Expert: Local Content Act Prone to Abuse by Oil Firm, Contractors

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Chineme Okafor
A legal practitioner and Managing Partner at Sefton Fross, Mrs. Olayemi Anyanechi, has warned that gaps in the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, otherwise called the local content law, could be exploited by some contractors and oil firms.

Anyanechi, stated this during a panel session on, “In-Country Value,” at the recent 2020 edition of the Nigerian International Petroleum Summit (NIPS), which held in Abuja. She stated that when this happens, it could be at variance with the objectives of the Act.

She cited some limitations in the Act like the definition of a Nigerian company which the Act defined as a company with 51 per cent of its shares held by Nigerians whereas what this requires is that legal ownership should be vested in Nigerians.

According to her: “This gives room for local fronting as the definition is not wide enough to capture trust or contractual structures behind the legal ownership, such as beneficial or ultimate beneficial ownership.”

Anyanechi added that the definition thus prevents Nigerians from having a foreign holding company structure with ultimate beneficial ownership in Nigerians, and that this may be desirable for several reasons, including tax or estate planning.
“Also, there are serious infrastructure gaps in the country, with power being a critical one. This affects the ability of Nigerians to optimise opportunities in areas like manufacturing and engineering.

“Due to these infrastructure gaps, as well as duties and taxes, the cost of importation may be lower than for in-country goods. This affects the costs of projects. Local content development must be holistic in nature such that investors do not become discouraged,” she said.

She also called for increased awareness, programmes, trainings, workshops and seminars to educate the public and investment community about local content.
Similarly, the Chairman of Nigerian Content Development and Monitoring Committee in. the House of Representatives, Hon. Legor Idagbo, revealed that the Act was undergoing a review in the House to plug existing gaps in its content.

Idagbo, also agreed that the NOGICD Act as it is presently constituted has lots of gaps that need to be addressed.
He said: “For example, the Nigerian Content Development and Monitoring Board (NCDMB) currently do not have the powers to enforce. We need to work at strengthening the board with powers of enforcement.

“Secondly, the board presently does not cover the midstream and downstream. It should be able to cover those parts of the industry as well.”
The lawmaker assured that the National Assembly would work to ensure the growth of indigenous capacity in the country’s oil industry.

“While the oil and gas industry provide about 70 per cent of government earnings, it contributes less than 10 per cent of the Gross Domestic Product (GDP). Meanwhile, in Angola, the oil and gas industry contribute about 50 per cent of the GDP. So, we need to make sure we make improvements,” Idagbo explained.

In his contribution, the immediate past president of the Nigerian Association of Energy Economist, Prof. Wumi Iledare, said it was important that professional bodies contribute to the development of local content by training younger professionals in the industry.

He stated that: “Universities must also be utilised in building capacity in the industry. In addition, there must be continuous evaluation of the gap in the curriculum in a bid to upgrade it in line with current industry needs.”