July 10, (THEWILL) – Nigeria’s 10-Year Strategic Road Map, anchored by the Nigerian Content Development and Monitoring Board (NCDMB) will impact the Nigerian National Petroleum Corporation (NNPC), which transforms to a limited liability entity this month (July 18, 2022). The evolution of the NNPC to a Company and Allied Matters Act (CAMA) firm coincides with the NCDMB Road Map to fast-track the Local Content Act created about 12 years ago.
The Local Content Act is a vital instrument that empowers Nigerian Companies to contribute tremendously towards the development of the Nigerian economy by encouraging value addition, job opportunities, and furthermore the award of different oil contracts and undertakings.
The Act established the Nigerian Content Development and Monitoring Board (NCDMB) with the mandate to oversee the implementation of the provisions of the law. It is seen as a revolutionary step towards enhancing Nigeria’s launch into the league of technology-driven economies spurred by the huge opportunities in the oil and gas industry.
The Road Map is targeted at the retention of over $14 billion out of $20 billion estimated industry spends in-country, creation of over 300,000 direct and indirect jobs for Nigerians and growing Nigerian Content from 27 per cent from 2017 to 70 per cent by 2027. To achieve this, the NCDMB has created a series of short-, medium- and long-term plans bordering on research, production and human capital development with well-articulated delivery and evaluation processes that are practically time-bound.
Among the schemes is the promotion of Science, Technology, Engineering, and Mathematics (STEM) education in Nigeria in partnership with stakeholders.
Speaking at the commencement of the training of teachers under the scheme, championed by Siemens Energy Nigeria, NCDMB, and Empowering Africa Through Education Initiative, EATEI, in Yenagoa, Bayelsa state in July 2021, the Executive Secretary, NCDMB, disclosed that the promotion of STEM education in Nigeria, would impact the nation’s 10-Year Strategic Road Map which has impacted many Nigerians. The scheme is vigorously pursued among tertiary and research institutes across the country with the objective of empowering Nigerian operators towards technological development and the transformation of the oil and gas sector.
The Niger Delta University (NDU) confirmed that it is exploring closer collaboration with NCDMB particularly in Research and Development following the Board’s various capacity development interventions which it had initiated in the university, including the donation of Econometric Centre, staff capacity building among other support initiatives. According to the Vice Chancellor of the university, Prof. Samuel G. Edonmiekumo, the partnership will deepen NCDMB’s pursuit of effective implementation of the Strategic Road Map.
In 2016, NCDMB, NNPC, Imperial College of London and four leading universities in Nigeria unveiled a framework for developing world class research for Nigeria’s oil and gas industry. The collaboration, which is spearheaded by NCDMB as part of the Road Map, aimed to establish a Centre of Excellence (CoE) for oil and gas research at the Federal Universities of Technology, Minna, Niger State; Federal Universities of Technology in Akure, Ondo State, and Owerri, Imo State, as well as the Niger Delta University, Yenagoa.
According to NCDMB, the project is geared towards solving oil and gas industry problems in Nigerian universities and local research centres thereby growing local research capacities and retaining huge spend which stakeholders normally spend on research overseas.
Linkage with New NNPC
By the provisions of the Petroleum Industry Law which came into effect in August 2021, the Nigerian National Petroleum Company Limited from July 1, 2022 became a limited liability company, but with the official unveiling scheduled for the 18th of the month.
The Corporate Affairs Commission (CAC) had on September 21, 2021 completed the incorporation of the NNPC Limited in accordance with the new PIA. Floated with an initial capital of N200 billion and with the required regulations in place, anchored by the PIA transition committee, stakeholders say the stage had been set for the formal take-off of the new NNPC. The NCDMB Road Map will assume a seamless linkage with the New NNPC to activate the huge potentials of the oil and gas industry which have been tied to the bureaucratic apron-string of government.
“Being now a commercially-oriented and profit-driven entity, the NNPC is expected to be managed like a private sector enterprise, hence the need for active linkage with the NCDMB Road Map. In fact, the NCDMB is expected to effectively support the New NNPC to actualize the objective of the privatization of the nation’s oil company,” said Ben Amadi, an oil and gas expert.
“In addition, like every other company in the country, NNPC will pay taxes to the government and eventually be able to pay dividends to its shareholders, represented by the government in its teething stages and then the public when it decides to have an Initial Public Offer (IPO).
“Furthermore, the new NNPC will serve as a holding company for all its subsidiaries, over a dozen of them, in the post-PIA era, which explains the optimism concerning the role of NCDMB in the new operations of NNPC,” Amadi added.
