11 Years of Nigerian Content in Practice

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By Ikenna Omeje, Jerome Onoja

According to a 2010 report by Accenture, “The golden era of easy oil is over.” The report noted that “Today the rules of the game have changed: developing local economies, stimulating industrial development, increasing local capability, building a skilled workforce and creating a competitive supplier base—also referred to as local content —are minimum requirements for doing business with host countries and national oil companies.”  This report underscores the importance of building local capacities in an oil economy.
In the past 11 years following the enactment of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, numerous opportunities have been created for Nigerians in the oil and gas space, resulting in increase of human capacity development, retention of capital in-country and job creation, especially for the teeming youth population in the country; all thanks to the Nigerian Content Development and Monitoring Board (NCDMB).
Before the enactment of the Act in 2010, the Nigerian oil industry was dominated by foreign companies and their local agents in areas ranging from exploration and production, trading as well as service operations.
According to reports in 2008, despite the fact that the oil and gas industry accounted for 90 percent of Nigeria’s revenue, it’s contribution to the country’s Gross Domestic Product (GDP) was less than 38 percent. This was because of the absence of local capacity in the industry, which made it difficult for the country to retain a significant percentage of about $18 billion, as of then, yearly average industry spend. Expatriates largely dominated most of the local strategic positions. As a result, most of the contracts that would have been beneficial to the country in terms of job creation were carried out in foreign fabrication yards, which had negative effects on the growth of the domestic economy.
The Central Bank of Nigeria (CBN) 2011 Annual Report of Sectoral Contribution to Growth Rates of GDP at 1990 Constant Basic Prices, shows that  crude oil contributed -0.1, -0.9, 0.1, 0.8 and -0.1 to the GDP in 2007, 2008, 2009, 2010 and 2011 respectively.

The attempts  by various administrations in the past  to introduce local content policies had challenges  owing to  the absence of an appropriate legal framework to drive such policies. It was in a bid to address these challenges that the 2010 NOGICD Act was signed into law on April 22nd 2010, with the aim to increase indigenous participation in the oil and gas industry through the prescription of minimum thresholds for the use of local services and materials.
The Executive Secretary of the NCDMB, Engr. Simbi Wabote captures it this way: “Before the enactment of the Nigerian Oil and Gas Industry Content Development Act, all fabrication, engineering, and procurement were done abroad, resulting in estimated capital flight of US$380 billion and over two million jobs lost in 50 years of our hydrocarbon history. Our vigorous implementation of the Act has reversed the trend: from less than five percent in-country value retention in 2010 to 28 percent, marked by a seismic shift from negligible local content activity in earlier deepwater projects to over 60 percent domestication and domiciliation of work and services in Egina.”
In a space of 11 years, NCDMB has redefined the role of a regulatory agency in shaping the economy of a nation positively, with remarkable achievements. The unwavering efforts of NCDMB to ensure regimented compliance to the Act by companies through rigorous implementation of the Act, has in no small measure led to economic revolution in the Nigeria’s oil and gas industry; as retention of annual industry spend has risen from less than 5 percent at the inception of the Board to over 30 percent.
To achieve 70 percent local content in Nigeria’s oil and gas industry, the Board in 2017 developed a 10-year roadmap to grow the Nigerian Content, which will elapse in  2027. The 10 – year road map is based on five pillars and four enablers. The pillars are: Technical Capability Development; Compliance and Enforcement; Enabling Business Environment; Organization Capability; and Sectoral and Regional Market Linkage.  The four enablers includes: Funding; Regulatory; Environment and Collaboration; Stakeholder Engagement and; Research and Statistics.

it’s contribution to the country’s Gross Domestic Product (GDP) was less than 38 percent.

