The nation’s oil and gas industry is without doubt facing a myriad of challenges with major stakeholders seeking ways of turning things around in the industry. No effort is being spared in this regard at every front. And just a couple of weeks back, one of such efforts appears to have come from the legislature, which passed for the second reading two bills on Nigerian content development. The bill are the Local Content Development and Enforcement Bill, as well as the Nigerian Oil and Gas Industry Content Development Act (Amendment) Bill.
Of major concern however is the latter aimed at amending the Nigerian Oil and Gas Industry Content Development Act (NOGICD Act 2010) by expanding its scope to capture the emerging changes in the industry. Good initiative no doubt!
Major features of the bill include but not limited to: creation of a Nigerian Content Council to be headed by the vice president; deduction of 2% from every contract awarded in Nigeria for the development of local content; ensuring no expatriate is allowed to do a job in Nigeria that can be done by Nigerians; building capacities of local companies not only to compete in Nigeria but also abroad and ensuring the patronage of made in Nigeria goods.
For a fact, Nigeria has recorded significant feats in Nigerian Content development since NOGICD Act 2010 came into effect and even well before then. This much was corroborated by the Minister of State for Petroleum Resources, Chief Timipre Sylva.
Sylva was quoted as saying: “Before 2010, only three percent of marine vessels were Nigerian owned; but today, Nigerians control and own over 40 percent of vessels that are used in the oil and gas industry. In the area of fabrication, Nigeria can handle fabrication of more than 60,000 tons per year with its array of world-class fabrication yards.”
Further to this, one cannot dispute the fact that the industry has continued to demonstrate unparalleled commitment to the promotion of Nigerian Content. Also, the industry has severally joined forces with other stakeholders in proposing and considering various amendments to the NOGICD Act to ensure the realization of the federal government’s vision on Nigerian Content in a way that would be beneficial to both the industry players and the government in a very efficient and realistic manner.
One must not fail to acknowledge the strong desire to have an efficient Nigerian Content Law with Nigerians at the commanding height in the critical oil and gas industry via capacity development and increased opportunities for the local businesses. This explains why the National Assembly deserves the commendation for its effort at making the law much more virile through the ongoing amendment and introduction of some novel provisions.
Notwithstanding the lawmakers’ intention, industry watchers have cautiously advised on the need for the Nigerian government to tread softly in its bid to get the NOGICD Act amended. Their concerns stemmed from the plan to increase the contributions to the Nigeria Content Development Fund (NCDF) by 100% as well as the additional requirement for companies to provide annually a minimum of 0.5% of their respective gross revenues for Research & Development (R&D) activities in Nigeria among others. Besides, the bill also proposes that the oil and gas operator should bear all the penalties exclusively (100%), a move that sharply contrasts the standard liability and risk distributions in joint operating agreements and global oil and gas industry practice.
One thing that we must not lose sight of is that already, the industry has far more to contend with in terms of all manners of levies and fees. As I write this, I am aware there are education tax, the Nigeria Police Trust Fund levy, Nigeria Content Development Fund levy, NDDC levy, Offshore Safety Permit, and Nigerian Export Supervision Scheme. There are also Value Added Tax, Cargo & Stevedoring Dues as well as Waste Reception Facilities Levy to mention but a few.
Truth be told, putting additional financial burden on the already overburdened industry, as envisaged by the NOGCID Act (Amendment) Bill, analysts believe, will drastically impact the nation’s competitiveness and affect projects and investments’ viability negatively.
We need not pretend about the open fact that as things stand today that the industry is heavily groaning under the huge cost impact caused it by the Deepwater Offshore and Inland Basin Production Sharing Contract (Amendment) Act, the Finance Act, and Petroleum (Drilling and Production) Regulation amendments with their cost burden.
More than any other time, the industry deserves strong support from government, giving the present regime of lower oil prices, OPEC production cut and the devastating consequence of the COVID-19 pandemic globally. Heaping further fiscal burden on the industry could be dangerous and ultimately pose some visible threat to the sizeable number of the workforce who risks being laid off.
Again, the Ministry of Petroleum Resources and NNPC’s plan to cap production cost at $10/barrel will also be a major threat to the bill. While government seeks to achieve lower costs, it’s still imposing all manners of multiple taxes and levies. Name them. NDDC (3%); Education tax (2%); NOGICD Amendment (2%) and (0.5%) for R&D. Isn’t this an irony?
Similar bills with tendency for huge costs include among others; NOSDRA Amendment, Maritime University Bill, Host Community Bill, CSR Bill. In my layman’s view, when combined with the costs of providing security, fixing damaged assets and the follow-up environmental remediation, then one can safely conclude that the industry is gradually being run out of business. This development, to say the least might set the country back economically.
Yes, it is a statement of fact that the natural resources are ours. However, if the proverbial goose that lays the golden eggs is not to be suffocated and killed, it behoves the lawmakers to take another hard look at the proposal with a view to saving the industry from economic strangulation. Genuine consultation with the stakeholders here suffices if the industry is to be truly and competitively effective, and also contribute meaningfully to the nation’s development. This, certainly is the way to go!
Abdulrauf wrote via rahmanrauf@ yahoo.com
