Nigerian Content: Appreciable success, greater challenges still ahead

Clara Nwachukwu

28 February 2012, Sweetcrude, LAGOS – One of the most topical issues at the just-concluded Nigeria Oil and Gas (NOG) 2012 International Conference and Exhibitions was how far indigenous participation has grown in the nation’s oil and gas industry since the enactment of the Nigerian Content Act 2010.

Indeed, before the law became effective, the Nigerian government had proposed an ambitious 70 percent content by the turn of the decade ending 2010, but this could not sail though because of technology challenges and inadequate local skilled manpower, which will wrestle petroleum jobs from the stronghold of the multinationals.

Although petro-dollars accounted for more than 80 percent of government’s total revenue earnings, its contribution to the nation’s Gross Domestic Product (GDP), is, however, less than 40 percent due to low indigenous participation in the sector.

While the Nigerian Content Development and Monitoring Board (NCDMB) believes that appreciable milestones have been recorded in terms of job retention and domiciliation, indigenous operators argued that a lot still needed to be done.

Executive Secretary, Mr. Ernest Nwapa, recalled that before the Act, Nigeria suffered capital flight in excess of $380bn and estimated job losses of two million. Dramatic changes have begun to occur to reverse the trend, he said.

According to him, the target is to retain at least $10billion of the industry’s annual spend in the country. “The Nigerian Content is a tool that will bring about economic growth and industrialisation in the country.”

Notwithstanding government’s target to become one of the 20 most industrialised countries in the world by 2020, Nwapa noted that “there can be no economic growth without massive employment, which is a very serious challenge facing our economy.”

The NCDMB boss, who spoke on ‘The Nigerian Content Implementation under the NOGID Act’, argued that a strong wind of change is sweeping over the industry, as a result of government’s regulation to ensure local content development in the petroleum industry, which is the bedrock of the Nigerian economy.

He said the Act has recorded significant milestones and successes since it came into force, adding that the board has succeeded in raising the bar on indigenous participation in the various sub sects in the industry.

In particular, he expressed delight that the board has been able to save the country about $1.8billion through indigenous marine vessel and rig ownership, noting that a lot more can be saved if the Federal Government can insist on vessels dry-docking in Nigeria.

He noted, “Most vessels that come into Nigeria go to the west coast and then come back to Nigeria to continue with their business. Can you imagine the quantum of business that will be retained here, and reduction in capital flight.”

In this regard, he said the Nigerian LNG is leading in terms of dry docking in Nigeria as 24 of its vessels are dry docked in Nigeria, adding that through the board’s effort, the International Oil Companies (IOCs) have put up to 40 Category 2 vessels, which they promised will be indigenously owned before the end of June.

He admitted that a number of the IOCs have made significant strides in local content development, like Shell, which has expressed interest in supporting government to set up a pipe mill in Nigeria as well as taking a complex at the Nigerian Institute for Welding (NIW) for the training of welders.

Furthermore, some of the fabrication yards like Nigerdock, Saipem, Onne Free Trade Zone, which used to be empty are now fully occupied with projects lined up even for the next six months

Discriminatory remuneration
The Executive Secretary, Petroleum Technology Development Fund ( PTDF), Dr. Muttapha Darma, expressed concern over discriminatory remuneration of professionals in the industry.

He called on the respective agencies of government – including NCDMB to synergise in terms of remuneration so that Nigerian professionals are not under paid. Comparing a Nigerian petroleum engineer with his Italian counterpart, who have both been trained in the same environment and institute and have the same qualification, he said the Italian would earn five times higher than the Nigerian.

According to him, while the average net pay of the Nigerian engineer working for one of the IOCs in Nigeria is about N229,436 per month as at 2009, his Italian counterpart earned a whopping $10,000.

Consequently, he said that collaboration among government agencies “will provide efficient tools for scientific and engineering design, simulation and optimisation for youth development in Nigeria.”

He said the PTDF, in line with the enabling Act, has over the years have trained up to 4000 Nigerians in the best universities abroad, while close to 500 doctorate degree lecturers trained abroad have been brought back to impart their knowledge on the fresh graduates.

But Nwapa argued that the issue of wages cannot cut across the environment in a particular country, which is the cost of living adjustment.

He said that government and the NCDMB was more concerned about bringing the jobs back. “If a Nigerian has a particular qualification, he should not be discriminated against and that is what we are working on. But to compare what people are paid in Nigeria and say Japan, is not something you do necessarily because of the qualification you have, but because there are other indices that control wages.

“In Nigeria for instance, the government workers, their wages are fixed, by a commission, in some European countries but in the private sector it is competitive you actually go out there and make a bid.”

Reminded that this could lead to further brain drain in the industry, the NCDMB boss insisted, “The job of the board is to encourage growth in the places where someone can work. In a place where you have only 2000 jobs where more than 40000 people graduated this year, government cannot accommodate that, what we are focusing on is to create.

Instead of having only two fabrication yards with work, we want to have about 10 – 12, and to give them a substantial work so they have the minimum work load every time. That will keep workers, even the fabrication yards that are working today can’t give people employment because they are worried about when the next job will come so they give you a six months contract, after that if they have a job for you they renew it because if they are not getting jobs they can’t keep paying salaries.

“This is why we are focusing on that fundamental so when they get and people are working, when they get to their union they talk about their pay. For now the most important thing is to stop our work from been taken to Korea and China, the ones that can be done here let us be doing them.”

IOCs content development
Underscoring the success of Shell companies in local content development, its General Manager, Local Content, Mr. Igo Weli, said the Anglo-Dutch company is constantly engaged in a number of activities to promote content development.

He said that such activities are based on the premise that “Nigerian Content development is the pivot for industrial and economic growth and stability.”

Others present at the Local Content Measurement: Challenges and Sustainability seminar, which was chaired by the Executive Director, Total E&P Nigeria, Dr. Kingsley Ojoh, also included the General Manager, Nigerian Content Development, Chevron Nigeria, Mr. Raymond Wilcox; and the Sustainability Coordinator, Saipem Contracting Nigeria, Ms. Joy Oserohwovo, who said her company had spent up to $9.2billion training local employees.

Each of them took turns to state how much of content development and value addition their respective companies have brought into the industry for overall economic growth.

Indigenous operator’s perspective
Some of the indigenous operators who debated on the subject agreed that the Content Act is the pivot for their recent growth in the industry.

The Technical Director, ERHC Energy, Mr. Adebanji Babarinde, said, “ERHC attained its current levels of success because of the Nigerian Content Act. The law gave local entrepreneurs the confidence to go into areas hitherto monopolised by multinationals.”

On his part, the Development Manager, Delta Afrik, noted that over 700 Nigerians are engaged in various industry projects being handled by the company. “This is due to functional partnership among government agencies, the IOCs and service companies.”

But looking at the challenges impeding indigenous growth in the scetor, the Sales/Marketing Manager, Aker Solutions, Mr. Anthony Okolo, urged government to reduce the contract approving cycle for projects.

“If a company takes about two to five years to utilise a local content programme, the company will die off before the next contract comes in,” he said.

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