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INTRODUCTION

The Nigerian Local Content Development and
Enforcement Commission Bill, 2020
, (the “Bill”) is seeking to repeal the Nigerian Oil and Gas Industry Content Act,
2010
(hereinafter referred to as the “Act”). This shortsighted initiative
emerged out of the misconstrued perception of the true purpose behind the
issuance of the Executive Order 03 signed
by the President of the Federal Republic of Nigeria seemingly in support of
Local Content, which mandates all Ministries, Departments and Agencies (MDAs)
to grant preference to local manufacturers of goods and service providers in
their procurement of goods and services.

Also, another misconception is the
proclamation entitled “Presidential Executive Order for Planning and Execution
of Projects, Promotion of Nigerian Content in Contracts and Science,
Engineering and Technology,’’ by President Muhammadu Buhari, pursuant to the
authority vested in him by the Constitution, which was signed on Friday,
February 2, 2018, the Executive Order
No. 5 (“EO5”)
by which all Ministries, Departments and Agencies (“MDAs”) of
Government were directed to engage indigenous professionals in the planning,
design and execution of National Security projects and maximize in-country
capacity in all contracts and transactions with science, engineering and
technology components.

These are directives
which can be easily actualized through the simple release of Guidelines or
modalities to that effect by the concerned MDAs without the need to enact a new
Local Content Law, let alone repeal the existing Act.

While this move
introduced by the Bill could be considered as remotely development-driven on
the surface, however, its bid to repeal the hitherto existing NOGICD Act, by
establishing a Local Content Commission and expanding the scope of Local
Content into all other Sectors of the economy, will only result in the
furtherance of unwarranted bureaucratic bottlenecks, which will hamper the much
desired rapid growth of the economy if assented to. This work exposes the
attendant shortfalls of the Bill, along with the impracticability of the
innovations it seeks to import into the economic structure of the country and
expound on why efforts should rather be channeled along the lane of properly
revamping the NOGICD Act already before the House of Representative and
undergoing some salient modifications, rather than obliterating it completely.

THE EXCLUSIVITY OF LOCAL CONTENT LAW TO THE OIL AND GAS
SECTOR

Local content
requirements are provisions (usually under a specific law or regulation) that
commit Foreign Investors and companies to a minimum threshold of goods and
services that must be purchased or procured locally. From a trade perspective,
local content requirements essentially act as import quotas on specific goods
and services, where Governments seek to create market demand via legislative
action. It ensures that within strategic Sectors particularly those such as Oil and Gas with large economic rents,
or vehicles where the industry structure involves numerous supplier’s domestic
goods and services are drawn into the industry, providing an opportunity for
Local Content to substitute domestic value-addition for imported inputs.

The rationale for
Local Content requirements is especially strong, particularly for the Energy
Sector. Apart from the United Kingdom, very few new energy producers including
Norway, long considered as the gold standard Local Content had, upon discovery
of their Oil and Gas deposits, stated the requisite industrial capacity to
serve as an internationally competitive platform for exploration, extraction,
distribution and export. Given that the Nigerian Oil and Gas industry is nearly
a century old, the dominance of established operators and the sophistication of
energy technology particularly for offshore deposits implies that emerging
energy producers will, at the outset, nearly always depend on foreign firms.
While energy sector investments (if properly managed) can ensure a steady revenue
stream and constant (and in the case of developing countries, rising) demand
levels, its exploitation however, requires sophisticated and cutting-edge
technology, a ready-made demand for a wide network of suppliers in virtually
all areas of manufacturing and services, and ongoing employment for trained
staff, both at home and in other energy-producing countries around the world.

Therefore, the reason
for having a Local Content Development Act specifically enacted for the Oil and
Gas Industry was not just to create more jobs but primarily to ensure
technology transfer of the grossly technical expertise applied in the Oil and
Gas Industry among other industry-based objectives. Countries all over the
world reserve Local Content laws for exploration of natural resources
especially in relation to the energy sector and this is because they desire to
build the necessary capacity to cater for that sector without high dependence
on external bodies.

Similarly, a cursory
look at the regime of Local Content in other Countries such as Ghana, will
reveal that the whole concept of Local Content not only resides with the Oil
and Gas sector, but also focuses on production and utilization of the Country’s
resources, and this puts away the need to have it present in other sectors.
Regulation 49 of its Petroleum (Local Content and Local Participation)
Regulations, 2013 L.I 2204, defines Local Content thus:

The quantum or
percentage of locally produced materials, personnel, financing, good and
services rendered
in the petroleum industry value chain and which
can be measured in monetary terms” (Underlined is ours for emphasis)
.

Having so defined
local content, the country has no other law on the area, as this will mean an
overstretching of its objectives.

Similarly, Section
106 0f the NOGICD Act defined “Nigerian Content” as thus:

The quantum of composite value added to or created in the Nigerian
economy by a systematic development of capacity and capabilities through the
deliberate utilization of Nigerian human, material resources and services

in the Nigerian Oil and Gas industry” (Underlined is ours for emphasis).

THE BILL LACKS A CLEAR-CUT APPLICATION AND DIRECTION

Unlike the NOGICD Act
which provides for a clearly-worded spectrum of its application as regulating
activities in the Oil and Gas Sector, and thus makes for ease of its
enforcement, the Bill in question seeking to repeal the Act has failed to
delimit itself to any relevant Sector(s) of the economy or even spell out the
nature of the exact activities it intends to regulate. It equally does not
provide for the purpose its eventual enactment will achieve, which is in sharp
contrast with the NOGICD Act, the focal point of which is the implementation
and monitoring of Nigerian Content, ensure and encourage the full indigenous
participation and transfer of technology to Nigerians and the provision for the
development of Nigerian Content in the Nigerian Oil and Gas Industry, as
vividly indicated by the wordings of the sections that ran through its pages
and even more so, in the clauses of the Bill (NOGICD Act (Amendment) Bill)
seeking to amend it.

