The Nigerian Oil and Gas Industry Content Development, NOGICD, Act is one of the few laws made by the Federal Government that has produced credible results and is being copied by African nations.
A few days ago the Republic of Equatorial Guinea entered into discussions with Nigeria regarding new partnership opportunities such as the establishment of a joint logistics base, deployment of indigenous capacities across countries, and lowering the costs of major oil and gas operations.
The NOGICD Act, being implemented by the Nigerian Content Development and Monitoring Board (NCDMB), has provided several opportunities for indigenous companies and creating thousands of direct and indirect jobs.
Also a few days ago, the NCDMB) and the Nigeria LNG Limited announced a partnership to roll out tender opportunities from the gas production and processing company on the Oil and Gas E-Market Place, thereby implementing a key provision of the NOGICD Act.
Section 106 of the NOGICD Act defines the “Oil and Gas E-Market Place” as a virtual platform for buyers and sellers of goods and services in the oil and gas industry that allows for speedy and transparent transactions.” This provision of the Act had not been implemented since the enactment of the Act in 2010.
The executive secretary NCDMB, Engr. Simbi Kesiye Wabote, said that the roll out of the Oil and Gas E-Market Place project would be carried out in phases and is starting with the Nigerian LNG Limited.
He said that a joint working committee comprising members of the company and the Board was formed to co-create the Blueprint for the Phase-1 implementation of the E-Marketplace, while subsequent phases of the project will include members of the Oil Producers Trade Section (OPTS), Independent Petroleum Producers Group (IPPG), and the other stakeholder groups.
He commended the management and staff of Nigeria LNG Ltd for being ever ready to comply with the provisions of the NOGICD Act and for demonstrating genuine willingness to partner with the Board in various initiatives, recalling that the Service Level Agreements (SLA) was initiated with the company in 2017, to drive the timely approvals of requests submitted to the Board.
The executive secretary explained that the Board uses the Nigerian Content Seminar to discuss the various elements of the NOGICD Act with industry operators, service providers and other stakeholders in the industry, noting that this year’s seminar provided a platform to clarify the provisions of the NOGICD Act (2010), the Ministerial Regulations, guidelines, tools and initiatives.
Speaking on various segments of the NOGICD Act, Wabote quoted section 70 (h) to justify the Board’s assistance of local contractors and support of Nigerian companies to develop their capabilities and capacities in furtherance of Nigerian content development in the oil and gas industry.
This clarity is meant to correct the wrong perception held in some quarters that the Board is acting outside its mandate by supporting and partnering companies in strategic business ventures.
Wabote emphasised that this provision is “at the heart of developing local capacities and capabilities in the oil and gas industry. According to him, this provision explains why the Board embarked on several initiatives including the funding support and other initiatives that are directed toward developing both human capital and infrastructure.
He listed some of the initiatives to include the $300million Nigerian Content Intervention Fund with the Bank of Industry (BoI), the $100million Matched Fund with NEXIM Bank, the $50million R&D Intervention Fund and the $50million NOGAPS Manufacturing Fund.
Other support provided by the Board to local companies include partnering with local businesses to establish modular refineries, gas processing plants, LPG storage facilities, Base Oil production plant, LPG depot and refilling plants, and others with clear exit plans once the target goals are achieved.
The NCDMB boss observed that there are severe challenges negating manufacturing in the oil and gas industry, which is why the Board is developing the NOGAPS Industrial Parks to provide modern infrastructure using the “sites and services” model to support in-country manufacturing.
He reported that the Industrial Parks are at various stages of development in seven states namely Akwa Ibom, Bayelsa, Cross River, Delta, Edo, Imo, and Ondo states, hinting that “the NOGAPS Industrial Parks at Odukpani in Cross River state and the one at Emeyal-1 in Bayelsa state are both at advanced stages of completion and will commence operations in 2024.”
While appreciating the contribution of the Shell Petroleum Development Company Joint Venture and the ExxonMobil Joint Venture for their contributions to the industrial parks using the CDI programmes, he confirmed that the Board has commenced the allocation of manufacturing shopfloors and services plots at the Odukpani and Emeyal-1 parks to qualified applicants.
The Act And The Power Sector
On 11 August 2014, the NCDMB reported that the Federal Ministry of Power (FMP) is setting up a local content policy, following the example set by the oil and gas sector in 2010.
In August 2014, the FMP published a memorandum on ‘The Development of Nigerian Power Sector Content Development Policy, Strategic Framework and Draft Bill’. This document stresses the need for a Nigerian content policy in the electric power sector, aimed at value creation, capacity development, the utilisation of Nigerian human material resources and services, and employment of Nigerians, and reducing the outflow of foreign exchange.
Though there is no further information available on what the exact provisions of the policy, when finalised, will be, or on its implementation date but the NCDMB reported that the FMP is likely to adopt the existing policy in the oil and gas sector – mutatis mutandis – to a large extent, and identified the manufacturing of meters and of 132 kV power lines as possible services Nigerians can easily provide.
