigerian Oil and Gas Industry Content Development Act (NOGICD) 2010 and the imperative for the Act to be extended to other critical sectors, such as automotive, real estate/construction, power and ICT, as these sectors could be key drivers of the Federal Government’s diversification programme.
Represented at the event by Barr. Naboth Onyesor, who is the Head of Legal Services at NCDMB, Wabote began his presentation by saying “I am happy to be part of this historic event. I want to thank Valuechain for the great job they have been doing in the past four years, and more particularly for their exceptional vision, tenacity and leading example in the art of Solutions Journalism in the Nigerian media landscape.”
He also referred to the statement made by the helmsman of Valuechain five years ago on the day that the magazine was first launched by saying: “In his inaugural speech at the launch of this magazine, the Publisher/Editor-In-Chief, Alhaji Musa Bashir Usman, hinted on the vision 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 favaourably with its peers all over the world in terms of reporting on investment opportunities, ease of doing business, human capital development and mainstreaming of environmental preservation in all its models.
“Part of the 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.
The NCDMB boss further reiterated and reminded the gathering that “these were the statements made by Alhaji Usman when this magazine was being launched in 2018, and this is a strong differentiation between Valuechain and all other magazines or media sources currently in Nigeria.”
According to Wabote “the story of Valuechain resonates with us and when I say us, I mean those of us that are implementing the local content law at the Nigerian Content Development and Monitoring Board (NCDMB). What they are doing, their mission, resonates with us because Valuechain is a small organization compared to many other organizations in Nigeria, but within a relatively short period of time, its impact has been enormous.
“This is much similar to the story of NCDMB, which has also recorded successes in a short period of time of about 12 years, as its Act was made in 2010, but compared to other agencies, our successes have been both remarkable and historic.”
He also commended the magazine by affirming that “what Valuecahin is doing by providing credible data is helping to deepen local participation in the oil and gas industry and reverse unfair foreign domination that was the case before the enactment of the NOGICD Act.
His words: “Quite often, you see that journalists regard their responsibility primarily as investigating and uncovering or revealing wrongdoings, especially in the public space, but that is not the only responsibility of journalists.”
“Solutions Journalism emerged in the 1990s in Canada, and its proponents held that there were so many economic and social issues that journalists needed to address.
They argued that it would be more beneficial to society for journalists to apply their skills and professionalism towards proffering solutions or pointing the society to possible solutions, but not just by merely giving reportage or revelation of wrongdoing, especially in the public space. That is what Valuechain has started and that is what they are known for.”
This magazine, he said, was launched on the 10th of July, 2018 here in Abuja, and for four years running, it has continued the upward trajectory of publishing both in print and electronic copy every month.
To him, for Valuechain to continue with this journey for four years and counting, especially considering the high mortality rate of print magazines in this country, deserves commendation because it is no mean feat.
He also noted that the secret of the remarkable success of Valuechain Magazine was rooted in its vision and its mission, and that the impact that this magazine has had on oil and gas industry stakeholders has been enormous, and this has enhanced the magazine’s general image.
This, Wabote explained, will increase the number of Nigerians that can participate in the oil and gas industry, which of course is the main goal of the Nigerian Content Development and Monitoring Board (NCDMB).
“So, in the five years of its existence, Valuechain Magazine has made significant impact on the media landscape and the oil and gas practitioners. It has identified the problem of lack of competitiveness of the Nigerian oil and gas sector, relative to other oil and gas producing jurisdictions and carved a niche for itself by taking up the task to provide solutions by presenting credible information and education to empower Nigerians to participate more in the oil and gas industry.”
Commenting on the progress made so far in the last 12 years since the enactment of the NOGCD Act, Wabote maintained that “the implementation of the NOGIDC Act has produced great results in a country that is often associated with failure in the implementation of public policies and laws, and it is something to cheer and that is why the theme of this year’s annual lecture clearly resonates with us as well.
“So, NCDMB has so much been proud to partner with Valuechain in diverse ways, and it is now pertinent for me to use this opportunity to recommend this approach of solutions journalism that is practiced by Valuechain to other media organizations in Nigeria as the right and effective strategy to fix the various social and economic challenges currently facing our nation, including insecurity, energy deficit, inflation, rising cost of living, increasing national debt, dwindling revenue, and scarce oil resources, among others.”
Referring to a comment made by Prof. Wunmi Iledare, who is Professorial Chair of the Oil and Gas Institute at Cape Coast University in Ghana, and Editorial Advisory Council member of Valuechain magazine, that “Nigerian content law was not enacted to make people millionaires,” Wabote responded by saying: “That is the way we interpret the law and it has helped us in implementing it with great results within a relatively short period of time.
“All the programmes and interventions of NCDMB are targeted at adding in-country value or extracting maximum value in-country for Nigeria and Nigerians, which will ultimately translate to more sustainable revenue for the country.”
According to him, the situation in the Nigerian oil and gas industry before the enactment of the NOGICD Act was very appalling, as over 90 percent of the estimated $20 billion spent annually in the industry moved out of the country because of capital flight.
