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Local content development

Published by Nigerian Compass on Wed, 08 Feb 2012


THE issue of local content development in Nigeria came to the fore recently, with the establishment of a steel pipe fabrication company on the outskirts of Abuja. Its products were reported to be of international standards and could be utilised in the provision of water and for the conveyance of oil and gas within and outside the country. If anything, the company's successful technological exploits, highlights its competencies as an indigenous service provider, and the need for more compliance with local content law in the oil and gas industry.The sad truth is that non-compliance with local content development has cost the country dearly. The motivation to develop a valuable skills and knowledge base, and generate employment opportunities hardly exists. On the contrary, poor policies permit the unpatriotic practice of repatriation of profit by foreign-owned corporations. The Nigerian Content Act in Oil and Gas, was signed into law by President Goodluck Jonathan, in 2010, to correct these anomalies. Essentially, it sets a minimum local content target of 75%, for all works and contracts to be undertaken in or on behalf of all oil & gas companies operating in the Nigerian oil & gas industry. The Local Content Act places emphasis on the progressive increase in the Nigerian content of a company to promote a framework which ensures that local competencies are built to internationally - acceptable standards through the active participation of Nigerians, and the deployment of local resources and raw materials, in oil and gas-related activities. To ensure full compliance with the Act, the government set up the Nigerian Content Development and Monitoring Board (NCDMB), as the focal agency through which to monitor progress. Last December, NCDMB revealed that Nigeria had recorded an estimated capital flight of about $380 billion between 1956, when oil was discovered, and 2006 before the policy was initiated. Furthermore, the country's oil and gas industry has exported approximately two million job opportunities to other countries outside Nigeria within the 50 years period by sundry operators in the sector. With full compliance with the Act, Nigeria could quickly retain an estimated $191 billion and 300,000 new job opportunities created in engineering, sciences and technical services, and at the same time, domiciling over 65 per cent of the total industry expenditure. It is clear that the vision for Nigeria's Local Content Act in the oil and gas sector, still remains largely unfulfilled. There is need to effectively implement and tighten up the process and workings of the Nigerian Oil and Gas Industry Content Development Act 2010, to stem any further haemorrhage. Indeed, vast socio-economic opportunities will automatically unfold if the Act is fully enforced and proactively monitored. The challenge to the International Oil Companies (IOCs) operating in the country, is to actively encourage more capable indigenous companies to service their needs particularly in the upstream oil and gas sector, in compliance with the provisions of the local content law. The IOCs must no longer sideline the services of indigenous companies and local products, because they want to have control of investments and project-specific undertakings. A situation where the IOCs outsource most of their major projects to the foreign oil servicing companies to the detriment of local companies and in flagrant violation of the local content law, is not only in bad taste but an affront to Nigeria's economic interest. The onus is therefore on the Board to step up its monitoring activities, enforcing compliance and apply penalties to erring parties, when necessary. Strict compliance with local content initiatives in major sectors is key to the country's vision for sustainable development and revival of small-scale enterprises as drivers of the economy.The trend of negligible or total-absence of local content development is reflected across other major sectors of the economy. In the ICT sector for example, there has been a phenomenal growth within the last decade, following the deregulation of the telecom industry. However, growth in the sector has to a large extent been limited to the availability of GSM phones and related services. Nigeria has also invested heavily in telecom satellite technology. Unfortunately, the knowledge and technology base in the ICT sector, is to a large extent still dominated by foreign industry players. Apart from hardware, most of the software that drive ICT are foreign-developed. Even where Nigerians have the capacity to the write software, most of the big companies, particularly in the banking and oil and gas industries, still opt for foreign expertise. Such obnoxious industry practices help to develop other countries and keep their economies growing at the expense of Nigeria's economy and her skilled labour market. Therefore, the country must speed up its local content development in this and other sectors of its economy. Today, India makes billions of dollars annually from the development of software for the home and foreign markets and boasts of one of the world's skilled workforce in high demand. Nigeria must retrace her steps and leverage on the size of her skilled labour market. The government and stakeholders in the various industries must take urgent steps to encourage and enforce local content development; increasing and expanding Nigerian participation. The combined synergy created by the local content development policies, would help in no small way in the growth of indigenous service companies, boost accretion to the country's foreign reserves, generate employment, create more jobs and leap-frog Nigeria into becoming an industrialised country.
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