This latter statement appears to have been confirmed on 1 October 2014, when the Nigerian Electricity Regulatory Commission reportedly the importation of electricity meters ‘unless there is a proof that local manufacturers cannot meet the demand, as we are committed to enhancing local production’.
The ministry of power then became the latest key sector of the economy to work towards replicating the success achieved with the implementation of Nigerian Content in the oil and gas industry.
The ministry of power, has also made firm promises to ensure that ongoing transformation in the sector and massive investments by governments and private sector entities are steered to develop the local supply chain and encourage manufacturing.
Everything was aimed at promotion of local content which requires a special funding pool to develop local capacity, skills acquisition, infrastructure development, facilities upgrade.
Stakeholders argued that the aim should focus on in-country value creation and that the policy must be a national agenda and championed from the top as part of overall national development program.
Other strategies according to industry operators should include inter-agency collaboration & synergies, the existence of fiscal incentives to attract and sustain investments, policy consistency and political will.
Reacting to the adoption of local content in the power sector, chairman/chief executive officer of MOMAS Electricity Meter Manufacturing Company Limited, Mr. Kola Balogun, said there is need for government to be more drastic in dealing with defaulters of local content in power sector.
Balogun, said government should jail those contravening the Local Content Act especially with regard to the supply of meters, adding that people need to be punished for disobeying the Local Content Act.
He added that it is when the violators of Local Content Act are punished that Nigerians will know the importance of creating the local content in power sector.
According to him, “There is need for us to create employment opportunities through the power sector. This sector can take many jobless people off the streets. So, until government insists on adherence to local content in power sector, we will not be able to go anywhere. “It is through collaboration with the ministry, the agencies and players that we can address the challenges in the power sector. Enough of this deceit in the sector. We should not depend on people from outside to clean up our power sector. We can do it ourselves, the power sector degradation is as a result of we, Nigerians and we can fix it ourselves.”
Resisting Attempts To Jettison The Act
The recent attempt to turn the Act upside down through skewed implementation of the phase II of the National Mass Metering Programme, NMMP, being funded by the World Bank, has attracted national condemnation.
Aside rejection of the move by local meter producers, the Manufacturers Association of Nigeria, MAN, has stated that any attempt to implement without fully involving local meter manufacturers will be a disservice and outright breach of the Local Content Act.
The Association has therefore expressed deep concerned over the impending displacement of local meter manufacturers and assemblers in the downstream of the power sector in the process of government’s implementation of the NMMP Phase II World Bank funded supply of 1.2million smart energy meters.
According to Segun Ajayi-Kadir, Director General of the MAN, The advertised financial requirements and the technical specifications by the Transmission Company of Nigeria (TCN) appears to be skewed against local manufacturers as they are outrageously stringent and negate the Central Bank of Nigeria, CBN guidelines for the implementation of National Mass Metering Programme (NMMP).
“This is a federal government intervention in power sector to accelerate energy meter supply in the country to bridge the metering gap and ought to be in sync with our overall national economic development objectives.
“We warn that this portends grave danger for the power sector as we may be witnessing a repeat of the ugly scenario in 2012 when local manufacturers where sidelined in the meter supply and the nation was greeted with supply of substandard meters supplied by the foreign companies that were awarded the contract that were later removed from the network. The position of the TCN that installation will provide employment opportunities to Nigerians will completely pale into insignificance when compared with a ratio of 1 to 10 jobs that will be created if local manufacturers are included in the scheme,” MAN noted.
The association recalls that, in keeping with the federal government’s backward integration policy and the advent of the NMMP intervention, manufacturers have made huge investments in expansion of manufacturing capacities, trained and promoted highly skilled workforce to meet the demands of the power sector as envisaged in the NESI.
It said that the seeming intentional denial of the local manufacturers does not take into cognisance their sterling performance of the nascent local manufacturing, vis:
- i) Deployment and installation of a total number of 611,231 energy meters across the country between January 2019 till 31st January, 2021.
This is corroborated by the report of the Regulatory Agency, the Nigeria Electricity Regulatory Commission, NERC, under the Meter Assets Provider (MAP) initiative of the federal government and the deployment and installation of 1million energy meters across the country under the phase zero of the National Mass Metering Programme (NMMP).
It further noted that this is under the federal government intervention aimed at increasing the metering rate to eliminate the inglorious and arbitrary estimated billing and strengthening the local meter value chain, as well as creating jobs, adding, Of course this has also helped in reducing collection losses and increasing financial flows to achieve 100 per cent market remittance obligations of the Discos and improving network monitoring capability and availability of data for market administration and investment decision making.”
The Association further recalled that its members have been denied the opportunity to fully execute the contract for the supply and installation of 4 million energy meters under the Phase 1 of the NMMP scheme.
This was due to the unrealistic terms that arbitrarily fixed the contract prices extremely and far below the approved regulatory prices of energy meters in the country.
