GLOBAL LOCAL CONTENT SUMMIT 2009. LOCAL CONTENT POLICY IMPLEMENTATION - A NIGERIAN PERSPECTIVE A Presentation by Olawale Akoni SAN Managing Partner Babalakin & Co. www.babalakinandco.com. OUTLINE. Introduction Nigerian Local Content Policy Thrust Policy Objectives
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LOCAL CONTENT POLICY IMPLEMENTATION - A NIGERIAN PERSPECTIVE
A Presentation by Olawale Akoni SAN
Managing Partner Babalakin & Co.
Government’s interest in developing indigenous manpower and encouraged patronage of locally manufactured goods and services dates back to the enactment of the Petroleum Act 1969. This was followed by the Government’s Policy on same which was drawn up in 2004 thus making it clear that the concept is not nouvelle in any way. The challenge for us lies with the actual implementation of LC due to the absence of the proper framework and the “will power” as both appear to elude us as a nation.
This presentation will examine Government’s policy on developing LC and the existing framework for implementing the policy within the Nigerian Oil and Gas Industry. We would also discuss the existing and proposed legislations which forms the legal framework for LC and some of the concerns mitigating against attaining the desired objectives.
LC has been defined as the quantum of composite value added or created in the Nigerian economy through the utilisation of Nigerian human and material resources for the provision of goods and services to the petroleum industry within acceptable quality, health, safety and environmental standards in order to stimulate the development of indigenous capabilities*
*Synchronized Report on Enhancement of Local Content in the Upstream Sector of the Oil and Gas Industry n Nigeria
The Government’s LC policy was launched in 2005 with the following objectives:
The LC policy seeks to put in place a framework that would guarantee active participation of Nigerians in Oil and Gas operations without compromising standards in order to stimulate steady and substantial development of indigenous capacity.
It also seeks to add value to indigenously manufactured goods and services as well as locally sourced raw materials by encouraging maximum utilisation of local raw materials and human resources in the manufacturing goods and provision of services within the Petroleum industry.
The overall aim is to promote steady measurable and sustainable growth of Nigerian Content.
Further to the introduction of the LC policy, there was a need to set up both organizational and legal frameworks which would serve as drivers of LC development in line with the set objectives.
Organizational framework - A Nigerian Content Division (“NCD”) was set up in March 2005. Upon creation, the NCD was placed under the supervision of the NNPC GMD's office. A Nigerian Content Consultative Forum (NCCF) was also inaugurated with Committees covering Fabrication, Engineering, Manufacturing, Banking & Insurance, Shipping & Marine, Well & Drilling as well as Logistics services.
The NCD has been active in:
Legal framework - Beyond the organizational framework, legislative efforts have also been made towards achieving Government’s set objectives in respect of LC. First was the Nigerian Oil and Gas Industry Content Development Bill (“NOGIC”) which was proposed in 2006 with emphasis on providing legal backing for the LC policy. The Bill has seen been passed by the Senate and the House of Representatives has since sent its final report on the Bill to the Committee of the whole House. It is hoped that the Bill will soon be passed into law.
There has also been an effort of Government to consolidate all Petroleum Industry related legislations into a single industry specific law, (the Petroleum Industry Bill) which is presently before the Nigerian National Assembly. Since LC is an integral part of the industry, the PIB also contains LC provisions.
Whilst both Bills recognise the importance of LC, there appears to be certain variations in the mode of implementation and set standards in achieving the policy objectives.
Definition – There is a concurrence on what LC represents as the PIB borrows the definition provided by NOGIC.
In a bid to show how both laws have sought to advance the implementation of the LC policy, we shall examine the relevant provisions on the following areas:
National Content Plan
Process for the bidding and award of licenses
Concerns on the success or otherwise of the LC drive centers around the policy implementation and the challenges which may be faced by both the institutions and the laws.
Some of the perceived challenges are:
The Norwegian Government introduced policies to establish a preference for Norwegian goods and services, technology transfer and research cooperation.
The Ministry of Industry established a Goods and Services Office (GSO) to act as a watchdog agency monitoring the IOCs’ contracting and procurement procedures.
The GSO was also responsible for stimulating the local supply industry through joint ventures and targets were set for local participation that were monitored and reviewed.
Over the years, the Norwegian LC implementation has become a model for other oil producing countries.
Following the an increase in oil prices in the early 70’s British authorities encouraged more UK companies to engage in oil operations and this led to the establishment of the Offshore Supply Office to assist UK firms gain a large share of the petroleum supply and the service market.
By the 1990s the UK’s focus changed from increasing local content to supporting UK service companies develop export markets thus taking LC to a higher pedestal.
The Government also established the Oil and Gas Industry Task Force (OGITF) with the mandate to keep the UK’s energy service and supplies industry highly competitive. The support given by the UK Government to its service companies has resulted in the companies developing into first class global companies.