What does the Nigerian Content Act mean?
The Nigerian Content Act is a law targeted at promoting local participation in the oil and gas industry. The Act provides exclusive consideration for Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute jobs in the Nigerian oil and gas industry.
When did the Act become operational?
The Nigerian Content Act came into force on April 22, 2010 following presidential assent by the then Acting President, Dr. Goodluck Jonathan.
All regulatory authorities, operators, contractors, sub-contractors, alliance partners and other entities involved in any project, operation, activity or transaction in the Nigerian Oil and Gas Industry shall consider Nigerian content as an important element of their overall project development and management philosophy for project execution.
What is key objective of the Nigerian Content Act?
The major objective of the Act is to promote local participation in the oil and gas industry for the overall benefit of the Nigerian economy. The overall goal is to domicile a greater spend of the industry in Nigeria.
Who is responsible for implementing the Nigerian Content Act?
The Nigerian Content Development and Monitoring Board (NCDMB), as established in accordance with the provision in the Nigerian Content Act 2010.
What are the functions of the Nigerian Content Development and Monitoring Board?
- Implementing the provisions of the Act.
- Implementing any Regulations made by the Minister in relation to the Act.
- Supervising, coordinating, administering, monitoring and managing the development of the Nigerian content in the Oil and Gas Industry.
- Appraising, evaluating, approving, reviewing and awarding Certificate of authorization to the Nigerian Content Plans and Reports submitted.
- Setting up audit procedures and conducting regular audits for purpose of monitoring and implementing the Act.
How will Nigerian content compliance be enforced?
Before the award of any contract, all new projects must have Nigerian content commitments aimed at compliance with stipulated Schedule in the NC Act including provision for deduction of 1% of every contract as contribution to the Nigerian Content Development Fund (NCDF). All contracts will be monitored for performance at intervals by Nigerian Content Development and Monitoring Board.
How will funding for implementation of the Nigerian Content Act be achieved?
The Nigerian Content Act provides for the establishment of the Nigerian Content Development Fund for the purpose of funding the implementation of the Nigerian Content Act in the oil industry. This also entails a provision in the Act for the reduction of 1% of every contract sum as contribution to the NCDF.
The Fund will be managed by the Nigerian Content Development Board.
What is the minimum project cost which must require approval by the Nigerian Content Monitoring Board?
All projects, contracts, sub-contracts and purchase orders in excess of $1 million.
How will the Act impact on the Nigerian economy?
The Nigerian Content Act will improve the Nigerian economy by enhancing the production capacity of local companies and associated job creation. The Act also stipulates that every multinational oil company operating in Nigeria must domicile 10% of its annual profit in Nigerian banks. In addition to this, the Act provides for all aspects of insurance in the oil and gas industry to be handled by Nigerian insurance companies unless where in the opinion of the Nigerian Insurance Commission, the capacity of the Nigerian company has been exhausted.
Is the Nigerian Content Act capable of tackling unrest in the Niger Delta?
The Nigerian Content Act stipulates that every company executing a project in a community must establish a project office in that community with an attendant retention of created NC value in Nigeria which in turn stimulates the growth of the local communities including associated derivatives from Oil and Gas production.
What are the compliance requirements of an operator with regards to employment?
All operators and companies operating in the Nigerian Oil and gas Industry shall employ only Nigerians in their junior and intermediate cadre or any designated grade provided by the operator or company, or in specific cadres as may be stipulated by NCDMB. Nigerians must also be developed to take over most of the senior management positions.
How will the Nigerian Content Act deal with expatriate quota in the oil and gas sector?
The Nigerian Content Act encourages collaboration between the Federal Ministry of Industry and the NCDMB to participate in the processing of expatriate quotas for cases involving the oil and gas industry. In addition, a requirement for professional bodies to certify foreign professionals who want to practice in Nigeria is another way to ensure that only unavailable expertise is imported.
What is the maximum succession plan for Nigerians to fill in expatriate positions under the Nigerian Content Act?
The maximum succession plan is 4 years.
Apart from the lowest bidder consideration, what else affects the award of contracts in the Act?
The award of contracts shall not be solely based on the principle of the lowest bidder where a Nigerian indigenous company has the capability to execute such a job. Nigerian Indigenous companies with bidded costs not exceeding 10% markup of the lowest bidder shall be awarded the contract.
All operators and project promoters shall consider Nigerian content when evaluating any bid where the bids are within 1% of each other at commercial stage and the bid containing the highest level of Nigerian content shall be selected provided the Nigerian content in the selected bid is at least 5% higher than its closest competitor.
What do I do when the stipulated minimum percentage of Nigerian content in – country cannot be achieved?
Where there is inadequate capacity to meet any of the targets, the Minister may authorize the continued importation of the relevant items and such approval by the Minister shall not exceed 3 years from the commencement of the Act.
Remarks: This waiver clause has to be supported by in-country capacity development initiatives which will aim to ensure that Nigerian content % targets are achievable in the future.
What additional cost does the introduction of this Act incur on projects in the Oil and Gas Industry?
- The sum of 1% of every contract awarded to any operator, contractor, sub-contractor, alliance partner or any other entity involved in any project, operation, activity or transaction in the upstream sector of the Nigerian Oil and Gas Industry shall be deducted at source and paid into the NCD fund – for the purpose of funding the development of Nigerian content, in addition to statutory provision in Federal Government budgets.
- Stipulation for contracts to be awarded to Nigeria Indigenous Companies that demonstrate capability but having a bidded cost that is 10% above lowest bid for a contract.
What are the incentives from compliance with the Act?
Compliance with the provisions of this Act and promotion of Nigerian content development shall be a major criterion for award of licenses, permits and any other interest in bidding for oil exploration, production, transportation and development or any other operation in Nigeria Oil and Gas industry including provision of fiscal incentives.
Are there sanctions for non compliance with the Nigerian Content Act?
Yes. An Operator, Contractor or Sub-contractor who carries out any project contrary to the provisions of this Act, commits an offence and is liable upon conviction to a fine of five percent (5%) of the project sum for each project in which the offence is committed or outright cancellation of the project.
It is an acronym for Nigerian Content Performance Report. It is the annual mandatory report by companies to show compliance with the Nigerian Content Act.
What has the industry been doing to comply with the Act?
The industry has been:
- Working with the OPTS Nigerian content Sub-committee on how to improve certain sections of The Act.
- Working with the Nigeria Content Development Monitoring Board Interim implementing Committee on setting up of the Board and modalities for implementing the provisions of the Act.
- Set up a Nigeria Content Act Technical Committee consisting mainly of senior technical managers to review the Act, determine its impacts on operations and develop strategy for compliance.
- Continuously sensitizing personnel and Management, pioneered by the Nigerian Content Departments, through awareness presentations.
What is the Reporting Relationship between the NCDMB and the Minister of Petroleum Resources?
The Nigerian Content Monitoring Board reports to a Governing Council appointed by The President of The Federal Republic of Nigeria. The Minister of Petroleum Resources is the Chairman of the Governing Council while the Executive Secretary is also the Secretary of the Council.