Implementation of Local Content Initiatives to Stimulate Economic Growth

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The promotion of indigenous participation within the Oil and Gas sector has been at the fore front of governmental initiatives for over a decade, with steps taken in the year 2010, to provide regulation within the Oil and Gas sector through the enactment of the ‘Nigerian Oil and Gas Industry Content Development Act’ also referred to as the ‘Local Content Act’.

The legislation, provided the much-needed oversight of the sector and introduced mandatory regulation to provide indigenous companies with opportunities, to have greater involvement in the development of the oil and gas sector.

The establishment of the Nigerian Oil and Gas Content Development and Monitoring Board (the ‘Content Monitoring Board’) as the regulator, to amongst other things implement, supervise, coordinate, administer, monitor and manage the various provisions of the Local Content Act, emphasized the efforts of the Nigerian government and desire to increase indigenous participation, which would subsequently provide economic stimulation as a result of increased transfer of technology and skills.

Over the years, implementation of the local Content Act has been diligently scrutinized. This has mainly been through the efforts of the Content Monitoring Board, who is empowered amongst other things, to issue certificates of authorization, to companies who submit Nigerian Content Plans that comply with the requirements under the Local Content Act. This is a requisite for Oil companies interested in bidding for any license, permit or interest in the Nigerian Oil and Gas Industry.

To further facilitate the implementation of Local Content, the Nigerian Presidency issued Executive orders, to facilitate the implementation of legislation within different economic sectors. This has been evident with the signing of the following Executive orders:

  1. Executive Order for ‘Local Content in Public Procurement issued in May 2017; and
  2. Executive Order No 5 ‘for Planning and Execution of Projects, Promotion of Nigerian Content in Contracts and Science, Engineering and Technology’ effective 2nd February 2018.

 

  • LOCAL CONTENT IN PUBLIC PROCUREMENT

On the 18th of May 2017, the presidency issued an Executive Order, the objective of which was to grant preference to local manufacturers of goods and service providers in procurement of goods and services.

The subsequent result of this was to mandate all Ministries, Departments and Agencies (‘MDAs’) of the Federal Government to abide by the order and ensure that local manufacturers are given preference in the procurement of listed items under the order, and at least forty percent (40%) of the procurement expenditure on items in all Ministries, Departments and Agencies of the Federal Government.

It should be noted, that reference to Local Content under the order refers to the amount of Nigerian or locally produced human and material resources utilized in the manufacture of goods or rendering of services.

 

  • EXECUTIVE ORDER ‘5’ PROMOTING NIGERIAN CONTENT IN SCIENCE, ENGINEERING AND TECHNOLOGY

This Executive Order provides a platform under which Nigerian Local content can be put forward within the areas of science, engineering and technology. The implication of this, results in Nigerian businesses, acquiring preference in the award of contracts in respect of the above stated areas in line with the Public Procurement Act of 2007.

Foreign companies shall only be considered where the requisite local expertise is unavailable or lacking, provided that such foreign company have demonstrable and verifiable plans for indigenous capacity development prior to the award of such contracts. This shall apply to duly registered Nigerian companies and those with current practicing licenses.

The order further introduces a system called, margin of preference (MoP) which is applied to indigenous suppliers of goods over foreign goods in any National Competitive Bidding and evaluation of tenders. It expressly provides that Ministries, Departments and Agencies shall maintain a fifteen percent (15%) margin of preference for international competitive bidding for goods, Seven and a half percent (7.5%) for works for domestic contractors and fifteen percent (15%) margin of preference for domestic contractors for National Competitive Bidding for goods and Seven and a half percent (7.5%) for works.  Additional highlights of the order include:

  • Restricting the Ministry of Interior from granting visas to foreigners bearing skills that are readily available in Nigeria.
  • Proscription of foreign companies or firms from engaging in contracts for Works, Goods, and Services in the country in violation of the standard international best practices as provided under relevant statutes such as the Companies and Allied Matters Act (CAMA), Council for Regulation of Engineering (COREN) Act, Chartered Institute of Purchasing and Supply Management Act, Public Procurement Act, and the National Information Technology Development Agency (‘NITDA’) Act as well as other relevant Nigerian laws and regulations on the acquisition of technology and public procurement;
  • Agreements involving any Joint Venture and Public Private Partnership (PPP) between a foreign firm and a Nigerian firm, for technology acquisition or otherwise, shall be registered with the National Office for Technology Acquisition and Promotion (‘NOTAP’) in accordance with the provisions of the NOTAP Act, before such contracts are signed by the ministries, Departments, Agencies (‘MDAs’);
  • A Nigerian company or firm shall not be disqualified from an award of contract by any MDA based on the year of incorporation except such Companies or firms are disqualified on the basis of qualification, competence and experience of the management in the execution of similar contracts;
  • Establishment of the Presidential Monitoring and Evaluation Council headed by the President and comprising the Vice President, Ministers and Chairman of the Governors’ Forum amongst others, with primary responsibility for monitoring the implementation of EO5.

In conclusion, it is evident that the implementation of Executive Orders in furtherance of the local content initiative, provides a positive development and response. Through the governments active involvement and efforts, the application of the Local Content Act in different economic sectors of the country, will surely become entrenched, thereby providing key economic stimulus, for long term sustainable development.

*Etin Giwa-Osagie is the Lead Consultant and Founder of AIXOS LIMITED

Email: [email protected]  [email protected]

Website: www.aixosng.com

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