The Local Content Law and It’s Effect on Job Creation
CHAPTER ONE
Research Objectives
The study seeks to provide a comprehensive assessment of local content law and its significance for job creation. Specifically, the study seeks;
- To assess effectiveness in the enactment and the execution of the Local Content Legislation in Nigeria’s petroleum sector in fulfilling its intended
- To examine the significance of Local Content Law on job creation in capital oil and gas limited.
- To investigate the extent to which Nigerians are participating in the Upstream Oil and Gas
CHAPTER TWO
LITERATURE REVIEW
Local Content Policies/Laws in Nigeria
Local content is the added value brought to a host nation (and regional and local areas in that country) through the activities of the oil and gas industry. This may be measured (by project, affiliate, and/or country aggregate) and undertaken through:
Workforce development:
- Employment of local workforce
- Training of local work force Investments in supplier Development:
- Developing supplies and services locally
- Producing supplies and services locally
Local content development is not a new concept in Nigeria. At the international level, the concept have been applied by oil and non-oil producing countries. The local content bill in the Nigerian oil and gas industry, as passed and signed into law by the national assembly and the presidency, is not the first attempt to indigenize economic activities in Nigeria.
It will be recalled that in 1976, the indigenization policy was passed, the nationalization policy and even the attainment of independence as a sovereign nation itself, were all aimed at giving total or greater opportunity to Nigerians to manage their own affairs and take their destinies in their hands.
We postulate that entrepreneurial activities may be influenced by external factors. Such external influence is often seen in the form of government intervention in an economic sector, such as encouraging local entrepreneurship. This has been identified in previous studies (Abdulkabir et al., 2015 and Radosevic and Yoruk, 2013).
In the oil and gas industry, various attempts have been made at ensuring a greater participation of the indigenes in the operations in the industry, such attempts include the Petroleum Act of 1969, and the Nigerian Content Directive by the NNPC in 1976.
The Nigerian Oil and Gas Development Law 2010 defines local content as the quantum of composite value added to or created in Nigeria through utilization of Nigerian resources and services in the petroleum industry resulting in the development of indigenous capability without compromising quality, health, safety and environmental standards.
CHAPTER THREE
RESEARCH METHODOLOGY
Sampling Procedure and Sample Size
In choosing the sample size for the study, consideration was given to the selected company; capital oil and gas, based on their overall number of workers. Sampling technique is used to select respondents from capital oil and gas. Additionally, the study adopted a purposive sampling approach, which is a non-probability sampling technique, is used to select respondents who deal directly respondents. This was favourable for the researcher as it aids in exploring cases of only typical cases based on the objectives of the study; the time frame also contributed to the choice. The research focused on a sample of 31 respondents, which was chosen from the selected population of various stakeholders in capital oil and gas. These respondents were categorised into three broad distinction. These were law makers, the implementers and the beneficiaries. This enable the researcher obtain relevant and divers information’s from different respondents for the purpose of the study.
CHAPTER FOUR
DATA ANALYSIS AND DISCUSSION OF FINDINGS
Demographic Characteristics of Respondents
1. Law Makers
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
Summary of Findings
The study sought to provide a comprehensive assessment of local content law and its significance for job creation in the oil and gas industry in Nigeria. The following objectives were developed to arrive at conclusive results: to assess effectiveness in the implementation of the Local Content Legislation in Nigeria’s oil and gas sector in fulfilling intended goals and objectives. Also, the study probe further to evaluate the significance of Local Content Law on job creation in the Oil and Gas Industry in Nigeria, to investigate the extent to which Nigerians participate in the Upstream Oil and Gas Industry and to find out if there are other best practices of local content in the Upstream Oil and Gas Industry. From this the following results were found:
Effectiveness in the implementation of Local Content Legislation in Nigeria’s oil and gas sector
The findings revealed that respondents were privy to the existing local content law regulations and its relevance to achieving efficiency and effective management of the oil and gas sector in Nigeria. Again, the researcher found out that procedures were effectively laid down in implementing the local content legislation in the oil and gas sector in Nigeria. These procedures had been developed from the Research and Development, legislative instruments backed by the laws of Nigeria and involved training and succession and the periodic assessment of Compliance by the Petroleum Commission. Although some positions with the major MNCs have been successfully been transitioned to Nigerians, for example, the Managing Director positions in Tullow Nigeria and Kosmos Energy are now occupied by Nigerians, Expatriates till hold critical positions that can be easily be filled by Nigerians.
These implementation programmes, according to law makers were feasible as Forty percent (40%) of the law makers strongly agreed to the assertion made on processes in implementing the Local Content Legislation
Further, with the introduction of the local content law on foreign investment in Nigeria, the impact of the law was also examined. The analysis revealed that forty percent (40%) of the law makers believed that foreign investment had increased, this is constant with the findings of Ojide et al investigating the impacts of Foreign Direct Investment in oil sector in Nigeria and its attendant impact on economic growth. The study indicated that employment have increased tremendously as a result of the introduction of the local content law in Nigeria. This is because the findings again revealed that the clause in the local law that disclosed that foreign companies are supposed to form a joint venture partnership with an indigenous company before they are allowed to operate affected the interest of the foreign investors.
Extent to which Nigerians participate in the Upstream Oil and Gas Industry The findings revealed that Nigerians are currently participating in the upstream oil and gas industry through employment, JV partnership, supply of goods and services and through sub- contracting.Again, the findings revealed that the employment aspect of the local content law was working very well. This was so with the indigenous in block acquisition as well as the policies on JVs, CSRs and capacity building of individuals were working very
However, with the improvement of an aspect of the local content law fifty-five percent (55%) of the law makers believed that the financing of local companies to partake in JV partnership is an aspect of the local content law that needs improvement as it results to most Nigeriaian companies fronting for foreign companies which is not beneficial to the Nigerian economy.