The Board has also commenced the construction of the Nigerian Oil and Gas Parks (NOGaPS) in Odukpani, Cross Rivers State; and Emeyal-1, Bayelsa State.  The aim is to create industrial hubs for oil and gas and linking industries.
As part of the creative strategy to build the capacity of indigenous companies, the Board launched Project 100 to provide institutional and financial support to 100 Indigenous oil and gas service companies. The project targets indigenous companies offering seismic, marine, engineering and drilling services and provides financial and non-financial as well as technical support and access to market for the beneficiary companies. Some of the beneficiary companies include Anzor Nigeria Ltd, B2 Oil and Gas Project Ltd, Energeria Ltd, Gemstone Energy Services Ltd, Jite Projekts Ltd and Mafuta Energy Services Ltd.
The Board has also taken measures to improve its level of operations efficiency with the development and deployment of the Service Level Agreements between the Board and the Nigeria LNG, Oil Producers Trade Section and Indigenous Petroleum Producers Group, which has reduced the tendering cycle time to six months and fast tracks the development of new projects.

Our vigorous implementation of the Act has reversed the trend: from less than five percent in-country value retention in 2010 to 28 percent, marked by a seismic shift from negligible local content activity in earlier deepwater projects to over 60 percent domestication and domiciliation of work and services in Egina.”

NCDMB catalyzed the successful integration of one of the largest Floating Production Storage and Offloading (FPSO) in-country at the SHI-MCI yard in the Lagos Deep Offshore Logistics (LADOL) Free Trade Zone and facilitated in-country integration of six modules on the Egina FPSO, the first time in the entire Gulf of Guinea. This is in addition to the introduction of key industry events into the oil and gas industry calendar such as the biennial Nigerian Oil and Gas Opportunity Fair (NOGOF), the annual Practical Nigeria Content (PNC); which provides a platform for indigenous companies to showcase their capabilities and the Nigerian Research and Development Fair (R&D Fair) to showcase the oil industry’s opportunities for investment and galvanize research capabilities, respectively. PNC is recognized as the leading platform to engage government and industry players from across the value chain to maximize business opportunities and increase Nigerian Content implementation. Convene with senior government representatives and the entire oil and gas value chain to discuss the keys to unlocking the industry’s potential through Nigerian Content.
Intervention Fund
In 2017, the Board in partnership with Bank of Industry (BOI), launched $200m Nigerian Content Intervention Fund (NCIF) to provide low cost and accessible credit to service companies.  According to Wabote in a recent interview,  almost 85 percent of the fund has been accessed by Nigerian companies. The fund has about five products: equipment financing, contract financing, manufacturing, loan refinancing and community contractor refinancing. The loan interest rate, which is fixed at 8 percent with five years span for repayment and one year moratorium, has enabled most Nigerian companies to refinance their loans.
The Governing Council of the Board at its meeting in June last year approved the expansion of the NCIF from $200 million to $350 million.
The Council chaired by the Minister of State for Petroleum Resources, Chief Timipre Sylva, approved that $100 million from the additional funds would be deployed to boost the five existing loan products of the NCI Fund.
Similarly, the Council also approved that $20 million and $30 million respectively should be deployed to two newly developed loan product types – the Intervention Fund for Women in Oil & Gas and PETAN/OGTAN Products, which include Working Capital loans and Capacity Building loans for member companies of these associations.
As part of the Board’s response to ameliorate the economic impact of the Covid-19 pandemic, the Governing Council approved reduction of the interest rate from 8 to 6 percent per annum for all four of the loan products in April 2020. The Board also extended the moratorium for all loan products.

The Board has also commenced the construction of the Nigerian Oil and Gas Parks (NOGaPS) in Odukpani, Cross Rivers State; and Emeyal-1, Bayelsa State. 

Chief Timipre Sylva

 

