- Nigeria attained 28% local content in 2017; set for 70% by 2027
- Move to aid production cost reduction drive
- CSOs say FG must commit to full oil industry deregulation
Nigerian National Petroleum Corporation (NNPC), the state-owned oil company, is challenging indigenous companies operating in the country’s oil and gas sector to upscale their capacity for global competitiveness, and as part of the effort to achieve the target of reducing the cost of oil production in Nigeria on a sustainable basis.
Mele Kyari, NNPC’s group managing director, made the challenge during a stakeholders’ consultative summit organised by the senate committee on Nigerian local content.
Kennie Obateru, group general manager, group public affairs division of NNPC, quoting the corporation’s GMD, said, there was need to amend the Local Content Act to reflect current realities in the industry.
Local content is the development of local skills, oil and gas technology transfer, and use of local manpower and local manufacturing. It is also building a workforce that is skilled and a competitive supplier base. According to the Nigerian Oil and Gas Industry Content Development Act (NOGICDA) 2010, local content is “the quantum of composite value added to or created in Nigeria through utilization of Nigerian resources and services in the petroleum industry resulting in the development of indigenous capability without compromising quality, health, and safety.”
The NOGICDA at inception had a target to attain a 10-year strategic roadmap, part of which were to achieve 70 percent local content by 2027 and 300,000 direct jobs. Information from the Nigerian Content Development Management Board (NCDMB) website said Nigeria attained 28 percent local content participation by 2017, against less-than five percent in 2010.
Kyari, who was represented at the stakeholders’ summit by Eyesan Oritsemeyiwa, the group general manager, corporate planning & strategy (CP&S), argued that there was need to have a legislation to resolve the issues of funding challenges faced by local players; stressing that oil and gas business required high technical skills and competence to compete favourably at the global stage.
He said the need for greater capacity building on the part of indigenous companies requires the nation’s education system to play a great role in the development of highly skilled technical manpower; while any legislation on Nigerian content development that fails to embrace issues of investment in the educational system was not likely to achieve much.
He welcomed the legislature’s initiative to review and amend the Nigerian Local Content Act, and urged the committee to ensure that it is carried out in a timely fashion in order for the law to deliver maximum value for the nation.
“In terms of the interaction between industry and education, we think these new bills would present a good model that we should work with. If you have the best brains in the industry today, as long as you are not getting good replacement for them from the educational sector when they grow old and retire, then your industry will collapse,” Kyari said.
He said Nigeria has made some good progress from the era when there was no single indigenous operator in the oil and gas industry, to the current situation where local operators have risen to double digits. And that the trend should be encouraged. The NNPC group managing director commended the legislators for the plan to extend the local content law beyond the oil and gas industry to other sectors of the nation’s economy, stressing that it would open up the non-oil sector to growth and development.
Meanwhile, a consortium of civil society organisations has asked the federal government to enact an appropriate legislation or embed same into the Petroleum Industry Bill (PIB) expected to be submitted to the National Assembly soon, in order to entrench the deregulation drive of the downstream sector of the petroleum industry.
The CSOs also demanded the government to commit to the full deregulation of the petroleum industry by originating moves to repeal the laws that established the Petroleum Equalization Fund (PEF), and the Petroleum Products Pricing and Regulatory Agency (PPPRA). They said only this would signal government’s commitment to the full deregulation of the oil industry.
Tengi George-Ikoli, programme coordinator of Nigeria Natural Resource Charter (NNRC), has equally asked the Central Bank of Nigeria (CBN) to ensure a level-playing field for all importers of premium motor spirit (PMS), rather than placing the NNPC at an advantage over others.
For the CSOs, NNPC must take urgent practical steps to reverse the fortunes of the loss-making refineries as revealed in its published 2018 audited reports of its subsidiaries, as the refineries have remained loss-centres that Nigeria can ill-afford at the time of knock-on impact of Covid-19 pandemic and other fiscal pressures on the nation’s economy.
They said the Nigerian government should create an enabling environment for the private sector to contribute to the efficient running of the refineries so that the country can reach its domestic refining goals.