A Review of the Nigerian Energy Industry

Nigeria Content Initiative: Let’s update NOGICD Act and pass PIB simultaeously

Dr Ibilola Amao

07 August 2012, Sweetcrude, LAGOS – THE delayed passage of the Petroleum Industry Bill, PIB, has a grievous impact on the psyche of all players in the Nigerian Oil and Gas industry. The passage of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, about two years ago, heralded a gust of activities, plans and pronouncements most of which can not be actualised without the appropriate projects. With Fiscal Terms set to change with the PIB, most investors have shied away from Nigeria and turned their Foreign Direct Investment to more stable and predictable countries such as Ghana and Angola.

As we begin to look at clause 102, that states: “subject to the approval of the Minister, the Board shall conduct a review of the Schedule to this Act at such intervals as it may determine but not later than every two years with a view to ensuring a measurable and continuous growth in Nigerian content in all projects, operations, activities and transactions in the Nigerian Oil and gas industry for onward transmission to the National assembly”

This implies that we should expect some positive changes that would not only correct the gaps in the schedule but also correct the anomalies in the letter of the Act by the time that the Ministers amendment has passed through the legislature. Indeed these are exciting times for the Oil and Gas industry. We should as a minimum expect:

1. The schedule to capture: man-hour, tonnage, volume, area, liters, length, numbers, usage, contract, numbers as secondary to spend. All the independent units of measurement save spend must be secondary to and tracked alongside spend. Spend must be maintained as the primary yard stick for measuring Nigerian Content as “in-country” spend is critical to value addition. All other units can be slashed and measures as secondary values for historical and analytical references.

2. Harmonisation of the line items in the schedules of the Act with that on the Nigerian Petroleum Exchange, NIPEX, portal and the Department of Petroleum Resources, DPR, activity categorization is critical for performance tracking in license re-issue and vendor development.

3. Inclusion of areas that critical to the general wellbeing of Nigeria and Nigerians Products Transportation, Marketing and Trading is necessary.
A good question that we should be asking ourselves is when would Nigeria begin to trade finished products in its own spot market? Neither has Nigeria so much as exported barrels of finished products nor traded crude on the spot market for the maximum value and return on investment possible?

The Act must go beyond first consideration to auditing the usefulness of first consideration. What have been achieved by those that were awarded blocks in the past to alleviate poverty and create jobs through effective and efficient optimisation of our natural and human resources?.

We would like to see more of investment opportunities and asset ownership (factories, industries, machines, equipments etc.), marine vessels, Rail, waterway that are privately owned with the ownership tied to the execution and successful completion of Oil and Gas projects and contracts. The need to track spend, “in-country” investment, visible assets etc can not be over-emphasised in the implementation of Nigerian Content.

The long awaited PIB must provide tax incentives and fiscal terms that would encourage expenditure on infrastructure (Fabrication Yard, roads, bridges, water, electricity, residential estate, schools, hospital), Education and employment of youths, linkages to critical sectors of the economy such as IPP (Gas utilization), Downstream (Refining, Petrochemical, Chemical, fertilizer), LNG, LPG. We need to tie Schedule of the Act to the development of the iron & steel (Ajaokuta & Aladja) industries in Nigeria or we have not started expanding the envelope of growth and development for the application of any strategic thrust.

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  • Dr. Amao has been in the vanguard of Nigerian Content Initiative for as long as I can remember. If she is proposing an update of the NOGICD Act she is in a position to know.