So far, the Board has committed a total of US$332million under its commercial ventures partnership programme, and targeting to attract more project developments in-country valued at US$3.7bn, according to Wabote while speaking at the biennial Nigerian Oil & Gas Opportunity Fair (NOGOF) 2021.
Some of the partnerships undertaken by the Board include the 5,000 barrels per day Waltersmith Modular Refinery at Ibigwe, Imo State; Azikel Refinery in Bayelsa State; and NEDO Gas Processing Company in Kwale, Delta State for the establishment of 80 million standard cubic feet per day (MMscfd) gas processing plant and a 300MMscfd Kwale Gas Gathering hub.
Other investments include the development of 5,000 metric tons LPG Storage and loading terminal facility by Triansel Gas Limited in Koko, Delta State and construction of Energy Park, inclusive of a modular refinery, power plant and 40MMscfd gas processing facility at Egbokor, Edo State by Duport Midstream.
Also, the Board, the Nigerian National Petroleum Corporation and ZED Energy Limited recently signed shareholders agreement on the construction of Brass Petroleum Products Terminal Limited (BPPT), to be located at Okpoama, Brass Local Government Area, Bayelsa State.
The NCDMB and NNPC own 30 percent respectively while ZED Energy – a private firm holds 40 percent. ZED would operate the terminal, which is estimated to cost N10.5 billion upon completion. Some of the benefits of the terminal when it becomes operational, is that it

the Board launched Project 100 to provide institutional and financial support to 100 Indigenous oil and gas service companies.

would make refined petroleum products available at riverine communities of the Niger Delta at the standard prices, discourage the operations of illegal refineries and create job opportunities for citizens of the Niger Delta and other Nigerians.
Underscoring the economic benefits of co-locating the BPPT with the Energy Infrastructure Park being developed at Okpoama and the Brass Fertiliser and Petrochemical Company Ltd (BFPCL), at Odioma, Brass, the Executive Secretary of NCDMB, Wabote said: “If you go to developed economies, there are parks for manufacturing and industrialization. When you have the Brass Fertilizer, the BPPT and the refinery that is being built in the same area, you get the benefits of being within a Free Trade Zone. It will bring down the costs of developing those products simultaneously because the raw materials are just behind them. There is no reason to take the investments to distant locations where costs would increase.”
Another milestone that the Board has made is the completion of the 17-storey headquarters for the board, comprising 1,000-seater auditorium, and multi-level car par, situated in Yenogoa, the capital of Bayelsa State. These, among other strategic capacity development initiatives, the Board is engaging in, in the hydrocarbon value-chain, in line with its vision to serve as a catalyst for the industrialisation of the Nigeria’s oil and gas sector.

Comparing Local Content Policies in Developed and Emerging Economies with that of Nigeria’s

The successes that Nigeria  has recorded in the implementation of local content in the oil and gas industry may not have gotten to the level at which Norway, Malaysia and Brazil operate, but it is obvious that the country is on the right track in its efforts to domicile and domesticate local content in the industry. NCDMB should be commended for what it has done in 11 years. Unlike Norway, Malaysia and Brazil, which began with a robust local content national policies and laws at the inception of exploration and production of oil in their countries, that of Nigeria began as a policy of the NNPC, which was not backed by law and had no national scope until 2010. The most obtainable at the time happened based on best endeavour.
For instance, exploration for offshore oil and gas in Norway began in the mid-1960s and from the 1970s onwards ministers started implementing policies to protect the interests of communities and the economy. To start with, just like the current practice in Nigeria, the Norwegian government aimed to award contracts to Norwegian bidders when they proved to be competitive in terms of price, quality, delivery time and service, as part of its strategic plans to domiciliate local content. The rationale behind this was to promote the establishment of local industry and this was achieved through cooperation with international oil companies.
When foreign operators started entering the Norwegian industry in the late 1970s, they were strongly encouraged to form research and development (R&D) partnerships and joint development programmes with Norwegian companies and institutions, thus engaging in local content growth.
Overseas firms’ commitment to strategies for technology transfers were made a crucial and determining factor in the licensing process by the Ministry of Petroleum and Energy, once again putting local content programmes at the heart of investments.

Enr. Simbi Wabote

Governmental policy meant that Norwegian oil and gas supply companies developed leading class, state-of-the-art technologies and, as a result, many international companies have located part of their R&D chain in the country.
Fast forward to 2021, the competencies and technological expertise developed as a consequence of Norway’s local content policy has strengthened its position within the international oil industry. Local supply and service providers to oil activities have proved truly competitive by global standards. This Norwegian practice is also obtainable in Malaysia and Brazil.

taken measures to improve its level of operations efficiency with the development and deployment of the Service Level Agreements between the Board and the Nigeria LNG, Oil Producers Trade Section and Indigenous Petroleum Producers Group, which has reduced the tendering cycle time to six months

