Nigerian Oil and Gas Content Under Review

Nigeria’s oil and gas industry provides 90% of its foreign exchange earnings every year – a huge proportion of the country’s GDP. However, the country is concerned that the benefits of this massive industry are not being shared out fairly amongst the Nigerians themselves, with much of the upstream work going to companies based in other countries including Europe. As a result, a new initiative has been put in place – Local Content development.

Local Content development is an initiative by the Nigerian Government to help develop local capacity building in the oil and gas industry and to enable Nigerians to take a more pro-active role in their largest industry. Basically put, it’s local jobs for local workers. The cause of concern at the moment is that less than 5% of the total annual budget in the Nigerian industry comes from local Nigerian content, meaning that the local people have a very small share of the business. The object of the Local Content development scheme is to significantly increase the contribution in the expenditures in the upstream sector to the GDP over a defined period of time. The target set by the Federal Government for Nigerian content is 70% by 2010. The vision is to transform the oil and gas industry and to create jobs and national growth by developing in-country capacity, with a greater proportion of the upstream jobs being carried out by Nigerian companies and local workers. A rise in drilling jobs, oil rig jobs and other oil careers is the aim of the proposal.

Under new proposals, only those companies qualified by the Nigerian National Petroleum Corporation (NNPC) will receive contract patronage, particularly in exploration and production. Oil prospecting companies will be made to domesticate most of their jobs based on official certification, with prospecting organizations being made to offer specific jobs to specific companies based on their competencies.

The Local Content development scheme was really brought to the forefront of Nigeria’s Federal Government when it was realized that basic engineering services such as front end design, fabrication and other oil jobs which could effectively be done in Nigeria by local companies were being outsourced to other countries such as South Korea, Singapore, Dubai and Europe. With unemployment rates amongst Nigerian workers already high, this situation compounded the effect and had a direct, knock-on effect on the economy of the country.

Aspirations to realize the 70% by 2010 local target may be difficult to reach, as things on the African continent can often move slowly, but it does show that the Federal Government is taking a pro-active role in promoting its own industry to ‘in-house’ companies and employing local workers. This does not mean that the country will shut its doors to foreign organizations or that foreign nationals will be unable to work in the oil and gas industry in Nigeria. To break off connections in that way with the rest of the world would be counterproductive and the Nigerian Government realizes this. However, the Local Content development scheme will mean a more equal share of oil and gas jobs for local workers, thus utilizing local skills and going some way to relieving the chronic unemployment situation faced by local workers within the industry. As Nigeria is such a key player in the African oil industry, any moves to improve and develop their industry can only be a good thing for every oil-consuming economy that trades in Nigerian oil and gas.