Nigeria’s acting leader signs local content oil bill


Nigeria’s acting president signed into law an oil industry bill that gives domestic firms priority in the award of oil blocks and requires foreign companies to hire more local workers.

The OPEC member hopes the new law will help provide domestic job growth to its 140 million citizens, who have seen little tangible benefit in their daily lives in the five decades since oil was first pumped.

Industry experts estimate that Nigerian content in the oil and gas sector is around 40%, indicating that most white-collar jobs, engineering, materials and maintenance work are provided by foreign workers and overseas suppliers.
“This bill seeks to address the compelling need for us as a nation to have indigenous participation in the industry,” Acting President Goodluck Jonathan said at a bill signing ceremony in the capital Abuja.

Nigeria’s new oil minister, Deziani Allison-Madueke, said the law had the potential to generate more than 30 000 jobs over the next five years.

The law is likely to be a boon for local firms, such as Oando, which has been investing in oil exploration and production over the last few years to try to diversify its low-margin fuel distribution business.

Nigerian banks, like First Bank, are also likely to benefit since the law requires multinational firms to keep at least 10 % of their profits in local accounts.
“There shall be exclusive consideration to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute jobs in the Nigerian oil and gas industry,” Jonathan said.

Home-grown bias

Domestic oil companies looking to bid on oil licenses or blocks will be given priority, and will not be disqualified even if their bid for a contract is 10% higher than others.

The law also lists in minute detail the number of materials, employees and services that must come from Nigeria to operate in the country.

For example, it says 65 percent of divers in energy projects must be Nigerian and 60 percent of steel ropes made by local firms.

Foreign oil companies, like Royal Dutch Shell and Exxon Mobil, will have to submit a regular report to the newly created Nigerian Content Monitoring Board on how they are in compliance.

Finding the local resources and employees to meet these new requirements is likely to prove difficult.

Educational standards have fallen sharply in Africa’s most populous country since the mid-1980s. Its once proud universities are a shadow of their former selves and those who can afford it prefer to study in Europe or the United States.

Aside from a lack of skills training, Nigerian manufacturing has been crippled by poor infrastructure. Intermittent mains power supply and high operating costs mean much of the equipment needed in the oil sector cannot be locally produced.