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Nigeria's National Content Bill: The Hype, the Hope and the Reality

Published online by Cambridge University Press:  03 March 2011

Abstract

Nigeria's recent efforts to pass local content legislation with stringent targets and stiff penalties have drawn widespread attention, spurred ongoing debate and prompted numerous international workshops and seminars. Lack of local content has been blamed for high unemployment and lack of capacity, and even been linked to militancy in the Niger Delta region. After much debate and delay, the bill has become law. This article reviews the bill's history and tracks the hype surrounding Nigeria's moves towards a legislative mandate. It discusses the provisions of the bill, observing that it is poorly drafted, vague and therefore difficult to comply with. The bill could also violate international agreements, such as bilateral investment treaties and GATT, and is unnecessary in the face of contractual alternatives that could be successfully utilized to enhance local content. Contract models contain ample provisions for enabling local content and have been successfully employed by other resource-rich nations.

Type
Research Article
Copyright
Copyright © School of Oriental and African Studies 2011

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References

1 J Bogan “Reliable Angola?” (27 July 2009) FORBES, available at: <http://www.forbes.com/2009/07/27/angola-oil-nigeria-business-energy-china.html> (last accessed 27 August 2009).

2 Revenue Watch Institute (2009), available at: <http://www.revenuewatch.org/our-work/countries/nigeria-extractive.php> (last accessed 27 August 2009).

3 MM Olisa Nigerian Petroleum Law and Practice (2nd ed, 1997, Fountain Books Ltd) at 122.

4 Ibid.

Ibid

5 Ibid.

Ibid

6 Of the 22 blocks offered in 2000, 11 were deep offshore, seven in shallow waters and four onshore. There were no bids for the shallow or onshore concessions. See “The significance of the Bonga offshore oil platform attack” (25 June 2008) The Oil Drum, available at: <http://www.theoildrum.com/node/4196> (last accessed 20 September 2009).

7 Revenue Watch Institute, above at note 2.

8 The World Bank “Nigeria country brief”, available at: <http://go.worldbank.org/FIIOT240K0> (last accessed 27 August 2009).

9 Ibid.

Ibid

10 See NNPC's website, available at: <http://www.nigcontent.com/index.php?option=com_content&task=view&id=12&Itemid=50> (last accessed 27 August 2009).

11 HO Ajumogobia, speech at the Nigerian Content Consultative Forum (20–21 October 2008) (copy on file with the author).

12 Ibid.

Ibid

13 See the definition on NNPC's website at: <http://www.nigcontent.com/index.php?option=com_content&task=view&id=12&Itemid=50> (last accessed 20 December 2010). This definition was adopted in sec 106 of the Nigerian Content Development Bill 2010.

14 INTSOK (Norwegian Oil and Gas Partners) “Enhancement of local content in the upstream oil and gas industry in Nigeria” (August 2003), available at: <http://bora.nhh.no/bitstream/2330/262/1/R25_03.pdf> (last accessed 20 December 2010). This study was commissioned by the Norwegian Agency for Development Cooperation and the Norwegian Ministry for Petroleum and Energy and executed through INTSOK, within the context of a memorandum of understanding signed between the governments of Norway and Nigeria.

15 GU Nwokeji “The Nigerian national petroleum corporation and the development of the Nigerian oil and gas industry: History, strategies and current directions” (paper presented at the James A Baker III Institute for Public Policy, Rice University, March 2007), available at: <http://www.rice.edu/energy/publications/docs/NOCs/Papers/NOC_NNPC_Ugo.pdf> (last accessed 28 September 2009).

16 S Olukoya “The slippery business of Nigeria's oil” (3 April 2004) The Mail & Guardian (quoting Funsho Kupolokun, former group managing director of NNPC), available at: <http://www.mg.co.za/article/2004-04-03-the-slippery-business-of-nigerias-oil> (last accessed 28 September 2009).

17 Ibid.

Ibid

18 B Udo “Oil industry gets deadline on local content” (25 March 2004) Daily Independent Online, available at: <http://news.biafranigeriaworld.com/archive/2004/mar/25/0127.html> (last accessed 20 December 2010). See also Olukoya “The slippery business of Nigeria's oil”, above at note 16.

19 See sec 2 of the Nigerian Content Development Bill, 2003.

20 See id, sec 4.

21 See id, sec 5.

22 See id, sec 6.

23 See id, sec 8.

24 See id, sec 12.

25 See id, sec 13.

26 See id, sec 14.

27 See id, sec 16.

28 NNPC “Nigerian content implementation framework”, available at: <http://www.nigcontent.com/index.php?option=com_content&task=view&id=30&Itemid=57#> (last accessed 28 September 2009).

29 Ibid.

Ibid

30 See NNPC “Directives & regulations”, available at: <http://www.nigcontent.com/index.php?option=com_content&task=view&id=29&Itemid=56&limit=1&limitstart=1> (last accessed 27 August 2009).

