As Oil and Gas industry is still the major source of Income to Nigeria. Nigerian Local Content Act was developed to aid Nigerians to participate in its Oil & Gas Industry as it was almost controlled by foreign nationals.
Nigeria is a middle-income, mixed economy and emerging market, with expanding manufacturing, financial, service, communications, technology and entertainment sectors. It is ranked as the 30th-largest economy in the world in terms of nominal GDP, and the 23rd-largest in terms of purchasing power parity. It is the largest economy in Africa; its re-emergent manufacturing sector became the largest on the continent in 2013, and it produces a large proportion of goods and services for the West African subcontinent.
The Oil and Gas industry in Nigeria is regarded as the foremost lucrative sector in the economy. It entails the exploration, transportation, development and sale of Nigerian oil and gas resources including upstream and downstream oil and gas operations.
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There are a number of policies governing the Oil and Gas sector inter alia the Petroleum Act, Petroleum Technology Development Fund Act, Petroleum Equalization Fund Management Board Act and Petroleum (Drilling & Production) Regulations. In addition, Government institutions such as the Ministry of Petroleum Resources (MPR), the Department of Petroleum Resources (DPR), amongst others, were also created by the Nigerian government to ensure that due process and procedures in the industry are adhered to.
It is however safe to note that a gap was identified as regards the protection of local participation in the industry. This led to the enactment of the Nigerian Oil and Gas Industry Content Development Act, 2010 (herein referred to as the ‘Local Content Act’ or ‘The Act’) by the Nigerian Government.
THE LOCAL CONTENT ACT
The objective of the Act is to increase indigenous participation in the Oil and Gas Industry. The Act is designed to promote local participation within the industry, that is, Nigerian incorporated companies. There is no clear definition of a Nigerian Company in the Companies and Allied Matters Act (CAMA) however it recognises that a company duly incorporated in Nigeria, with not less than 51% equity shares by Nigerians and in accordance with the provisions of CAMA can be referred to as a ‘Nigerian Company’ or a ‘Local Company’. This is also in accordance with the Local Content Act.
The Nigerian Content Monitoring Board (NCMB) was established as the regulatory body responsible for monitoring, coordinating and implementing the provisions of the Local Content Act. The NCMB has also been given the mandate to certify companies to ensure compliance with the Local Content Act.
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THE Effects of Nigerian Local Content Act
The impact of the Local Content Act on the Nigerian Oil and Gas Industry has been tremendous. A few of these impacts include:
Employment
- There has been a creation of employment opportunities for Nigerians who have interest in the industry. This in turn has reduced the unemployment rate within the country. The Local Content Act specifies that for each operation, an operator, in this context foreign expatriate, may maintain a maximum of five percent (5%) of management positions as a way of protecting the interest of investors.
- Section 31 of the Local Content Act clearly states that a mandatory succession plan needs to be placed wherein Nigerians can understudy an incumbent expatriate for a period of four (4) years. This allows the expatriate disseminate relevant technical expertise to the Nigerian whilst also adding to the development of the Nigerian employee.
- With the establishment of a mandatory succession plan, there is a certain reassurance of longevity of Nigerian participation and interest within the industry.
Training
- Training, in any given field, is advisable as it contributes to the development of manpower which thereafter results in attaining a company’s goals and objectives. Section 30 of the Local Content Act provides that training shall be provided to Nigerians who require adequate training to operate within the Oil and Gas industry. This effort creates an avenue for continuous learning development opportunity.
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Professional Services
- Professionals are not left out from the benefits of the Local Content Act. Under Sections 49, 51 and 52 of the Local Content Act, Insurance Brokers, Legal Practitioners and Financial Advisors can be enlisted by contractors and operators within the industry for the provision of professional services for any of the operations the contractors and operators wish to execute.
- Joint Venture Agreements (JVAs) are usually entered into by parties within the oil and gas industry. This, in turn, will provide opportunities for the professionals listed above to input their services into the industry.
Investment
- With the introduction of the Act, there has been a high level of investment in the Oil and Gas industry as investments have been received from reputable international companies.
- The Act, as much as it is directed at local involvement, has also resulted in providing a platform for international participation as well.