It was so bad due to the fact that most of these contracts were executed offshore by foreign companies, and only very few service companies in Nigeria would participate in the oil and gas industry because of inadequate capacity. Therefore, for more than 50 years, that was the country’s situation, but value is derived when you provide goods and services in the oil and gas industry, which is a sector that is the mainstay of the Nigerian economy.
However, as that did not happen, consequently, Nigeria lost $380 billion to capital flight within a period of 50 years, in addition to other collateral damages, including 2 million job losses, among many opportunity costs for in-country capacity development and value addition.
Valuechain findings show that the total level of Nigerian content before the enactment of the Nigerian content law was less than 5 percent, and that compelled the Federal Government to introduce the Nigerian content policy as a national industrial development strategy for national economic growth and development.
This resulted in the issuance of 16 directives or set of instructions as a pilot that the NNPC started giving out to guide them in their project development in oil and gas operations, since they were the best agency of government at the time to implement it when the NOGIDC Act was not yet introduced, being the joint venture partner to the operating companies. Also, the Petroleum Trainers Association of Nigeria (PETAN) embraced the directives and created massive awareness and sensitization among their members to key into the vision for in-country capacity development and national economic growth through active participation in offering services in the Nigerian oil and gas industry.
This brought some improvement but it was not significant enough, relative to Nigeria’s volume of hydrocarbon resources and the need for local participation in the industry. This was much so because these were mere policy statements and not legally enforceable laws, making NNPC constrained to just moral persuasion of foreign operating companies to promote Nigerian content inclusiveness.
However, on April 22, 2010, the Nigerian content law was signed by the then President, Goodluck Jonathan, and it came into effect as a useful instrument in building local technical capacity of Nigerian companies in the oil and gas industry.
Sections 3, 12 and 28 of the Act provide “that first consideration should be given to Nigerian operators with respect to the award of oil blocks or oil drilling licenses, lifting rights; first consideration should be given to Nigerian goods and services, particularly in the evaluation of bids and in terms of employment and training in any project executed in the oil and gas industry in Nigeria.”
In like manner, Sections 20, 21 and 22 empower NCDMB to “monitor and probe the prequalification, bidding and award stages in any projects in the oil and gas industry.”
Although NCDMB does not award contracts in the oil and gas sector of Nigeria, which has rather been the core responsibility of NAPIMS, it is mandated to show interest in contracts with the value of $1 million and above to see the level of Nigerian content in their designs and plans for implementation. This is in order to ascertain whether or not sufficient Nigerian content has been factored into such projects as prescribed in Section 7 of the Act, and when the target is not met, NCDMB then advises NAPIMS and other stakeholders to bridge the gaps that exist, in accordance with the law.
Also very importantly, Section 104 of the Act provides that 1 per cent of every contract awarded to operators, contractors, subcontractors, partners or any other entity involved in any project in the upstream sector of the Nigerian oil and gas industry must be set aside and paid into a fund called the Nigerian Content Development Fund (NCDF). This is the Fund from which NCDMB derives most of its finances to support or drive the implementation of its mandate.
On account of this, the Board has been able to grow Nigerian content from 5 per cent in 2010 to 42 percent as at December 2021.
Measuring this against the damage that has been done for over 50 years, pegging Nigeria at less than 5 per cent participation in its oil and gas economy, the 42 per cent achieved in 12 years by NCDMB remains huge and quite significant. This is because the implementation of the NOGIDC Act itself, in the words of Wabote “is not a sprint but a marathon, and calls for patience.”
The achievements by NCDMB in this regard have been visible in terms of production numbers by indigenous operators, in terms of in-country capital retention, development of infrastructure, vendor development and supply chain efficiency, engineering and technical services, fabrication capabilities, human capital development, job creation, asset ownership, procurement, as well as manufacturing of critical oil and gas tools and components. This is an entire paradigm shift in terms of project execution philosophy in the oil and gas industry in Africa’s largest economy and most populous nation.
Section 2 of the NOGICD Act says that “all players in the Nigerian oil and gas industry must see Nigerian content as an important project development culture and factor it into their own project execution plans,” and this has given birth to the establishment of very important oil and gas facilities around the country, while adding value to the national economy and creating jobs for the citizens. This has so far given birth to 50,000 direct jobs in the industry.
Consequently, Nigeria can now boast of two world-class pipe mills or manufacturing plants located each in Abuja and Lagos. Before now, all the pipes used in the oil and gas industry were all imported into the country, and the most disturbing part is the fact that these pipes were not only imported but even the coating part of the business was also done outside Nigeria.
This is because, after coming on board, NCDMB issued instructions outlawing and banning the importation of coated pipes and most goods and services that could be readily sourced from within Nigeria. As a result of this, pipes now had to be coated in-country, at least, by coating companies that existed in Nigeria but were not getting the jobs to do.
