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…our expectation is a legal framework to strengthen local content in the oil and gas sector and extend the initiative to other sectors – C’ttee Chairman
Former Minister of State, Ministry of Petroleum Resources, Odein Ajumogobia on Wednesday said if the Local Content Development Enforcement Bill 2020 is passed into law, it will boost job creation in Nigeria.
TheNewsGuru.com (TNG) reports Ajumogobia stated this at a two-day webinar entitled “Nigerian Content Summit 2020” that was hosted by the joint committee of the National Assembly (NASS) Chambers Chairmen on Local Content.
Speaking at the webinar, Ajumogobia said, “If the Bill is passed it can increase local content and can lead to job creation, boost domestic private sector and facilitate technology transfer and build a competitive local work force”.
Ajumogobia, who is also a former Foreign Affairs minister said, “the local content policy has been very successful in the oil and gas sector and it is time that the robust gains we have seen in the oil sector to be extended to the economy at large and that is what precisely the Nigerian content development enforcement bill 2020 seeks to do.
“However local content goals are also unfulfilled, and even in the oil and gas sector there are goals that are easy to achieve and the opportunities are not always captured.
“For example local content provisions in this bill specifically requires investors to meet certain targets, restrict them from certain areas of activities, issues of the type of investments they can make, partnership with local partners and so on, ownership of joint ventures, equipments they can and cannot supply and jobs created.
“Now if the targets in the law are too high, then they may scare away investment or remain unmet, as investors accept the fines that are stipulated or seek local legal loopholes, which obviously is not desirable.
“On the other hand if they are too low, the country will not maximise potential leakages. I am saying this to highlight the importance of framing the local content provisions in our laws. Targets and other local content objectives must be carefully quantified and adapted to local context and collaborative because local content is context specific.
“For example there is a provision that says a stipulated benchmark of 40% for subcontractors, perhaps the whole Nigerian economy this may need to be reviewed in terms of capacity.
“The implications of the bill includes the following; on the objectives and terms of the draft bill clearly and properly articulated.
“Would the draft bill do what it sets out to do, can it meet the objectives of those stipulated goals articulated in the bill enough to achieve what we seek and are they realistic. Could there be unintended consequences.
Using slides, he explained that “this bill seeks to set up a local content legal framework for everything other than oil and gas. Now clearly on the face of it, if there is no conflict with the oil and gas local content bill.
“However as we all know the oil and gas is very broad and there are companies that are not oil and gas in their orientation but provide services to oil and gas; catering would be an example.
“Now does the law take into account those overlaps in terms of activities in the industry for local content. Are there gaps or overlaps or conflicts without the laws? There are a few references to internal affairs, NIPC, NOTAB and so on.
“These are all areas that should concern us in ensuring that the new law is consistent with existing laws even though there is a provision for superiority.
“Now this law seeks to simply put into legal hold the executive order three and five 2017 and 2018 respectively made by the President on the respect of science and technology, engineering component specifically and the procurement of goods and services. In general terms, the bill is welcomed and overdue.
“The title of the bill I think could better reflect its broader but still limited ambit, section one excludes oil and gas. While I would suggest something like the Nigerian content non oil sector development and enforcement bill, to make it distinct from the existing bill that we discussed yesterday and by saying non oil sector you have clearly delineate its purpose without any further explanation.
“The bill clearly elevate local content to the highest level of government by creating a local government content development committee headed by the vice president to drive the policy on local content.
“And the fact that this committee comprise some of the ministers in some of the key ministries, Finance, information communication technology, power, science, technology..
“But again back to the database, the database should drive the percentages, it should also drive the applicability of this limits in the law.
In conclusion, the overriding goal is to extend to the non-oil sector scene, the local content in that sector to the overall sector for economic development, job creation and national security.
It will also reduce employment pressure on government through the enhancement of job creating mechanism even in the private sector.
Just as we saw in the oil and gas sector, the increase domiciliation of value added activity in country that is what drove the local content policy and law in the oil and gas sector and like we heard yesterday the savings of about 2billion dollars on one project by domesticating some of the expenditures in the oil and gas sector and the oil and gas sector represents only a small percentage of our GDP and you can imagine if this is don’t as regards to surfaces which has much higher percentage of GDP and manufacturing which is another sector of GDP.