 

Research & Development

To achieve its R&D mandate, NCDMB developed the R&D framework anchored on seven (7) policy thrust, including focus on market-driven research, establishment of world class Research and Development (R&D) Centers of Excellence, establishment of Research and Development Council and provision of sustainable funding to support Research and Development. Other areas of focus include development of stakeholder collaboration matrix for Research and Development (R&D), provision of enablers for commercialization of research breakthrough and facilitation of acceptance and utilization of products of research by end users.
The NCDMB in 2017 organised its maiden edition of R&D Fair and Conference to engender stakeholders’ participation.
The Board in its commitment to change the narrative in R&D activities in the Nigeria’s oil and gas industry with the implementation of the R&D Framework, in 2020 launched a $50million R&D intervention fund to enhance the role of R&D in developing local content and for other stakeholders to contribute to the fund as most countries who have invested in R&D are optimal in their GDP.
In November 2020, the Board partnered with Enactus Nigeria for the implementation of its local content development program – the Nigerian Content Science and Technology Innovation Challenge (STIC).

 

The Nigerian Content STIC is an enterprise development program designed to challenge students of all accredited Nigerian tertiary institutions to stretch their ingenuity and apply science & technology, to create home-grown, innovative, and technologically driven business solutions that address some of our pressing everyday problems, accelerate reverse-innovation and create wealth, while also providing job opportunities for the growing numbers of the unemployed people in Nigeria.
The STIC is also structured to provide opportunity for the successful applicants to experience top-of-the-range personal and professional development through a mentorship program integrated into the project implementation.

 

The successful applicants are made to apply themselves to the rigors of market research, critical thinking, ideation, product development & marketing, implementation, performance control, and proof of concept as they attempt to create their unique business solutions consistent with the winning ideas for the STIC.
Also, through the Nigerian Oil and Gas Technology (NOGTECH), the Board earlier in July 2020, opened hackathon applications for startups with innovative solutions that could practically tackle challenges facing the Oil & Gas Industry. At the end of the applications, about 630 startups pitched their various solutions, but out of this number, only 15 finalists were selected from the pool.  After a 3-day hackathon where  their solutions were examined, five key solutions were selected as winners. The winners were Gricd Mote, Fuel Intellisense, Home Fort, AirsynQ and Kiakia Gas 360.
Each of the five winning teams was given a cheque of US$10,000 equity-free grant and proceeded to participate in a 3-month incubation programme during which they got workspace, expert mentors, global partners and market access to the nation’s oil and gas industry, ensuring they become commercial and investor-ready.

Nigeria as a Local Content Model in Africa

While Nigeria has recorded successes through the NCDMB in its implementation of local content policy, other African countries are struggling to catch up with Nigeria.  A significant example is Angola. According to Babafemi Oyewole in his “Overview of Local Content Regulatory Frameworks in Selected ECCAS Countries”, a research paper, which was commissioned by the United Nations Conference on Trade and Development (UNCTAD), stated that ,”In the early years of the oil and gas industry in Angola, citizens did not derive many benefits from the exploitation of the resources due in part to limited employment opportunities, capacity limitations and very low national industry participation. This was basically a result of the country’s structural problems including high poverty rates, inequality in income distribution, highly unskilled labour force, lack of infrastructure, high bureaucracy and corruption. These challenges were the driving force behind the implementation of a local content policy to achieve positive development outcomes using the oil and gas resources. The Angolanisation policy framework was developed on the back of the Petroleum Decree – Law 20/80 promulgated in 2002. It stipulates that oil companies operating in the country are required to develop their Angolan workforce from 70 percent to 90 percent as well as develop the local supplier market by 2010.”

 

He noted that the country has made important progress in the implementation of the local content policy and regulatory framework, but added that the policy would have had more impact on the economy if it was accompanied by a dedicated and functional institutional mechanism for monitoring, evaluation and measuring outcomes as well as a more favourable business environment.  This could be the reason the country’s oil firm, Sonagol, was unbundled not too long ago.

