The Nigerian Local Content requirements is shrinked in Nigerian Oil & Gas Industry Content Development Act (“Local Content Act”). Local Content Act applies to all operations in the Nigerian oil and gas industry including Exploration and Production, Supply / Service Companies both Onshore and Offshore. It is now compulsory to register NIGERIAN CONTENT DEVELOPMENT AND MONITORING BOARD through NOGIC JQS registration.
Over the years, Nigerian Oil and Gas Industry has been controlled by foreign companies with foreign staff who have the technologies and training more or far more than Nigerian companies and staff thereby making it difficult for indigenous companies/ staff to compete with foreign companies. Local Content Policy in Nigeria is developed, focusing on increasing indigenous participation in the industry. This is reflected through the Nigerian government initiative of increasing Local Content and ensuring that indigenous companies have a greater part in developing oil and gas assets.
Read: REQUIREMENTS FOR LOCAL CONTENT (NOGIC JQS) REGISTRATION
DEFINITIONS
What is Nigerian Local Content?
Definition of local content- When a foreign company makes products in a country, the materials, parts etc that have been made in that country rather than imported. A minimum level of local content is sometimes a requirement under trade laws when giving foreign companies the right to manufacture in a particular place
NIGERIAN CONTENT MONITORING BOARD. The Act establishes the Nigerian Content Monitoring Board (“the Board”) which is the regulatory agency vested with the responsibility of regulating Local Content. The Board shall implement the provisions of the Bill with a view to ensuring a measurable and continuous growth in Nigeria content in all and gas arrangements, arrangements, projects, projects, operations, activities or transactions in the Nigerian oil and gas industry.
FIRST CONSIDERATION TO NIGERIAN OPERATORS Section 3(1): Nigerian independent operators shall be given first (1st) consideration in the award of oil blocks, oil field licenses, oil lifting licenses and all projects for which contracts will be awarded. Section 3(2): Exclusive consideration to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel an d capacity to execute work on land and swamp operating areas.
Read: DPR Permit Requirements, Cost & Registration
Nigerian Local Content Requirements
NIGERIAN CONTENT IN BID EVALUATION
Where bids are within 1% of each other at commercial stage, bid containing the highest level of Nigerian content shall be selected provided the Nigerian content in the selected bid is at least 5% higher than its closest competitor.
The award of contract shall not be solely based on the principle of the lowest bidder where a Nigerian indigenous company has capacity to execute, the company shall not be disqualified on the basis that it is not lowest financial bidder, provided the value does not exceed the lowest bid by 10% (Section 16).
LABOUR AND EMPLOYMENT
Nigerians given 1st consideration for employment and training in any project by any operator or project promoter in the industry. Section 35 requires all operators and companies to employ only Nigerians in their junior and intermediate cadre.
Each operator required to submit a succession plan covering any position not held by Nigerians with provision for Nigerians to understudy each incumbent expatriate for a maximum period of 4 years after which the position shall become Nigerianised (except retention of a maximum of 5% of management positions to take care of the interests of investors).
PROHIBITION OF IMPORTATION OF WELDED PRODUCTS
All operators, project promoters, contractors and any other entity engaged in the Nigerian oil and gas industry shall carry out all fabrication and welding activities in – country (Section 53).
Read: Nipex Registration
Above is subject to where it can be shown to the Minister of Petroleum Resources there is no capacity for in-country fabrication. In this circumstance, the Minister may approve importation of welded products for a period not exceeding 3 years as stated in Section 11 of the Act.
Functions of Local Content Board include:
– Approval of Nigerian Content Plan
– Issuance of Certificate of Authorization
– Setting minimum Nigerian content level for project or project items which were not included in the Schedule A to the Act
– Determine if Nigerian indigenous contractors have the capacity to perform services listed in the schedule of services
– Issuing Regulations for the industry regarding Local Content.
NIGERIAN CONTENT DEVELOPMENT FUND
The Act establishes a Nigerian Content Development Fund managed by the Board and funded through a 1% deduction at source of every contract awarded to any operator, contract, subcontractor, alliance partner or any other entity in any project, operation, activity or transaction in the upstream sector on the industry.
FINANCIAL SERVICES All operators, contractors and any other entity requiring financial services shall retain only the services of Nigerian financial institutions, except where to the satisfaction of the board this is impracticable. The Act further provides 10% of total revenue from Nigerian operations be retained in a Nigerian bank account.
(Effect may be minimal if quantum required to be retained in Nigerian banks is equal or less than Nigerian payment obligations Nigeria (e.g. salaries, rent, supplies etc ) Also Schedule to provides lower thresholds, thresholds, e.g. Credit Granting Services (50%); Financial Management Consultancy Services (70%); etc
LEGAL SERVICES Section 51 makes it mandatory for operators, contractors and other entities engaged in the Nigerian Oil and Gas industry to retain the services of only Nigerian legal practitioners or a firm(s) of Nigerian legal practitioners whose office is located in any part of Nigeria as well as submit a legal services plan (LSP) to the Board. The Act further provides in its schedule a 50% threshold of Nigerian Content for legal services relating to project management and consulting services.
OFFENCES AND PENALTIES TO LOCAL CONTENT ACT
Section 68 spelt out offences and penalties for the operators, contractors or subcontractors who carries out any project contrary to the provisions of the Bill, commits an offence and is liable upon conviction to a fine of 5% of the project sum for each project in which the offence is committed or cancellation of the project.
Read: Permits and Licenses in Nigerian Oil & Gas Industry
What is NCDMB?
NCDMB means: NIGERIAN CONTENT DEVELOPMENT AND MONITORING BOARD
The Nigerian Content Development and Monitoring Board (NCDMB) is a federal government body. NCDMB was established by the Nigerian Oil and Gas Industry Content Development (NOGICD) Act which came into effect on April 22, 2010.
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NCEC Registration as regards to NCDMB
NCEC means Nigerian Content Equipment Certification. It is a certificate given to Nigerian companies by NIGERIAN CONTENT DEVELOPMENT AND MONITORING BOARD (NCDMB). Nigerian company here means a company that is registered in Nigeria that will operate under Nigerian Local Content rules and regulations.
What is NOGIC JQS?
NOGIC JQS means: NIGERIAN OIL & GAS INDUSTRY CONTENT JOINT QUALIFICATION SYSTEM.
The NOGIC JQS (Nigerian Oil and Gas Industry Content Joint Qualification System) is an Electronic Platform for Data Consolidation on all major activities in the Nigerian Oil and Gas Industry.
The NOGIC JQS was created in line with section 55 of the NOGIC Act which states that the Board shall establish, maintain and operate a joint qualification system (JQS) in consultation with industry stakeholders which shall be administered in accordance with provisions set out in the regulations to be made by the Minister in accordance with the provisions of this Act. The NOGIC JQS is managed by the Nigerian Content Development and Monitoring Board, NCDMB and key requirement for registration is DPR Permit(s) of any category. Read: Requirements for Local Content Registration (NOGIC JQS)
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