31 J Nse and F Oparaugo “NNPC insists insurance industry lacks capacity to underwrite oil, gas sector” (16 July 2009) The Guardian, available at: <http://www.ngrguardiannews.com/insurance/article01//indexn3_html?pdate=160709&ptitle=NNPC%20insists%20insurance%20industry%20lacks%20capacity%20to%20underwrite%20oil,%20gas%20sector&cpdate=190709> (last accessed 27 October 2009).

32 E Wikina “The scope of Nigerian content in the oil & gas industry” (paper presented at the Nigerian Society of Engineers Workshop, 5 December 2007), available at: <http://www.nigcontent.com/index.php?option=com_docman&task=doc_view&gid=10> (last accessed 21 September 2009).

33 Ibid.

Ibid

34 Ibid.

Ibid

35 I Obi “Nigeria's oil industry: Between nationalism and skills gap” (1 September 2009) Businessdayonline, available at: <http://www.businessdayonline.com/index.php?option=com_content&view=article&id=4794:nigerias-oil-industry-between-nationalism-and-skills-gap&catid=117:news&Itemid=349> (last accessed 27 October 2009).

36 P Chukwu, group executive director, exploration & production, NNPC (opening remarks at the Human Capital Development Workshop, 29–30 April 2009) (copy on file with the author).

37 See secs 71 and 112 of the draft Nigerian Oil and Gas Industry Content Development Bill.

38 Id, sec 70.

39 Id, sec 37.

40 Id, sec 14.

41 Id, sec 15.

42 Id, sec 25.

43 Id, secs 46 and 47.

44 Id, sec 37.

45 Id, sec 34.

46 Id, sec 27.

47 Id, sec 49.

48 See Nigeria's Petroleum Industry Draft Bill 2009, available at: <http://www.nnpcgroup.com/petIndsBillDocs/PIBDrapftBill2008.pdf> (last accessed 27 October 2009).

49 The Nigerian Oil and Gas Industry Content Development Bill 2010, available at: <http://www.ncdmb.org/> (last accessed 10 September 2010). Although the act reflects the acting president's signature on 29 March 2010, the Nigerian Content Development and Monitoring Board and the Nigerian government state that it was actually signed on 22 April 2010. See the board's press release: “Jonathan inaugurates Nigerian Content Governing Council”, available at: <http://www.ncdmb.org/press1.php> (last accessed 9 September 2010).

50 Id, sec 4.

51 Id, sec 104.

52 Id, sec 2.

53 Id, sec 3.

54 Id, sec 106.

55 Id, sec 7.

56 Id, sec 10.

57 Id, secs 65 and 66 (emphasis added).

58 Id, sec 60.

59 Id, sec 43.

60 See id, sec 106, defining a “Nigerian company” as a “company formed and registered in Nigeria … with not less than 51% equity shares [sic] by Nigerians”.

61 Id, sec 45.

62 Id, sec 47 (emphasis added).

63 Id, sec 25.

64 Id, sec 26.

65 Id, sec 27.

66 Id, sec 51.

67 Id, sec 11(1).

68 Ibid. See sched to the Act.

Ibid

69 Id, sec 28.

70 Id, sec 30.

71 See id, secs 7–9.

72 Id, secs 8 and 9.

73 Id, sec 9.

74 Id, sec 70.

75 Id, sec 100.

76 Id, sec 70(b).

77 Id, sec 72. See the inclusion of a representative of the DPR, Emmanuel Kpenwin Bekee, amongst the representatives on the Board's Governing Council: <http://www.ncdmb.gov.ng/init.php> (last accessed 12 September 2010). According to NNPC's website, the NNPC established the Nigerian Content Consultative Forum, which generally comprises representatives from the Nigerian Society of Engineers, oil and gas industry, organized private sector, bankers committee, etc. “Each forum holds monthly working sessions for respective industry sectors to obtain input and feedback for planning and implementing the Nigerian Content agenda”. See: <http://www.nigcontent.com/index.php?option=com_content&task=view&id=49&Itemid=71> (last accessed 12 September 2010). The Petroleum Technology Association of Nigeria is “an association of Nigerian Indigenous Technical Oilfield service companies in the upstream and downstream sectors of the Oil Industry”. It was formed, to “acquire, develop, advance and promote Petroleum Technology for the benefit of Nigerians”. See: <http://www.petan.org/about_us.html> (last accessed 12 September 2010). The National Insurance Commission and the Council of Registered Engineers of Nigeria respectively accredit and regulate insurance and engineers in Nigeria.

78 Id, sec 72.

79 Ibid.

Ibid

80 Id, sec 1.

81 Id, sec 3.

82 Id, sec 106.

83 Transparency International Global Corruption Report 2009: Corruption and the Private Sector (2009, Cambridge University Press), available at: <http://www.transparency.org/publications/gcr/gcr_2009> (last accessed 10 December 2010).

