With the attainment of 30 percent local content in oil and gas in December 2019, Nigeria reached a significant milestone in an ambitious ten-year journey to domesticate 70 percent of activities in the premier sector of the economy by 2027. The landmark comes in the ninth year of the establishment of the Nigerian Content Development and Monitoring Board, the agency set up to manage the local content journey following the enactment of legislation in 2010. The base was a miserly five percent with the country experiencing a capital flight of $300 billion.
The principal mandate of the Nigerian Oil and Gas Content Development Act (NOGCD) 2010 remains to develop the capacity of the local supply chain for effective and efficient service delivery without compromising oil and gas industry standards. The regulator then pursued two principal objectives. It had to develop Nigerian capacity and capabilities while monitoring compliance and protecting investments.
The NOGICID Act 2010 outlined ambitious, vital thrusts. The foremost is to integrate oil-producing communities into the oil and gas value chain. This objective spoke to a major failing of the industry in over 50 years of operations in Nigeria. Other goals include maximising the participation of Nigerians in oil and gas activities; maximising utilisation of Nigerian resources i.e. goods, services and assets and attracting investments to the Nigeria oil and gas sector (service providers, equipment suppliers etc.). Others include linking the oil and gas sector to other areas of the economy and fostering institutional collaboration.
Local content is a matter of value addition and retention. The goal is to ensure that Nigerian firms contribute significantly to the value generated in the sector. They would, in consequence, retain in-country the specified percentage of jobs and activities. The 2027 goal of 70 percent according to NCDMB should translate to $14 billion out of a sector spend of $20 billion and yield 300,000 jobs.
Local content has become a global concern. Local content is the development of local skills, oil and gas technology transfer, and use of local manpower and local manufacturing. It is also going beyond the oil and gas industry. In Nigeria, NCDMB is quick to issue the explainers that local content does not mean nationalisation or naturalisation of the sector. It is also not corporate social responsibility but is a business imperative. Nor must it happen at all cost. Players and the regulator would review projects and work out what level and manner of local content are possible.
The Egina FPSO provided a crucial fillip to the success that Nigeria has recorded in the journey. The achievements include 24 million person-hours worked in Nigeria equivalent to a workforce of 3,000 persons on average for five years; construction of large-scale new fabrication yards in the country, including Africa’s first FPSO integration quay and addition of 200,000 BPD or ten per cent of current production levels. The gains include training and skills transfer on facilities integration and commissioning.
Forty per cent of marine vessels operating in oil and gas are now Nigerian-registered. Nigerian firms now perform many of the critical activities in the sector and in the country including the processing of barites, engineering design, fabrication and pipe coating.
Performance appraisal shows that the Nigerian Content Development and Monitoring Board has performed satisfactorily. It has met 20 of the 25 goals in the short-term local content plan. Of utmost significance is the fact that indigenous firms have accessed 70 percent of the $200 million local content fund the NCDMB manages. With that fund and the regulation and enforcement activities, we can genuinely assert with it that NCDMB is developing the capacity of local firms to take up opportunities in oil and gas. That is real local content development.
