‘Oil firms, contractors may exploit loopholes in local content Act’

Though the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, is designed to foster institutional collaboration, and maximize resource utilisation as well as participation of Nigerians in oil and gas activities, by linking oil and gas sector to other sectors of the economy, a legal practitioner and Managing Partner, Sefton Fross, Olayemi Anyanechi has warned that current loopholes in the Act may defeat the objectives.

Indeed, she insisted that the gaps in the Act could be exploited by some contractors and oil firms.Speaking at the just concluded Nigerian International Petroleum Summit (NIPS) held in Abuja, Anyanechi noted that the development could be at variance with the Act’s objective.

The Nigerian Content Development and Monitoring Board (NCDMB), was established by the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, which came into effect on April 22, 2010.While speaking on “In-Country Value”, Anyanechi 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.

The legal expert noted that there was room for local fronting, as the definition in the Act is not wide enough to capture trust or contractual structures behind the legal ownership, such as beneficial or ultimate beneficial ownership.

According to her, the definition prevents Nigerians from having a foreign holding company structure with ultimate beneficial ownership in Nigerians, which may be desirable for several reasons, including tax or estate planning. Anyanechi said: “Also there are serious infrastructure gaps in the country, with power being a critical one. This affects the ability of Nigerians to optimize 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.”

To her, there is need for increased awareness, programmes, trainings, workshops and seminars to educate the public and investment community about local content.Chairman, Nigerian Content Development and Monitoring Committee, House of Representatives Legor Idagbo, had stated that the Act is undergoing review in the lower chambers of the National Assembly.

The lawmaker agreed that the NOGICD Act as it is presently constituted, has lots of gaps that need to be addressed.“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,” says Idagbo.He assured the gathering that the National Assembly will work towards ensuring the growth of indigenous capacity in the industry.

“While the oil and gas industry provides 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 contributes about 50 percent of the GDP. So, we need to make sure we make improvements” he added.

In his own contribution, African Region Director, Society of Petroleum Engineers (SPE), Prof. Wumi Iledare, tasks professional bodies to contribute to the development of local content by training younger professionals in the industry.“Universities must also be utilized 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,” says Iledare.