The Journey so far – The hope for the nation’s future
The clamour for Nigerians to take centre stage in industrialization and home-grown businesses is not new. In fact, as early as 1970s, Nigerians started seeking for the Nigerianisation of the strategic sectors of the economy, especially the Oil and Gas Industry.
This should not be a surprise considering that the Oil and Gas sector contribute about 70% of Nigeria’s gross earnings and about 40% of her GDP. The question is what percentage of the goods and services used in the industry are made and sourced internally? However, the signing of the Nigerian Oil and Gas Industry Content Development Act (the “Nigerian Content Act”) in April, 2010, brought hope for Nigerians.
Quite some time, all efforts at increasing local content (also known as Nigerian Content) were mere policy directives which lacked legal backing and political will, hence not taken seriously by most stakeholders. Unfortunately, as laudable as some of the achievements seem, the Act
is beleaguered by myriads of challenges.
The key concerns include poor monitoring and implementation which keen industry watchers say is rather disheartening five years after the passage of the Nigerian Oil and Gas Industry Content Development Act, 2010. However, it must be mentioned that since its implementation, about US$5 Billion of investment has been made in various forms of capacity building, a feat that cannot be ignored.
According to George Onafowokan, Managing Director/Chief Executive Officer, Coleman Wires and Cables Limited, the last five years of the Local Content Act for the Wire and Cable Industry has not been encouraging because the aspect of the law in reference to the cables and electric wires for low voltage production states “90 meters of every 100, must be locally purchased” has not been adhered to. Today, we have not met even 5% of the requirement”.
Onafowokan pointed out that the initial enthusiasm of the Government, Independent Oil Companies (IOCs) and stakeholders looking for local content solutions started waning within the first two years. For instance, we gave data on production capacities, cable specifications and audits but the whole process dragged for too long to the point of frustration. There are tactical reasons why NCDMB needs to actually push for effective implementation of Local Content to meet the target objectives of 90%”, he added.
In his submission, Mario Portaluppi, Managing Director, Nivafer Steel Construction Company Limited stressed that the scheme has the potential to create millions of jobs within and outside the oil sector in the coming years as it is geared towards increasing the domestic share of the US$18 Billion annual spending on Oil and Gas from 45% to 70%.
Portaluppi spoke further that the Local Content Law in the Oil and Gas Sector will bring change to the business landscape with more local firms raising funds and acquiring assets in the industry, getting involved with the legal work, acquiring the technical know-how and managing the resources. More Nigerians are now participating in the exploration and production of Oil, as well as fabrication, engineering and marine transportation. This has the potential to create wealth and raise the country’s GDP.
Although many of the stakeholders across all sectors have always championed the struggle for an increased participation of Nigerians in the Oil and Gas Industry, the challenge has been in finding the required in-country technical expertise which is inadequate at moment, leading to employment of many expatriates (foreigners) in Nigeria. Apart from the obvious human capacity gap, there is also a continuous misinterpretation of the Act leading to abuse and unrestrained use of contract staffing and casualization in key sectors.
In his view, Dr. Frank Jacobs, President, Manufacturers’ Association of Nigeria (MAN) described the level of success recorded so far by the Nigerian Content Development and Monitoring Board (NCDMB) as quite encouraging as some of his members already have benefitted by supplying Made-in-Nigeria goods to a number of projects. In addition, where irregularities were discovered with respect to importation of goods that are already Made-in-Nigeria by various IOCs, such issues have been addressed by NCDMB”.
According to Jacobs, the Local Content Act must be implemented and enforced in all sectors of the Nation’s economy. He sought to support the patronage of ‘Made-in-Nigeria’ products, especially with respect to big companies and multinationals with large purchasing requirements and award contracts. With a National Local Content Act in place, all companies must create the mind-set to patronize Made-in-Nigeria products and services for their operations and processes. In his words, such an Act will propel backward integration for manufacturing and provide the only viable way to grow the nation.
Although he admitted that there is much to be done, he said that MAN will not relent in its effort to see the full implementation and enforcement of Local Content across all sectors of the nation’s economy.
In his remarks, Rasheed Olaoluwa, Managing Director, Bank of Industry (BOI) fully agreed that the local content idea should not be restricted to the Oil and Gas Industry alone. It should permeate the entire economy, especially the manufacturing sector – a kind of economy-wide initiative. He added that it is high time Nigeria took certain deliberate measures to really begin to give the nation’s economy the needed impetus because at the end of the day, it is about the Nigerian national interest. Foreign producers cannot have interests that are fully aligned with the nation’s interest. The only way to actively promote and develop Nigeria national interest is when we have Nigerian companies, even if they are not fully owned but majority-owned by Nigerians, in the forefront of the key sectors like manufacturing, oil and gas, agro-processing, solid minerals, telecommunications, construction, amongst others’, he noted.
Experts maintain that Nigeria can get fully industrialised through a sound Local Content Act for the entire country. With a population nearing 200 million people, we have the purchasing potential to attract local industrialists and foreign partners to make investments in our Local industry. This will eventually become the impetus to develop Nigeria’s Economy and project its market as a forerunner in the ECOWAS region.
Speaking on how local content can enhance employment, Frank LeBris, the Managing Director, Nigerite PLC, said local production of goods means that the entire supply chain behind this is within the country and at each point, there are people involved. In addition, this practice will reduce overhead and logistics cost. Most importantly, it will trigger investment in new process and new machine.