Additionally, the MAN pointed out that the contractual term of payment after the supply and installation of the meters have not been adhered to, thereby jeopardizing the financial capabilities of our members that participated in the scheme.
“We opine that the subsisting Executive order 003 on patronage of made in Nigeria products and the avowed policy of government to give priority and first consideration to local businesses should have made the government to interrogate the world bank documents and actively consulted/engaged Nigerian stakeholders in the sector with a view mainstreaming their inputs.
“This is clearly the cardinal aspirations of the NMMP scheme, which is to strengthen the local meter value chain by increasing local meter manufacturing, assembly and deployment capacity as well as to support Nigeria’s economic recovery by creating jobs in the local meter value chain,” MAN said.
As a nation that aspires to make progress and improve the wellbeing of its people, it is unconscionable that we continuously make the same mistakes, the Association advised stressing, “The overbearing government control over the energy meter procurement and pricing has continued to limit meter availability and almost treacherously hindered the factualisation of the forces of demand and supply in the determination of the prices of meters. It has stifled the emergence of healthy competition in the meter manufacturing and pricing ecosystem, which should have created more job, upscaled technology, innovation and skills, as well as an expansive value chain across the country.”
“We counsel that the excellent constitutional amendment that enlisted power generation and transmission in the concurrent list, should be complemented with the liberalization of the distribution end of the value chain. To this end, the energy meter procurement and pricing should be liberalized. There is no doubt that Nigerians are in dire need of and are desirous of procuring meters, they have only been limited by the unwarranted and stringent processes of applying for energy meters by the DisCos, as well as the indiscretion of some of their operatives. We are convinced that the liberalization of the distribution end of the value chain will eradicate these bottlenecks and give fillip to the efforts of government to bridge the metering gap and ensure just electricity billing regime.” Ajayi-Kadir added.
The Nigerian Meter Manufacturers and Assemblers had earlier intensified their demand for Federal Government to step in and cause the suspension of the bid by TCN PMU for the supply of 1,250,000 smart meters for eleven (11) Discos in the West African nation.
The World Bank is financing the procurement of the meters with a loan of US$155 million and the bid is expected to close Tuesday, July 11, 2023.
The bid has five lots and interested companies are raising Bid security of US$340,000 for lot 1, US$396,000 for lot 2, US$407,000 for lot 3, US$450,000 for lot 4 and US$385,000 for lot 5.
According to the manufacturers, the current structure of the bid will make it difficult for majority of the local companies to participate in the process.
In their view, the structure of the bid will favour only foreign companies who have the capacity to borrow from their foreign banks.
Ademola Agoro, Acting President of the Association of Meter Manufacturers of Nigeria said there are about 40 plus local meters with the capacity to produce about 5 million meters.
He said the local manufacturers have invested a lot in building their capacity to produce meters to be able to produce meters to meet demand and wonder why the bid has been structured in a way that favour only foreign companies.
He said that the local manufacturers are not saying that the bid should not be competitive but that it should be restructured to make it easier for local meter manufacturers to be able to raise the bid security.
According to him, instead of the current 5 lot which is why they are raising concerns, TCN PMU should expand the lot from 5 to 20 lot stating that this will reduce the money for bid security and consequently allow more local meter manufacturers to participate.
He added that the bid should be restructured in such a way that any foreign company that wins a bid partner with a local firm for the execution of the contract.
According to him, if the bid process is allowed to continue in its current state it will mess all the gains local meter manufacturers have made.
“If this is allowed to go it will mess up the gains. Many local meter manufacturing companies will close down and there will be loss of jobs,” he stated categorically.
He said the Association has the option of going to court to stop it but said they have shelved that option for now due to the fact that President Bola Ahmed Tinubu had been in office for few days and therefore do not want to disturb his peace.
The Association had earlier submitted a letter to Bureau of Public Procurement (BPP) requesting their intervention to suspend the bid process.
Meanwhile, Adetayo Adegbemle, Executive Director for PowerUp Nigeria, an advocacy group in Nigeria who started raising alarm about the bid process queried whether the huge amount of money in Bid security is intended to push local meter manufacturers out of business.
“It must be stated that we have had this kind of World Bank Loan with similar conditions before (2012). However, none of the Imported Meters procured under that scheme are presently still in the system.
“Again, this is a World Bank Loan, which we are definitely repaying. It is therefore imperative that we also use this to deepen our local manufacturers’ capacity,” he added.
Balogun on his part argued that the importation of foreign made meters is destroying local factory development or sustainability in Nigeria.
“Therefore, we should commend the effort of government for increasing the tariff of imported meters.
We need to take a bold step to show that that tariff on imported meters remains, and that it does not change, and we have one of the best facilities to produce electricity meters in the entire West Africa which anybody can attest to. I can boldly tell you that electricity meters can solve energy theft in Nigeria. Be it bye-pass, revenue leakages, technical losses, the meter is enriched and designed locally to solve the problem.”