 

In the last 11 years, NCDMB has built a reputation embellished with innovation and excellence, which has earned it not just respect, but has made it a model for other oil producing countries in Africa.
In June 2016, a delegation from Uganda  visited the NCDMB in a quest to model the development of their local content policies after the Nigeria’s NOGICD Act, which has achieved immense benefits for the Nigerian economy and attracted commendations from local and international stakeholders.
The East African country was about investing $20bn in the development of 15 oil fields, construction of a refinery, and an export pipe line- projects which were expected to be completed within five years. The country at the time, was determined to retain a substantial part of the $20bn spend within the country and hence their mission to share Nigeria’s experience in local content which would help their country succeed in that regard.

Babafemi Oyewole

 

successful integration of one of the largest Floating Production Storage and Offloading (FPSO) in-country at the SHI-MCI yard in the Lagos Deep Offshore Logistics (LADOL) Free Trade Zone and facilitated in-country integration of six modules on the Egina FPSO, the first time in the entire Gulf of Guinea.

 

At the 2020 Sub Saharan Africa International Exhibition and Conference (SAIPEC), organized by the Petroleum Technology Association of Nigeria (PETAN) in Lagos, Benin Republic, Ghana, Liberia, Mozambique and Uganda, did not hide their admiration for the successes NCDMB has recorded in local content in Nigeria, and sought the Board’s expertise to help them develop theirs.
At the same conference, the African Petroleum Producers Organization (APPO) applauded the NCDMB for its effective promotion of local content within the Africa continent. The organization described Nigeria’s Local Content policy as a model worthy of emulation by other African nations and eulogized NCDMB for propelling the development of infrastructure and human capacities, which is aiding the operations of the Nigerian oil and gas industry.

the Board in partnership with Bank of Industry (BOI), launched $200m Nigerian Content Intervention Fund (NCIF) to provide low cost and accessible credit to service companies. 

 

Conclusion

Going forward, the Board must not rest in its oars, but remain focused on its core objective, which is domiciliation and domestication of skills and capacities in the Nigerian oil and gas industry. NCDMB has not only increased indigenous capacities in the country’s oil industry, but has positioned Nigeria at a higher advantage in the African oil industry. Today, Nigerian companies are playing key roles in exploration and production of oil in various countries across the continent.
With the signing of African Continental Free Trade Agreement (AFCFTA) – which took effect in January this year, and encourages African countries to trade and cooperate among themselves, Nigeria is in to dominate in the oil and gas space on the continent.
Giving his perspective on NOGICD Act at the 2018 Practical Nigerian Conference (PCN) held in Yenagoa, Bayelsa State, the Chairman, Petroleum Technology Association of Nigeria (PETAN), Engr. Bank-Anthony Okoroafor gave some compelling statistics to point out how impactful the implementation of the Act has been on the services sector of the industry.

the Council also approved that $20 million and $30 million respectively should be deployed to two newly developed loan product types – the Intervention Fund for Women in Oil & Gas and PETAN/OGTAN Products,

 

“Before the Nigerian Content Act, we had 27 service companies operating in Nigeria. At Last count, there were 287 service companies operating in Nigeria,” he said. He noted that the implementation of the Act has led to a remarkable growth in the number of goods sourced in-country and has contributed to an increase in the training of Nigerians on the back of major oil and gas projects.
“When Usan deep water project was done, in-country training was 150,000 man-hours. With Egina, it was 450,000 man-hours. In Engineering, Usan recorded 40,000 man-hours but Egina had 1.167 million man-hours and we saw collaborations between Nigerian companies – NETCO, IESL and Delta Afrik,” he said.
NCDMB’s effectiveness and efficiency in carrying out its responsibilities, has made it become an excellence to behold. The Board has demystified the stereotype that government agencies cannot be ran effectively in Nigeria. The exemplary role that NCDMB has played in the development of the oil industry in the last 11 years is legendary and should be emulated by other agencies in the country.

If you go to developed economies, there are parks for manufacturing and industrialization. When you have the Brass Fertilizer, the BPPT and the refinery that is being built in the same area, you get the benefits of being within a Free Trade Zone.

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