Experts lament costly delay in Nigerian content legislation
Lanre Oyetade, Group Business Editor
David Mark, Senate PresidentNIGERIA remains without specific local content
legislation, nine years after a bill to that effect
was first presented to the National Assembly. Several lawmakers have presented versions of private member’s bill on the subject since 1999, but none has enjoyed the prospect of becoming law.
Several speakers at the recent Nigerian Content Stakeholders’ workshop decried the lingering absence of enabling legislation for such an important component of the nation’s Vision 2020 strategy.
Following years of increasingly vocal campaigns by industry stalwarts such as former NNPC managing director, Aret Adams, the Federal
Government announced a Nigerian Content policy with benchmarks and targets.
The policy aimed to deliver 45 per cent local content in 2006 and 70 per cent by 2010. Higher levels of local content have been proven in other economies to significantly boost the oil and gas industry’s contribution to gross domestic product (GDP), save foreign exchange, create jobs, and expand the technological base.
With such broad consensus on the strategic gains the country stands to reap from the Nigerian content policy, there is considerable consternation that the needed legislation has failed to be passed. National Assembly sources say that it is precisely because they recognise the strategic imperative of Nigerian content that they have been pressing for an executive bill on the issue, rather than using private members’ bills.
The consequence of the delay is that years of capacity building in skills and facilities are being lost. Massive investments by Nigerians, encouraged by the Nigerian Content policy, are also imperilled as they are not guaranteed patronage and are further hamstrung by a tariff regime that is not supportive of local content aspirations. The loss to the economy is projected at $67 billion over five years.
Much hope has been invested in Nigerian content legislation. The local content law is expected to outline the legal universe within which the oil and gas industry should operate with changed rules and emphasis. It ought to codify a new regime to which the oil majors must comply, and to prescribe the structures of coordination among ministries, departments and other agencies that are essential to a successful local content policy. Experts say this is particularly important because local content gains have multipliers in other industries such as power, telecommunications and shipping.
In the absence of specific legislation, the NNPC has been relying on existing laws to issue regulations and directives on local content. This has yielded a few gains, but industry sources insist that a significant leap forward depends on robust legislation that is comprehensive in its purview, clear in its intent and non-permissive of extensive ministerial discretion.
“Any law that grants ministers or supervisors too much discretion is prone to having the perverse effect of making those ministers violate the very spirit of the legislation,” an oil executive explained on the sidelines of the Abuja workshop.
Many of the Nigerian investors in Nigerian content facilities are also eager for legislation to clarify what actually constitutes local or Nigerian content. Although, there is no argument that Nigerian content means the quantum of value created in the Nigerian economy using Nigerian resources in the exploration, production, exploitation, transportation, sale and marketing of oil and gas, it matters who is creating the value and who is organising the value creating activities.
“Legislation should avoid ambiguity about what constitutes Nigerian content. Locating a project or facility in Nigeria should not suffice. To qualify for Nigerian content status, a service provider should have both majority Nigerian ownership and a proven programme of actual technology transfer,” the chief executive of a manufacturing firm demanded.
To be effective, stakeholders expect the policy to be primed to reward verifiable investments in local capacity. This should include a mandatory requirement for the NNPC and its joint venture partners to give supply contracts to service providers that are building in-country infrastructure. Where services and products are to be imported, why should that not be undertaken by companies that are building the local facilities that would eventually make such imports unnecessary?
Nigeria’s dismal performance in the local content league means that jobs and skills in the oil and gas industry are exported along with crude and LNG exports. Essentially, Nigeria has replicated in the oil and gas industry the state of things with its agricultural and mineral exports. To attain rapid economic and technological development, Nigeria has to enhance the quantum of participation by citizens in the financial and technical aspects of mineral exploration and production.
Stakeholders also identified robust regulation as a critical success factor for meaningful benefits to the economy from higher local content levels. While awaiting comprehensive legislation, they urged the NNPC to use the powers available under extant petroleum industry legislation to enforce Nigerian content regulations and prevent oil majors from frustrating implementation by hiding under issues of standard.
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