Jonathan Urges African Leaders To Embrace Local Content To Deepen Economic Growth

Former President Jonathan has advised African nations, especially
those producing oil and gas, to establish a local content policy as a
means of fast-tracking the development of local technology,
industrialisation and deepening economic growth on the continent.

The ex-President gave this advice on Wednesday in Houston at the 2018 Local Content Conference, taking place on the side-lines of this year’s Offshore Technology Conference (OTC) in Texas the United States.

Jonathan noted that the impact of the local content Act which he
signed into law as a President in the year 2010 has brought about
significant progress in local capacity utilization in the Nigerian oil
and gas industry. Encouraging other African nations to embrace similar initiative, he said: “I strongly recommend the local content policy for all oil and gas producing African nations because of its
in-country positive impact on the development of local technology,
employment generation and capacity to promote value addition,
industrialisation and overall expansion of the economy.

A statement issued by his media adviser Mr. Ikechukwu Eze said that the former President further described local content policy as “the missing link in Africa’s search for viable processes and procedures that would strengthen the continent’s economy across strategic value chains.”

Jonathan also urged African leaders to prioritise education and
manpower development in order to produce the required workforce that would galvanise industrialisation.

According to him, “African leaders must pay special attention to manpower development through quality education, training and research in areas of need to give local content through quality Industrialization, a great push. For Africa to truly develop in a sustainable manner, leaders must make conscious efforts to ensure that the education curricula of various countries are radically redesigned to produce skills relevant to the economic needs of the 21st century.”

He said also that “Africa needs to build competences and cultivate
knowledgeable manpower that would revolutionize the continent’s
technological advancement. That way, we can control the processes of exploration and exploitation of resources across the entire value
chain of the petroleum industry and other sectors of the economy.”

Speaking further on the gains of the local content policy to Nigeria,
the former President stated that its successful implementation has
improved local capacity building for upstream and downstream
operations and greatly boosted the push for industrialization in the
country.

He said further: “I believe that Nigeria is utilising the increased
application of the local content Act in its oil and gas industry to
stimulate investments that will positively transform other sectors of its economy, and create more jobs for the unemployed. I am aware that the mileage already covered and successes recorded in the implementation of the Act in less than a decade have attracted local and international commendations. It has also excited the interest of some African countries that are already soliciting for the Nigerian content policy as a guide.

“By its nature, the local content policy was designed to stimulate
local production and industrialization by leveraging linkages in the
petroleum industry and other sectors of the economy to boost
employment and production. I will say that the local content Act has
galvanised and transformed the entire oil and gas industry in Nigeria into a very vibrant sector with enhanced capacities in technological development, interventions and innovations. I believe that the local skills, capacities and creativity developed for the oil industry can easily be adapted in other sectors of the economy such as ICT, agriculture, transportation, power, health and overall manufacturing.

“We have got to the point where we can safely say that the oil and gas sector in Nigeria decisively forms the pivot for the acceleration of the country’s industrial growth. I believe that with consistency and unwavering commitment in the implementation of the law, the industry will continue to grow and more values can be achieved in the economy.”

-Below is the full text of the speech delivered by former President
Jonathan in Houston on Wednesday, 2nd May, 2018.

-“LOCAL CONTENT AS A DRIVER FOR TECHNOLOGICAL DEVELOPMENT” A SPEECH BY
DR. GOODLUCK JONATHAN, FORMER PRESIDENT OF NIGERIA, AT THE LOCAL
CONTENT CONFERENCE, HOUSTON 2018.

MAY 2, 2018.

1. INTRODUCTION

It is my pleasure to speak at this year’s Local Content Conference, in
Houston, United States. I chose to be here today because of the
importance I attach to the concept of local content which, in my view,
is a deliberate and pragmatic policy to improve and develop local
technological capacities of indigenous companies.

Let me acknowledge the efforts Marak Alliance has been making towards
boosting economic growth and development in Africa. The fact that the
organisation has also been promoting U.S.-African cultural and
economic relations, through programmes like this one, is worthy of
commendation.

Though I will focus generally on the gains of the local content policy
which was signed into law during my administration, I have elected to
guide myself, by entitling my presentation; “Local Content as a Driver
for Technological Development”. I believe that the benefits of the
different perspectives being discussed at this forum will not only be
of immense interest to key industry players back home but will
undoubtedly improve the oil and gas sector.