Best practices of local content in the Upstream Oil and Gas Industry known to Nigerians
Finally, with the other best practices of the local content in the upstream oil and gas industry, the findings revealed that thirty-six percent (36%) of the law makers were aware of the Norwegian local content law with a report of eighty-three percent (83%) cases. Twenty- nine percent (29%) of the lawmakers were aware of the Nigerian Local Content law with sixty-seven percent (67%) reported cases. Followed by fourteen percent (14%) who were aware of the local content requirement with thirty-three percent (33%) reported cases. And another fourteen percent (14%) who were aware of the local content for Kenya with another thirty- three percent (33%) reported cases. Finally, seven percent (7%) of the law makers were aware of the provision of financial assistance to indigenous Nigeriaian companies with seventeen percent (17%) reported cases. This in effect fosters best behaviours within the industry.
Conclusions
The discovery of oil and gas at the Jubilee Field in 2007 has heightened expectations for the transformation of the economy by the oil revenues; while others have expressed caution due to the negative effect of oil in other oil producing African countries like Nigeria and Angola. The oil find has since increased investor interest and attracted huge financial inflows for development attracting more MNCs to engage in the oil and gas business. This establishes the link between oil and development.
As the local content law appears to remain a significant issue in driving the development of Nigeria and increase the influx of foreign investment, the study sought to provide a comprehensive assessment of local content law and its significance for job creation in the oil and gas industry in Nigeria. Therefore, the following objectives were developed to arrive at conclusive results: to assess effectiveness in the implementation of the Local Content Legislation in Nigeria’s oil and gas sector in fulfilling intended goals and objectives. Also, the study probed further to evaluate the significance of Local Content Law on job creation in the Oil and Gas Industry in Nigeria, to investigate the extent to which Nigerians participate in the Upstream Oil and Gas Industry and to find out if there are other best practice of local content in the Upstream Oil and Gas Industry.
With the use of a qualitative methodology through the aid of a well-structured open and closed questionnaire, the study found out that respondents were privy to the existing local content law regulations and its relevance to achieving efficiency and effective management of the oil and gas sector in Nigeria. Again, the researcher found out that procedures were effectively laid down on how to implement the local content legislation in the oil and gas sector in Nigeria. These procedures had been developed from the Research and Development, legislative instruments backed by the laws of Nigeria and involved training and succession, periodic assessment of compliance by the Petroleum Commission. Further, the findings revealed that the introduction of the local content law increased the level of foreign investment in Nigeria The findings revealed local participating in the upstream oil and gas industry has improved through various mechanisms such as employment, JV partnership, supply of goods and services through sub-contracting. Finally, with the other best practices of the local content in the upstream oil and gas industry, the findings revealed that significant number of respondents were privy to the Norwegian local content law, Nigerian Local Content and the local content for Kenya. These in effect fosters best behaviours within the industry as Nigeria’s Local Content Law is quite similar to the Norwegian and the Nigerian Local Content Policies.
In summary, the study based on the hypothesis that “There has not been any significant fulfilment of the intended goals and objectives of the Local Content Legislation in Nigeria’s Oil and Gas Industry”. This study sought to agree to the hypothesis since the inception of the local content law, the local content fund has only been proposed and therefore the maximum penetration and involvement by the indigenous companies in Nigeria still struggle to compete vigorously with foreign investors thus end up in fronting most foreign companies. Also, some Expatriates still hold critical positions in MNCs eventhough there are qualified Nigerians who could occupy those positions. An example of such jobs is the Drilling Manager; GNPC Scholarships has sent a number of Nigerians abroad for training purposes in Universities such as Aberdeen University, Heriot-Watt University, Robert Gordon University and Dundee University, those Nigerians can easily occupy these critical positions since they have been trained by world class oil and gas universities.
As the Local Content Law is currently under review, it suggests government’s initiate to strengthen the law implementation to safeguard foreign investments, job creation, technological transfer and effectively regulate the activities of the industry and enhance progress within the sector and thus increasing investments.
Recommendations
From the study findings, the researcher suggests the following recommendation for law implementation.
- Establishment of local content funds to support indigenous SMEs to enhance their competitiveness vigorously in the industry with their foreign counterpart thus increasing the participation of Nigerians in the oil and gas industry and eliminating fronting of foreign companies is
- The local content law should be strengthened such that foreign investors and local industryplayers so that unnecessary expectation would be reduced to avoid any conflict between Also, locals should be encouraged to take advantage of this law so as to improve upon the competitiveness within the industry. This would reduce the over dominance of the foreign investors and increase economic growth.
- A temporal Petroleum Commission license should be introduced for short term opportunities i.e. to make it more attractive for smaller foreign investors as administrative charges for setting up are quite expensive, therefore, foreign investors couldwork on a onetime opportunity for a duration that is less than a Having more smaller foreign investors means that more Nigerians companies would get the opportunity to work with these companies and gain more expertise rather than these smaller investors working through the foreign companies already existing in the country.
- There should be mechanisms in place to monitor the training and succession programmes of MNCs to ensure Expatriates that have occupied critical positions for number of years should be transitioned to qualified
- As this study focused heavily on a comprehensive assessment of local content law and its significance for job creation in capital oil and gas limited in Nigeria, it is imperative that future studies would also consider touching the impact of the local content law on economic growth and development within the
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