A Review of the Nigerian Energy Industry

NLNG boss tasks procurement managers on transparency, cost efficiency

16 June 2015, Lagos – The Chief Executive Officer and Managing Director of Nigeria LNG Limited, Mr. Babs Omotowa has charged procurement managers to ensure transparency and efficiency in contract and procurement processes. He said that due processes, transparency, benchmarking database, and e-procurement, are indeed the right direction.

Babs-Omotowa, NLNG boss
Babs Omotowa, NLNG boss

Omotowa noted that in many countries and companies, the expenditure on goods and services accounts for 60 or 70 per cent of their total expenditure.

This, Omotowa said clearly has significant impact on the bottom line, either in terms of profitability or the delivery of socio-economic impact.

He said many oil and gas producing nations were taking various steps to respond to the challenge of low oil price by cutting costs.

According to him, many companies are also swiftly reacting by cutting capital expenditure, postponing projects and reducing overhead.

“In the past few months I have visited many countries in the course of my Global Presidency of the CIPS (Chartered Institute of Procurement and Supply), the world’s largest professional body for the Procurement and Supply profession with over 114,000 members globally and headquarters in the United Kingdom. From those visits, I have been struck by how hungry the world is for a different kind of contract and procurement model and much more creative ideals,” he said.

Omotowa said the role of procurement had changed remarkably over the years from that of an administrative back office to overseeing an integrated set of management functions.

According to him, procurement decisions are increasingly becoming intertwined with strategic management and are becoming competitive advantage for various global organisations.

There is therefore no gainsaying that a well-structured contracting and procurement process can have profound impact on a country or a company.

“As contract and procurement is involved throughout life-cycle; from product concept, to design, to tendering, to execution, to disposal, etc, it has pivotal position and 360-degree view, which are inbuilt advantages that can enable it provide significant value. Therefore there is no doubt that effective and efficient procurement can help bring public confidence for a government and canenable private sector to grow,” he added.

Citing the case of NLNG, Omotowa said the company recently utilised a $1.6 billion ship building contract with Samsung and Hyundai to deepen local capacity; trained 600 Nigerians in Korea and Nigeria in shipbuilding and facilitated export of $20 million ‘made in Nigeria’ goods to Korea for use on the vessel – cables, paints, furniture, anodes.

He further stated that $10 milion simulators obtained from Samsung and Hyundai were being installed in Bonny to enable many more operators and regulators be trained than sending a few overseas.

Omotowa added that the contract also facilitated the construction of dry-dock facility in Nigeria with Samsung and Hyundai committing tens of million dollars and also providing technical partnership.

“Nigeria has moved forward positively in this direction too with the set up and good work being done by the bureau of public procurement. Due processes, transparency, benchmarking database, e-procurement, etc are indeed the right direction.

These should be built upon, and also many more states should join the likes of Lagos and Rivers States, in setting up similar bureau at State levels. We should also start to transparently see the comparative cost of providing similar service between Federal and States and across different States. Such open benchmarking will also help to drive for lower costs. The recent indication by the new government that it will implement the provisions of the Public Procurement Act of 2007, and set up the National Council of Procurement is a welcome development,” he explained.

– This Day

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