The strengthening of the legislature-executive partnership for local content is critical. The executive took the lead with regards to number oil sector by the executive order passed by Mr President and this legislation sakes to put a legal framework around it and create the platforms on which enforcements can take place.
One of the unintended consequences that I wish to reiterate is local content and foreign direct investment are not mutually incompatible. So they have to make sure that the bill in its provisions especially the penalty provision do not discourage FDI in the bid to try and increase local capacity, this can be done through incentives and other mechanisms to ensure that the objectives of the bill are realised.
I talked about one or two gaps, qualification and experience of the staffs to be appointed as director, in the bill as it stands it is left entirely to the discretion of the minister which directors in the ministry succumb to head the local content department.
“The database provision I have spoken about, on funding the bill provides for 20% to be used for administrative activities. The 80% is …in its application and I think we can learn lessons from the oil and gas experience to see how they apportioned the funds that they have to ensure that the funds are used to increase local content capacity and development. Capacity especially because that is where the bottleneck may lie.
“It is not surprising that the bill focuses on public sector procurement and I think that is a good way to begin and obviously at some point it may be extended to the private sector organizations as well.
“But public sector expenditure is probably the largest across the economy. So therefore it is successful in the public sector expenditure procurement and so on, we would have come a long way in ensuring that the objectives of the bill are met.
“I think the bill should have a schedule perhaps this could be contained in the database of reasonable target for material, services, labour requirements in each of the non oil sectors in order to better plan and execute capacity building initiatives and to close any gaps that there are.
“Just to say that the bill is timely, and when COVID-19 exposed the vulnerability of the Nigerian economy and there is desperate need for us to look inward and there are a lot we can do in-house as it were without outsourcing.
“This is an opportunity for us to deliberately articulate those capacities that we have and ensure that those capacities are utilized.
“CBN should improve access to single digit financing. If the 1%, 0.5% or 1.5% whatever percentage is finally determined and it is utilised properly I suspect that just as we have in the oil and gas sector a large fund from which clients can access funding this will also help.
“Infrastructures as I highlighted, railway, power, roads to improve the environment and enhance competitiveness because it is critical for us to be competitive. Perhaps provide incentives for indigenous companies to provide manufacturing hubs.
“The unintended consequences need to be addressed in order to meet the objectives of the Act.
Earlier in his remarks, Chairman Senate Committee on Local Content, Senator Teslim Folarin said:
“We had meaningful discussions yesterday on understanding the immediate and wider implications of the proposed Nigerian Oil and Gas Industry Content (NOGICD) Amendment Bill (2020) and the importance of building strong and viable institutions.
The expert and brilliant presentations by the Executive Secretary, NCDMB, Engr. Simbi K. Wabote and Hon. Justice Nelson Ogbonnaya, Justice of the Industrial Court, elicited vibrant contributions from all participants. Their presentations have enhanced our knowledge and allowed us to share different opinions on a common platform.
The panel discussion that followed thereafter afforded us to get inputs from key stakeholders in the oil and gas sector that will inform our decision to fine tune the bills. We are all aware that the bills are still at the proposal stage therefore, your useful comments will aid the Committees in the passage of the Bills.
Today, we will be expanding the Nigerian Content possibilities through legislations to allow other sectors of the economy accrue benefits arising from effective National Content Development and Management. We have experts from the key sectors of the economy who will be sharing their thoughts, knowledge and opinions with the rest of us. We hope to also have a comparative study of local content from another country and learn lessons from their experiences.
The major outcome that we expect from this summit is a legal framework to strengthen local content in the oil and gas sector and extend the initiative to other sectors of the economy to develop capacity and capabilities of Nigerians.
In conclusion, I would like to thank all the participants who have attended this summit. I encourage you to participate effectively in all discussions for today. I wish everyone a successful and fruitful summit.
The summit was moderated by Jimmy Ahmed.