2. THE RESOURCE DILEMMA IN AFRICA

Talking about home, Africa is known to be blessed with mineral
resources; solid, liquid and gas. It is also blessed with arable land
for agriculture and forest produce. But it still remains the poorest
continent in the world because we have not been able to add
substantial value to these resources. The continent’s natural
resources, forest and farm produce are exported raw and, by so doing,
we export jobs and wealth to other countries.

In Nigeria, the oil rich Niger Delta region is characterized by
activities around the petroleum industry which remains the mainstay of
the Nigerian economy. According to the National Bureau of Statistics,
the industry constituted 8.69% of the nation’s gross domestic product
(GDP) in 2017, while crude oil export still brought in about 90% of
foreign exchange earnings.

Nigeria, before the local content law, had remained to a large extent,
a source of mainly primary commodities, hardly adding value to the
natural produce and mineral resources the nation exported. The sector
lacked indigenous players to exploit the industry’s massive value
chain between exploration and the end products. Back then, about 90
percent of the equipment and personnel found in the industry were
procured from outside the country.

The high technological and huge capital nature of the industry meant
that the big oil players and their expatriate staff carried out most
of the key functions.

There is no doubt that production and fabrication of equipment in the
oil and gas industry deliver sizable sustainable jobs. And until a few
years ago, only the multinationals had the capacity to invest huge
sums of money in the industry. However, back then, two questions were
pertinent. 1) What percentage of this investment went into the local
economy? 2) Could we say that the oil industry had created the number
of jobs commensurate with the income it was generating, particularly
in the areas where these multinational companies were domiciled?

All these pointed to the fact that a deliberate policy and paradigm
shift was needed for rapid industrialization in the oil and gas sector
in Nigeria and in Africa.

3. MY EXPERIENCE IN CHINA

My decision to sign the Nigerian local content bill into law without
hesistation was informed by my experience in China in the year 2000.
As Deputy-Governor of Bayelsa State then, I led a trade delegation to
China. Being from the Niger Delta, we took interest in visiting some
of the oil producing cities. One of such cities we visited was Daqing,
which is regarded as the oil capital of China.

I recall that our host took us through a detailed history of the oil
industry in China. One thing that struck my mind was that oil was
discovered in China in 1958, two years after it was discovered in
commercial quantity in Oloibiri, in the Niger Delta in 1956, by the
same Western companies.

However, the difference was that four decades later, most of the
in-country equipment, facilities and activities in the oil industry
were produced in China while in Nigeria, the key needs of the industry
were imported.

When I returned to Nigeria, I represented my Governor in a meeting on
Niger Delta issues and the oil industry with the then President, Chief
Olusegun Obasanjo. In that meeting, I briefed the President on my
experience in China and the need to enact a law that would compel the
oil companies to produce some of their required equipment in the
country.

The President agreed in principle that it was a good idea, but noted
that we should first develop our iron and steel industry. The thinking
was that except that was done, the issue of local fabrication of
equipment would have major challenges.

However, despite the valid points that he raised, I still envisioned a
time in Nigeria when the multinational oil companies would align with
policy changes that would promote indigenous companies and grow the
local economy.

4. THE BIRTH OF THE NIGERIAN OIL & GAS INDUSTRY CONTENT DEVELOPMENT ACT 2010

I was the Vice President of Nigeria until 2010 when the late President
Umaru Musa Yar’Adua took ill in the third year of our administration
and I became the Acting President.

Within the first two months as Acting President, I was briefed by the
then Minister of Petroleum Resources that a private member bill on
local content in the oil and gas industry was in the offing in the
National Assembly. The bill was pioneered by Senator Lee Maeba, a
member of the National Assembly who incidentally is from the oil-rich
Niger Delta region.

I instantly developed interest in this bill, guided by my experience
in China and my personal convictions. Thus, on 29th March 2010, as
Acting President, I signed the Nigerian Oil and Gas Industry Content
Development (NOGICD) Act 2010 into law under two months as Acting
President. I knew that the gains in local industrialization, human
capacity development and enhanced technology that the Act and its
implementation would bring to the country in the short and long term,
would be revolutionary.