84 See the Act, sec 90(1).

85 Operators need to be wary not to breach anti-corruption laws, such as the US Foreign Corrupt Practices Act.

86 Dr Rilwanu Lukman, then minister of petroleum resources (keynote address on the proposed petroleum industry bill, 16 July 2009), available at: <http://www.nnpcgroup.com/petIndsBillDocs/SpeechByHonorableMinisterToIndustry.pdf> (last accessed 27 October 2009).

87 See Petroleum Act of 1969 (chap 350, Laws of the Federation of Nigeria, 1990) (Petroleum Act), available at: <http://www.nigeria-law.org/Petroleum%20Act.htm> (last accessed 27 August 2009).

88 See sec 403(a) of the draft PIB, above at note 48.

89 Clause 3.1 of the 1993 PSC.

90 Dated 30 October 1947; available at: <http://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm> (last accessed 10 December 2010).

91 Available at: <http://www.wto.org/english/docs_e/legal_e/18-trims_e.htm> (last accessed 10 December 2010).

92 These are the BITs available on the International Centre for Settlement of Investment Disputes website: <http://icsid.worldbank.org> (last accessed 27 October 2009).

93 See the Nigeria-UK BIT, available at the United Nations Conference on Trade and Development website: <http://www.unctadxi.org/templates/DocSearch_779.aspx> (last accessed 27 Oct. 2009).

94 See clause 6 of Nigeria's 1993 model PSC.

95 Id, clause 8.

96 Under clause 3.1 of the 1993 PSC, recoverable “operating cost” means “expenditures made and obligations incurred and approved by NNPC in carrying out petroleum operations”.

97 “Nigeria: The local content challenge” (4 February 2009) The Daily Trust (editorial), available at: <http://allafrica.com/stories/200902040383.html> (last accessed 27 August 2009).

98 Y Lawal and J-A Ogbodo “Woes hit nation's oil sector” (24 November 2008) The Guardian, available at: <http://www.ngrguardiannews.com/news/article01/indexn3_html?pdate=241108&ptitle=Woes+hit+nation's+oil+sector&cpdate=241108> (last accessed 27 August 2009).

99 Ibid.

Ibid

100 O Gabriel and H Igbikiowubo “Local content policy failure: $6.2bn oil investments at risk” (24 November 2008) The Vanguard, available at: <http://allafrica.com/stories/200811240002.html> (last accessed 27 August 2009).

101 J Nse and F Oparaugo “NNPC insists insurance industry lacks capacity to underwrite oil, gas sector” (16 July 2009) The Guardian, available at: <http://www.ngrguardiannews.com/insurance/article01//indexn3_html?pdate=160709&ptitle=NNPC%20insists%20insurance%20industry%20lacks%20capacity%20to%20underwrite%20oil,%20gas%20sector&cpdate=190709> (last accessed 27 October 2009).

102 P Saghana “Oil and gas insurance: Still some grounds to cover” (25 July 2009) Vanguard, available at: <http://www.vanguardngr.com/2009/07/25/oil-and-gas-insurance-still-some-grounds-to-cover/> (last accessed 27 October 2009).

103 P Saghana “Insurers accuse NNPC of sabotaging local content policy” (23 November 2006) Legal Oil News, available at: <http://www.legaloil.com/NewsItem.asp?DocumentIDX=1165175268&Category=news> (last accessed 28 September 2009).

104 Y Lawal and T Hassan “NNPC loses control of local content project” (5 August 2009) The Guardian, available at: <http://www.ngrguardiannews.com/news/article01//indexn3_html?pdate=050809&ptitle=NNPC%20loses%20control%20of%20local%20content%20project&cpdate=050809> (last accessed 27 October 2009). The newspaper cites an unnamed NNPC senior manager as stating that, while much success was achieved in the past seven years in local content, “since the inception of this administration, less attention had been given to the policy with many jobs that could be handled by Nigerian firms being handled by South Korea, Malaysia and Singapore”.

105 Ibid.

Ibid

106 HK Nordas, E Vatne and P Heum “The upstream petroleum industry and local industrial development: A comparative study” (report by the Institute for Research in Economics and Business Administration, Bergen: SNF report no 08/03).

107 Id at 38–39.

108 Ibid.

Ibid

109 Id at 28.

110 See model PSC Between The Republic of Equatorial Guinea and Guinea Ecuatorial De Petroleos and [company], available at: <http://www.equatorialoil.com/pdfs/Model%20PSC_2006_English.pdf> (last accessed 21 September 2009).

111 See sec 81 of the Act. According to the Board's website, Engr Ernest Chu Nwapa is its executive secretary; see <http://www.ncdmb.gov.ng/govc.php> (last accessed 12 September 2010).

112 See Engr Nwapa's profile on the Board's website: <http://www.ncdmb.gov.ng/govc.php> (last accessed 12 September 2010). NNPC drafted the NCD Bill, the earlier version of the Act.

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