Amadi further explained that since the NNPC does not and cannot operate without partners or third parties, those of them with subsisting contract(s) and joint operating agreements with the NNPC, will also have their fate determined by the PIA.
This development is based on Section 54 of the PIA, which provides that all assets and liabilities of the NNPC will be transferred to NNPC Ltd within the first 18 months of the PIA coming into effect.
As a business under CAMA and with the relevant guidelines of the PIA, the NNPC Ltd, the new NNPC will enter new investments and partnerships in upstream assets to increase gas production. It is also expected to expand its downstream operations, while modular or small-scale refineries will be developed in addition to current investment in rehabilitation of existing refineries to ramp up in-country refining. Experts believe that this is why the linkage with the NCDMB Road Map becomes more imperative.
Era of Local Content
The last 12 years has revolutionised the oil and gas sector by strategic capacity development in a way that has positively impacted on the nation’s GDP through job creation, skill acquisition, tax revenue and economy. It also enhanced the absorption of local communities who now have ownership of the projects in their communities.
“We have expanded our business beyond measure; we now do virtually everything locally without the help of expatriates; this is part of the benefits of the Local Content Policy,” a Port Harcourt-based oil and gas service operator, who would not want his name published “because of these tax people,” told THEWILL. He applauded the NCDMB’s role in its monitoring of the industry.
Credit goes to the man at the helm of affairs at NCDMB, Engr Simbi Wabote, who assumed office as the Executive Secretary in 2016. In a recent interview with THEWILL Downtown, Wabote stated that the Board had recorded significant milestones.
“The idea is that in Nigeria, we’ve made a lot of progress with regard to the local content development in the oil and gas sector. Before we started, the oil industry used to spend about 21 billion dollars year on year in our activities and less than 5 billion of that remained in the country.
“Today as we speak, we’ve taken that ‘less than five per cent’ to about 42 per cent Nigerian participation. It is a 10-year plus strategic plan.” He revealed that his predecessors had raised the local content to 25 per cent before his appointment in 2016. “From 2016 till now, we’ve moved it from that 25 per cent up to 42 per cent. Ninety-eight percent of the contracts given out in the oil and gas industry are given out to Nigerians. All the activities between the land and swamp are set aside for Nigerian companies. Today, in oil servicing, almost 99% of oil service activities are done by Nigerians. These are guys who open their shop, taking advantage of the Local Content Act.”
Industry operators who spoke to THEWILL maintain that the success of the Local Content Policy hinges on capacity building, especially in the aspect of human capital development. They argue that oil and gas is technology-driven and is transforming rapidly to another level where less emphasis is on fossil fuel. .
The Supervisor, Media and Publicity at NCDMB, Obinna Ezeobi, said the Board is serious about capacity. He referred to the research centres of excellence being established in five universities by the Board. Engr. Wabote had disclosed in 2021 that the Board had established a $50 million Research and Development Fund to support research findings that have practical utilisation and capability of being commercialized and applied to solve critical problems in the Nation’s economy.
The Act has been fundamental to the promotion of the development of indigenous capacity in the Nigeria oil and gas sector. Now in combination with the Petroleum Industry Act, which will complement it, it is expected that the 2027 target for 70 per cent Nigerian content will remain on course. By 2027, Nigeria expects to achieve 70% local content.
Some players also lament the involvement of Indians and Chinese being hired by some indigenous firms to do the work that Nigerians do, especially in the downstream sector, thereby jeopardising the Local Content Policy.
The Nigerian Content Development and Monitoring Board (NCDMB) said in February 2022 that the Nigerian Content Intervention Fund had exceeded half a billion dollars.
This was disclosed by Wabote, while speaking at the Sub-Saharan African International Petroleum Conference (SAIPEC) organised in Lagos by the Petroleum Technology Association of Nigeria (PETAN).
He indicated that the NCI Fund which is extended as low-cost credit to qualified oil and gas companies covers asset acquisition, project financing, manufacturing, working capital, loan refinancing, women in oil and gas, and research and development.
The NCI Fund is a component of the Nigerian Content Development Fund, NCDF which is accumulated through one per cent deductions from contracts awarded in the upstream sector of the oil and gas industry.
Mr Wabote added that the Board is using the NCDF to catalyse the construction of modular refineries, gas processing plants, LPG terminals and bottling plants, LPG Cylinders manufacturing plants, lube oil blending plants, base oil production plant, methanol production plant, and many others.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