5. KEY TARGET AREAS OF THE NIGERIAN OIL & GAS INDUSTRY CONTENT
DEVELOPMENT (NOGICD) ACT 2010.

The Act defines Nigerian content as “the quantum of composite value
added to or created in the Nigerian economy by a systematic
development of capacity through deliberate utilization of Nigerian
human and material resources in the Nigerian oil and gas industry.”

This covers all activities connected with the exploration,
development, exploitation, transportation and sales of Nigerian oil
and gas resources with regard to the development of indigenous
capability without compromising quality, health, safety and
environmental standards, for the overall benefit of the economy.

The policy also aims at the promotion of a framework for which local
competencies in the oil and gas sector would be developed through the
deliberate and active involvement of Nigerians, using local resources.

I am aware that the Nigerian local content Act 2010 is a document that
is easily accessible, but I will briefly mention some of its key
provisions and policy objectives.

First, it is meant to tackle the problem of insufficient value
addition to the Nigerian economy, arising from the near lack of local
capacity and capability in the oil and gas industry.

The Act provides in Section three that Nigerian indigenous service
companies shall be given first consideration in the award of oil
blocks and oil field licences.

Also, indigenous service companies which can demonstrate ownership of
equipment, Nigerian personnel and capacity to execute work on land and
swamp will receive exclusive consideration for work in those areas.

Section two of the Act clearly provides for a minimum level of
Nigerian content in any project executed within the oil and gas
industry, irrespective of whether the project is onshore, offshore or
deep offshore.

Another interesting aspect of the Act is that section 16 also gives
100% Nigerian-owned companies, a ten percent price advantage over the
bids of other companies. By implication, the bid of such an indigenous
company would not fail or be disqualified solely on the basis that it
is not the lowest bidder, if the value of its bid does not exceed that
of the lowest bidder by more than 10 percent.

Section 25 of the Act provides for the establishment of project
offices by project promoters and operators in catchment areas where
projects are to be carried out. These offices are to be established
before the commencement of the projects. This provision also has the
capacity to compel contractors to utilize local skills.

The Act requires operators to support technology transfer through the
establishment of joint ventures, strategic alliances/partnerships
between international and local companies as well as the execution of
licensing agreements.

A key area of the Act is Section 69 which provides for the
establishment of a Nigeria Content Development and Monitoring Board
(NCDMB) with the responsibility of implementing the provisions of the
Act, make procedural guidelines and monitor compliance by operators
within the oil industry.

Finally, Section 104 of the Act established the Nigerian Content
Development Fund. This is a resource pooled from one percent of every
contract awarded in the upstream sector of the industry and managed by
the Board. The aim is to increase Nigerian content by addressing the
challenges and improving access to funding for key industry players.

6. THE IMPACT OF NOGCID ACT 2010 SO FAR

Despite some limitations, the gains from the implementation of the
local content Act have been very visible in local capacity building
for upstream and downstream operations. For instance, before the law
the industry projected a value addition profile or percentage spending
retained in Nigeria of less than 5%. Even then, this came in the form
of taxes, royalties and rents. That figure has now been ramped up to
about 32% through engineering design, fabrication, manufacturing and
procurement, in addition to taxes, royalties and rents.

There has also been appreciable progress in skills acquisition in the
industry, in line with the manpower development objectives of the Act.
The pre-local content Act picture of limited skill sets which brought
about the influx and dominance of expatriates in the industry, has
been positively altered. Through training and strict adherence to
streamlined regulation, there are more qualified Nigerians working in
the industry now than ever before.

Thousands of Nigerians have been trained in technical areas such as
geosciences, oil spill management, underwater welding, pipe mill
operation, engineering design and fabrication.

Another positive development in this area is that Nigerians have
developed the capacity to carry out most onshore upstream activities,
just as many Nigerian companies involved in drilling activities are
competing favourably with industry leaders. More than 38% of
registered marine vessels currently belong to Nigerians, up from a
time when indigenous operators could only boast of less than 10%
ownership of the operating vessels.

There has also been a boost in the promotion of indigenous
participation and the fostering of technological transfer as reflected
in appreciable local growth in such technical areas as line-pipe
mills, pipe coating, paint and cables manufacturing, as well as
improved fabrication capacity. Only recently, one of Nigeria’s
indigenous oil servicing firms established a $100 million fabrication
plant in the Niger Delta region.

With this plant the local company intends to serve the fabrication and
industrial needs of Nigeria and Africa, especially in the petroleum
and power sectors.

