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NNPC-Chevron JV: Promoting Local Content Across Oil Industry Chain

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The Local Content Bill received presidential assent on  April 2 , 2010, and created a law to provide for a framework towards indigenous content in the Nigerian oil and gas industry. The law also establishes the Nigerian Content Monitoring Board (NCMB) which is charged with the responsibility of  managing  the coordination, monitoring and implementation of local content law.

In a simple term, the local content law specifies that Nigerian independent operators should be accorded “first consideration” in the award of oil and gas- related contracts and that Nigerian service companies should also be given “exclusive consideration” for contracts and services. Indeed experts believe that an agreeable scenario would  be where Nigerian companies are allowed to participate alongside international oil majors.

This stakeholders see as a commendable move in view of the previous limited attempts by government at developing a local content framework for the industry. This explains the fanfare associated with the enactment into law of the Nigerian Local Content Bill.

Nigeria is the world’s eight biggest oil exporter and relies on crude as its main foreign exchange earner. The industry accounts for over 40 per cent of Nigeria’s gross domestic product and is associated with over a billion dollars worth of investment annually. There is however, a marked absence of indigenous players in these transactions, where about 90 per cent of the equipment and personnel used in the industry are imported. The local content law seeks to increase indigenous participation by prescribing a minimum threshold for the use of local services and promoting the employment of Nigerian staff in the industry.

Government has sought to increase indigenous participation in the sector by prescribing a minimum threshold for the use of local services and materials and to promote transfer of technology and skill to Nigerians in the industry. The NCDMB to actualize this dream recently launched $200 million Nigerian Content Intervention Fund, NCIF,  which targeted at deepening local content participation in the oil and gas industry of the country.  Launch of the fund LEADERSHIP gathered was part of the Boards 10-year strategic plan, to create over 3,000 jobs in the country, including indirect employment.

Simbi Wabote,  executive secretary of the Board, said that since the Local Content Act was enacted in 2010, the oil and gas sector has witnessed tremendous growth in terms of what the country has been able to draw back and domicile locally. According to him, prior to the enactment of the act, “Out of the about $20 billion, which the industry spent on its annual activities, less than three per cent originated from the country while the rest was taken out, but after the implementation of the Act, about five per cent has returned to the country.”

He explained that the aspiration of the Board in terms of its 10 years strategic plan, was to have up to $14 billion out of the about $20 billion domiciled in the country annually. The critical success factor of the Board, he pointed out, has been the implementation of the Act itself. “The Act has been very critical to the success we had achieved. Prior to now, we practised what we call poles in terms of local content implementation, ” he said.

Wabote disclosed that one of the major impediments for most Nigerians in the oil and gas sector was the cost of financing projects which was put at between 15 per cent and 26 per cent. But working in partnership with the board he said, the sector came up with facilities that involve a large range of funding up to $10 million with a single digit interest rate of eight per cent.



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