Nigeria Local Content Act Imperative

The Nigerian economy is largely dependent on the Petroleum sector. Contributions to national revenue from this sector are in excess of 70% and more than 90% of foreign exchange earning is from oil exports. Despite the huge investments of the Federal government in this strategic sector of the economy, averaging an annual spend of 8 billion U.S Dollars in the Upstream sub-sector, GDP growth is virtually non-existent and Nigerian content in the industry is still below 15%.

This trend is attributable to the fact that since inception of Oil and Gas operations in the country, the upstream sub-sector has been dominated by multinational companies with little or no participation by indigenous companies.

Even with the recent awakening of local content consciousness, declarations and directives emanating from Government have not achieved desired objectives because there is no clearly defined policy position and/or implementation strategy.

Inevitably, this has resulted in stunted capacity building with increasing reliance on imported goods and expatriate personnel at the expense of locally manufactured goods and indigenous manpower.

The Downstream sub-sector covers activities in refining, processing, transportation, distribution and sale of petroleum products. Though highly indigenized, it is largely public sector driven with inherent operational inefficiencies. For many years, capacity utilization in the refineries has not exceeded 60% as a result of prolonged absence of a proper maintenance regime. However, the failures in this sub-sector are being addressed by reforms sponsored by Government to improve efficiency and profitability. The policy is also aimed at addressing this reality.

The NLNG which was established pursuant to the NLNG Decree has proved very successful as a commercial and strategic national investment. Important lessons have been learnt from the NLNG experience, but aggregate contributions to Local content growth and capacity building need to be enhanced in subsequent expansion programs.

Downstream gas-related projects have their unique characteristics, but key activities during project implementation are predominantly performed by foreign companies and outside Nigeria. This practice is inimical to the value-adding aspirations of the Nigerian content plan and needs to be urgently reviewed to ensure optimization of in-country capabilities and capacity.

A comprehensive policy for Nigerian content is therefore needed to address both Upstream and Downstream sub-sectors, set challenging but achievable goals and develop effective strategies for implementation. This is the Nigerian Content Act imperative