Despite the roles research and development (R & D) play in industrial
development, little or no attention was hitherto paid to this critical
area in the oil and gas industry. The story changed after the R&D
guideline and strategy, involving the participation of industry
players, academia and government was developed, in the wake of the
Act.

Local operators are now benefitting from the prevailing order where
over 90% of contracts are awarded to Nigerian companies or foreign
companies that are in partnerships with Nigerian firms. Before the
local content law came on stream, less than 20% of contracts in the
industry were conceded to indigenous companies.

Also, some international oil companies have been reviewing their
interests in oil blocks and marginal fields by selling off some of
their assets to Nigerian firms. It is instructive to note that the Act
has ensured that no obvious gap was left in the industry because
benefitting Nigerian firms have not only lived up to the task, but
have greatly improved output. The outcome is that there are now more
technically competent indigenous oil and gas companies with Nigerians
constituting the majority of their workforce.

Although, the implementation of the local content policy recorded some
successes as has been pointed out, there are still some limitations in
the area of steel manufacturing for fabrication, as well as the local
capacity in manufacturing for upstream and downstream operations.

Consequently, the industry can still do with further strengthening of
the capacities of Nigerian operators as well as the inclusion of more
indigenes of producing communities in the economic activities of the
sector.

In the end, I can say that the local content legislation has greatly
boosted Nigeria’s technical know-how and its overall advancement. The
policy has remarkably positioned Nigerian entrepreneurs as key players
in the industry while their capacities and ability to raise capital
and go into big partnerships with foreign technical partners have been
greatly enhanced.

7. THE WAY FORWARD FOR AFRICA

The impact of the local content Act is clearly evident in the
significant progress recorded in local capacity utilization in the
Nigerian oil and gas industry. The implementation of the Law has
greatly boosted the push for industrialization in the country. I
believe that Nigeria is utilising the increased application of the
local content Act in its oil and gas industry to stimulate investments
that will positively transform other sectors of its economy, and
create more jobs for the unemployed.

I am aware that the mileage already covered and successes recorded in
the implementation of the Act in less than a decade have attracted
local and international commendations. It has also excited the
interest of some African countries that are already soliciting for the
Nigerian content policy as a guide.

The local content policy is perhaps the missing link in Africa’s
search for viable processes and procedures that would strengthen the
continent’s economy across strategic value chains.

I strongly recommmend the local content policy for all oil and gas
producing African nations because of its in-country positive impact on
the development of local technology, employment generation and
capacity to promote value addition, industrialisation and overall
expansion of the economy.

In this regard, African leaders must focus on private sector-driven
solutions that would enhance in-country value additions. They must
invest in the value chain and sectoral linkages of the oil & gas and
other industries to increase technological development, production and
manufacturing.

And while they are doing that, African leaders must pay special
attention to manpower development through quality education, training
and research in areas of need to give local content through quality
Industrialization, a great push.

For Africa to truly develop in a sustainable manner, leaders must make
conscious efforts to ensure that the education curricula of various
countries are radically redesigned to produce skills relevant to the
economic needs of the 21st century.

8. CONCLUSION

By its nature, the local content policy was designed to stimulate
local production and industrialization by leveraging linkages in the
petroleum industry and other sectors of the economy to boost
employment and production.

In closing, I will say that the local content Act has galvanised and
transformed the entire oil and gas industry in Nigeria into a very
vibrant sector with enhanced capacities in technological development,
interventions and innovations. I believe that the local skills,
capacities and creativity developed for the oil industry can easily be
adapted in other sectors of the economy such as ICT, agriculture,
transportation, power, health and overall manufacturing.

We have got to the point where we can safely say that the oil and gas
sector in Nigeria decisively forms the pivot for the acceleration of
the country’s industrial growth. I believe that with consistency and
unwavering commitment in the implementation of the law, the industry
will continue to grow and more values can be achieved in the economy.

Lastly, Africa needs to build competences and cultivate knowledgeable
manpower that would revolutionize the continent’s technological
advancement. Both the public and private sector should invest more in
qualitative education, especially in the areas of science and
technology, as a means of deepening growth and economic development.

That way, we can control the processes of exploration and exploitation
of resources across the entire value chain of the petroleum industry
and other sectors of the economy.

Thank you.

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