Furthermore, the Bonga, Usan and Akpo FPSO projects offered little in-country capacity development but there is now an FPSO-vessel integrating yard at LADOL Free Zone in Lagos, which is the only facility currently in Africa where an FPSO vessel can be integrated, courtesy of NCDMB efforts. This facility was built on the back of Total’s Egina Project and this is a significant achievement because of the implementation of the NOGICD Act.
There are also four active dry docking facilities in Port Harcourt, Onne and Lagos, which was previously impossible and many vessels had to divert to Cameroon for dry docking. In a related development, 20 marine cadets have been trained and 40 more are undergoing training in various parts of the world.
Then, in terms of asset ownership, the NOGICD Act has triggered phenomenal change from less than 5 per cent ownership of all kinds of assets in the oil and gas industry, including marine vessels. Today, 40 per cent of the marine vessels working in the maritime sector of the country are owned by Nigerians. Equally, all cables of different types and specifications required in the oil and gas industry can now be manufactured in Nigeria.
Today, nondestructive test and certification level 3 which is issued by the American Society of Nondestructive Testing (ASNT), can be obtained in Nigeria. Nondestructive testing is one blue-collar job that pays so much but was draining Nigeria due to capital flight as a result of lack of skills or capacity in-country.
Yet, the massive NCDMB Headquarters Building was done with money from the Nigerian Content Development Fund, which is an indication of prudent utilization of resources, having been started and completed within a period of five years. The building also comes with an associated 10-megawatt gas-fired power plant that provides energy to the building and to the Bayelsa State government House, while many other federal government agencies and other organizations domiciled in Bayelsa are now in discussion with NCDMB to be supplied energy from the power station.
Worthy of mentioning is the Waltersmith and Azikel modular refineries which are all part of achievements that have been made possible through the implementation of the NOGICD Act by NCDMB.
The Board has also instituted a $50-million-dollar research and development fund for professors and researchers that engage in applied research that will solve problems in the oil and gas industry or other aspects of our national life. It is also supporting the incubation of 100 world-class oil servicing companies through “Project 100,” giving them institutional support and financial incentives to help them meet up with the competition from companies in any other part of the world.
There are also currently 39 ICT centers established in different parts of the country by NCDMB, while the Board also stages research contests among young Nigerians to encourage the culture of solution provision through applied research and technological advancement.
Outcome of the 2022 lecture
At the end of the Valuechain 5th Annual Lecture, which was attended by H.E Vice President, Federal Republic of Nigeria, Prof. Yemi Osinbajo GCFR, who was represented by the Minister of Petroleum Resources, Chief Timipre Sylva (represented), as well as captains of industry, regulatory agencies, public sector players, research institutions and the academia, explored whether the country needed a new law similar to the NOGICD Act for these sectors or there is no need to create multiple regulators of local content in Nigeria but to modify NCDMB’s template to suit other sectors.
Those who featured in enlightening panel discussions moderated by veteran broadcaster, Mrs. Omotayo Omotosho, MFR, were the Executive Secretary of NCDMB, Engr. Simbi K. Wabote; the Ghana National Petroleum Corporation (GNPC) Professorial Chair in Oil & Gas Economics Management, Prof. Wumi Iledare; President, Manufacturers Association of Nigeria (MAN), Mansur Ahmed; and the DG National Information Technology Development Agency (NITDA) Mr. Kashifu Inuwa Abdullahi (represented).
Key observations made by discussants at the conference were that:
•The pragmatic implementation of the Nigerian Content Law in the oil and gas industry by the NCDMB has supported the critical task of nation-building and the actualization of some of the federal government’s policies and initiatives under President Mohammadu Buhari GCFR, 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).
•The President has continued to reinforce local content practice in the industry through his total support for the Board’s programmes as well as the issuing of Executive Orders (EO: 3 & 5) that aim to promote local content in the public procurements and projects.
•There are currently before the National Assembly, three different bills seeking to extend local content law to other sectors. 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).
•Local content laws exist across the different sectors with various levels of successes in implementation but monitoring of compliance and enforcement are major challenges for regulators.
•One of the factors increasing cost is the local content provision, a situation where an important project has to be done but the local content provision is making it economically unviable.
They, therefore, recommended that:
•It would be more efficient and successful to adopt a bespoke approach to the call to extend the Nigerian Content Law to other sectors, an approach that would consider the peculiarities of the various sectors intended to be covered.
•The MDAs with responsibilities to monitor or implement local content have a lot of learnings from what the NCDMB has done.
•The National Assembly should rather consider a sector-by-sector local content law approach as lumping the sectors together will not promote efficiency and effectiveness. The oil and gas sector is unique so also are other sectors like ICT, therefore each sector will require a different bespoke local content approach.
•Local content implementing agencies should not see themselves as pro-government or enforcing government law but see themselves as protecting the investors. The success of local content depends on manpower development and deployment.
•Nigerians should be strong advocates of the promotion of locally developed goods and services.
•Provisions in the NOGICD Act 2010 that impose fiscal burden on existing and new investors should be reviewed. Nigeria cannot afford projects not going forward simply because of the fiscal burden imposed.