He advised that it is paramount for the country to fully implement the Nigerian Content in all the sectors of the economy. Sadly, it appears that the country has waited for too long before making effort to industrialize outside the Oil and Gas Sector. Industrialization will encourage a lot of suppliers to contribute to technological advancement of the country, as well as, create huge employment. The bottomline is that the country needs high level education system in other to take her citizens off the streets hawking.
Just like several stakeholders, Portaluppi was confident that the implementation of the Act in the Manufacturing, Power, Construction, Agriculture and ICT Sectors will be a welcome development that will encourage local industry participation.
This conviction resonates with the MAN Local Content Group (MANLOC), a stakeholders’ platform for manufacturers to promote the ideals of the Federal Government of Nigeria initiative towards Local Content (Nigerian Content Act of 2010) and its further development into a national policy for the entire country whilst ensuring compliance to requisite standards.
MANLOC lists the benefits of full implementation of the Local Content to the entire country to include: creation of jobs; increase in FDIs; cultivation of inter-firm linkages; accessibility to technology transfer; building of human capital and physical infrastructure; generation of tax revenues for government; provision of a broader variety of products; enhanced services to consumers and other businesses; and savings of foreign exchange.
Vassily Oye Barberopoulos, Chairman, MANLOC Group, gave an insight into what he called his passion for the Nigerian Content said that it is tied to the passion for survival of Nigeria which is also tied to the survival and future of the people and the entire business community.
Today, there are over sixty countries worldwide that are practicing Local Content; from Oil and Gas to the entire sectors of their economies. Most of these countries are developing countries that recognized the need to feed their population, to give their citizens education and provide sustainable employment. However, all this can only be achieved through the industrialization of their countries.
Vassily explained that as government wants more local value creation, each of these contributions has multiplier effects on a country’s development. “Undoubtedly, trillions of dollars in goods and services will be procured over the next ten years in Nigeria by public and private companies for exploration and development of oil, gas and mineral resources, power generation, agriculture, transportation amongst others.”, he noted.
Also, these will include the purchase of associated manufactured equipment and components. The big question is “how much of these expenditures will be required to be discharged through purchasing locally provided human and material resources, goods and services made and provided in Nigeria – the country in which this expenditure is to be invested?”, he queried.
Olaoluwa said it is regrettable that many foreign producers bring in excessively high numbers of expatriate staff even in areas where higher technical skills (such as store-keepers, book-keepers, administrative clerk) are not required. This is happening in an environment where millions are unemployed. Although they have valid expatriate quotas approved by Nigerian officials, there must be a way to checkmate this. To him, apart from the local content, the entire economic management framework has to be coordinated and aligned.
If there is a policy that is meant to protect the local producers, different institutions of government must be well informed as regards what their duties and roles are in promoting national interest and protecting the local production. They must understand the impact of their action and how it undermines the national interest.
Jacobs stressed that “it is not necessary to ban foreign importation of products in order to protect the locally made brands provided there is a strong bias to buying Made-in-Nigeria goods. Currently, the European Union has come with an initiative to create the National Quality Infrastructure Project which is aimed at addressing the issue of quality and standards of products made in Nigeria to conform to the international standard. This initiative is aimed at ensuring that Nigerian products become competitive globally”.
He expressed concern that in order to effectively implement Local Content there is need for adequate publicity and awareness to canvass for sincerity of purpose amongst Nigerians. This enlightenment must be championed by the Federal Government and all stakeholders if local content is to become a success.
In the same vein, Vassily submitted that there is the need for a conscientious political will, as well as, a clear and genuine mindset from all stakeholders (not only the MDAs) in our economy. These stakeholders include developmental institutions, banks such as the Bank of Industry (BOI), multinational corporations, private companies, focus groups and associations like the Manufacturers Association of Nigeria (MAN), Nigerian Employers Consultative Association (NECA), Non-Governmental Organisations (NGOs), everybody must have the same zeal to push, promote and make local content work. In particular, big corporations must promote their Corporate Social Responsibility with a reasonable Local Content bias that will promote sustainability in employment and add value to the economy. There must be a legal framework that will explain how the policy will be administered. In addition, we need to fund the institutions of government that will be in charge of the policy”. MAN/MANLOC Group has been working on some potential blueprints with respect to making Local Content for the entire Nigerian Economy.
Vassily further warned against the present initiative whereby many sectors of the economy are looking to “create” their own Local Content strategy independently from each other. This will lead to lack of national focus, cohesiveness in actions, waste of time, effort and funds. It will be like using different “currencies” for different sectors in the same economy. There is need to have an apex organisation coordinating all efforts.
In conclusion, Jacobs urged Nigerians to look inward and buy ‘Made in Nigeria’ products as a first consideration. By so doing, Nigerians are inadvertently improving the economy, creating jobs and empowering the teeming population.
Olaoluwa shared the same sentiments when he implored the general public on the need to understand that the country cannot become industrialized and the economy may not develop at the expected pace we want unless we learnt to produce what we consume and consume what we produce. This has become even more imperative at this time, with dwindling revenue from Oil and Gas, to perfect the Nigerian Content Law and expand it to cover other sectors of the economy. On this note, the country can ultimately overcome the consequences of many years of over-dependence on black gold.
The most effective way to perfect any law is to ascertain that appropriate and sufficiently deterrent sanctions are applied when the law is contravened and we encourage NCDMB along with other authorized government agencies to continue strengthening the laws by tenaciously exercising the powers bestowed on them equitably until the goals of the NOGICD Act are fully achieved.
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