The Local Content
Development and Enforcement Commission Bill on the other hand is not Sector
specific and other Sectors of the Nigerian economy comprises of Services,
Mining, Forestry, Agriculture, Transport, Tourism, Energy, etc. Considering
these Sectors are made up of 70% low income earners and striving entrepreneurs,
it is quite an enormous task if not an outright impossibility to implement the
wordings of the Bill. This deficiency it has by itself brought to the fore in
many of its proposed clauses. Prominent among which is the very first Clause
that hinges on the number of objectives it undertakes to achieve. Some
provisions are stated below:

Clause 1

The objectives of
this Bill include —

 

“(1) The imposition
of the application of Nigerian Local Content to any transaction in which public
fund belonging to the Federal Government of Nigeria or any of its arms and/or
agencies is used in any sector of the Nigerian economy, in donor or loan funded
projects and in activities carried out by any entity in possession of an
investment agreement with any arm of the Federal Government of Nigeria or any
of its agencies;

 

(2) The imposition of
Nigerian Local Content to transactions in all sectors of the Nigerian economy
where regulated activities are carried out especially in the petroleum, solid
minerals mining, construction, power, information and communication technology,
manufacturing and health sectors of the Nigerian economy;”

 

The foregoing provisions alone without
addition, are an obvious pointer to the fact that the Bill is certainly biting
a lot more than it can chew. Given that an innumerable percentage of publicly
funded transactions involving the Federal Government, its Arms, Agencies in
various sectors and activities by entities in investment Agreement with these
bodies, are conducted year in and year out, of which an accurate data and
status reports of are unfortunately not obtainable in any of the regulatory or
statutory establishments empowered to oversee and monitor these transactions.

If such primary
duties have been so neglected over the years, it automatically follows that
there is absolutely no footing upon which the imposition of the application of
Local Content can possibly thrive, as multiple projects and activities have not
been and are still not being tracked, thus, breeding more avenue for;  perpetual looting of funds, low or zero
revenue generation and abandoned or uncompleted public works, the sum of which
could have been positively harnessed towards achieving the fast growth of the
economy and according more impetus to public-private-partnership which will aid
the smooth implementation of government policies, bring about robust economic
and commercial boost and add to the volume of the national wealth.

Conversely, the NOGICD Act has maintained a
solid record since its inception 10years ago, as it has remained focused on
achieving its sole objective, made possible by the specific nature of its
application to the Oil and Gas Sector, the mainstay of the economy and large
contributor to the overall national GDP. Interestingly, about $9 billion has
been retained from the average $20 billion being spent in the Oil and Gas
industry yearly due to the implementation of the Act and about Nine Million
man-hours has been achieving in training, with indigenous players owning about
40% of marine vessels operating in the industry. These are only a few of the
laudable economic transformations ushered in by the Act as a result of the
clarity and narrowed application of its mandates and the powers, functions and
roles exercised by the agency saddled with the onus of giving effect to its
sector-based provisions, the Nigerian Content Development and Monitoring Board.

ADDITIONAL EXPENSES TO THE NATIONAL BUDGET

It is beyond debate
that an Act to make provision for Local Content on all sectors of the economy
would not only be too voluminous and incapable of capturing all necessary
developments it ought to, but it will equally increase the amount of expenses
accruing to the annual national budget in running the costs of the numerous
Directorates and Departments the Bill seeks to establish and in setting up
offices for more Directors.  This is especially
because the new Departments are more of a duplicate to the already existing
Departments in the Ministries. Instead of creating new Directorates and
Departments, it is advisable that the provisions in this Bill be used as an
upgrade to the already existing Departments to properly discharge their
administrative functions.

CONCLUSION

Before
the advent of the Bill, the NOGICD Act has withstood the test of time and
ensured developmental breakthroughs in the Oil and Gas Sector it regulates,
piloted by the skillful management of the NCDMB, and it will be an economic
drawback to discard it after a decade of excellence. Also, there are in
existence various Ministries to cover each Sector of the economy all having
regulations governing their activities. The application of Local Content is
indeed, a concept that can only be successfully actualized in the Oil and Gas Sector
alone, as records have exhibited, attempting to drag it into the shores of
other Sectors is fated to being an exercise in harmonic futility. 

 

 

 

Mr. Oyetola Muyiwa Atoyebi, SAN is one of the most notable professional Nigerian lawyer,
who has distinguished himself in his professional sphere within the country and
internationally. He is the youngest in the history of Nigeria to be elevated to
the rank of a Senior Advocate of Nigeria. At age 34, he was conferred with the
prestigious rank in September, 2019. Mr. O.M. Atoyebi, SAN can be characterized
as a diligent, persistent, resourceful, reliable and humble individual who
presents a charismatic and structured approach to solving problems and also an
unwavering commitment to achieving client’s goals. His hard work and dedication
to his client’s objectives sets him apart from his peers.

As the Managing Partner of O.M. Atoyebi, SAN &
Partners, also known as OMAPLEX Law Firm, he is the team leader of the Emerging
Areas of Practice of the Firm and one of the leading Senior Advocates of
Nigeria in Local Content Law, where he has worked with various key industry
stakeholders and successfully facilitated transactions in the Oil & Gas and
Energy Sector. He has a track record of being diligent and he ensures that the
same drive and zeal is put into all matters handled by the Firm.