Local Content Policy (Local Content Act) in Nigeria

Local Content Policy in Nigeria is in Nigerian Oil & Gas Industry Content Development Act (“Local Content Act” or “Act”). Local Content Act applies to all operations in the Nigerian oil and gas industry including Exploration and Production / Service Companies both Onshore and Offshore. It is now compulsory to register NIGERIAN CONTENT DEVELOPMENT AND MONITORING BOARD through NOGIC JQS registration. Another registration you may do depending on the type of service you render in the Nigerian Oil & Gas industry  if NCEC registration. Over the years, Nigerian Oil and Gas Industry has controlled by foreign companies with foreign staff who have the technologies and training more or far more than Nigerian companies and staff thereby making it difficult for indigenous companies/ staff to compete with foreign companies. Local Content Policy in Nigeria is developed, focusing on increasing indigenous participation in the industry. This is reflected through the Nigerian government initiative of increasing Local Content and ensuring that indigenous companies have a greater part in developing oil and gas assets.   Read: REQUIREMENTS FOR LOCAL CONTENT (NOGIC JQS) REGISTRATION   DEFINITIONS

What is the meaning of local content?

Definition of local content: When a foreign company makes products in a country, the materials, parts etc that have been made in that country rather than imported. A minimum level of local content is sometimes a requirement under trade laws when giving foreign companies the right to manufacture in a particular place What is NCDMB? NCDMB means: NIGERIAN CONTENT DEVELOPMENT AND MONITORING BOARD The Nigerian Content Development and Monitoring Board (NCDMB) is a federal government body. NCDMB was established by the Nigerian Oil and Gas Industry Content Development (NOGICD) Act which came into effect on April 22, 2010. What is NOGIC JQS? NOGIC JQS means: NIGERIAN OIL & GAS INDUSTRY CONTENT JOINT QUALIFICATION SYSTEM. The NOGIC JQS (Nigerian Oil and Gas Industry Content Joint Qualification System) is an Electronic Platform for Data Consolidation on all major activities in the Nigerian Oil and Gas Industry. The NOGIC JQS was created in line with section 55 of the NOGIC Act which states that the Board shall establish, maintain and operate a joint qualification system (JQS) in consultation with industry stakeholders which shall be administered in accordance with provisions set out in the regulations to be made by the Minister in accordance with the provisions of this Act. The NOGIC JQS is managed by the Nigerian Content Development and Monitoring Board, NCDMB and key requirement for registration is DPR Permit(s) of any category. Read: Requirements for Local Content Registration (NOGIC JQS)  

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  NCEC Registration as regards to NCDMB NCEC means Nigerian Content Equipment Certification. It is a certificate given to Nigerian companies by NIGERIAN CONTENT DEVELOPMENT AND MONITORING BOARD (NCDMB). Nigerian company here means a company that is registered in Nigeria that will operate under Nigerian Local Content rules and regulations.   Back to Local Content Policy in Nigeria FIRST CONSIDERATION TO NIGERIAN OPERATORS Section 3(1): Nigerian independent operators shall be given first (1st) consideration in the award of oil blocks, oil field licenses, oil lifting licenses and all projects for which contracts will be awarded. Section 3(2): Exclusive consideration to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel an d capacity to execute work on land and swamp operating areas.  

Read: DPR Permit Requirements, Cost & Registration

  NIGERIAN CONTENT IN BID EVALUATION Where bids are within 1% of each other at commercial stage, 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.   The award of contract shall not be solely based on the principle of the lowest bidder where a Nigerian indigenous company has capacity to execute, the company shall not be disqualified on the basis that it is not lowest financial bidder, provided the value does not exceed the lowest bid by 10% (Section 16).   LABOUR AND EMPLOYMENT Nigerians given 1st consideration for employment and training in any project by any operator or project promoter in the industry.   Section 35 requires all operators and companies to employ only Nigerians in their junior and intermediate cadre.   Each operator required to submit a succession plan covering any position not held by Nigerians with provision for Nigerians to understudy each incumbent expatriate for a maximum period of 4 years after which the position shall become Nigerianised (except retention of a maximum of 5% of management positions to take care of the interests of investors).   PROHIBITION OF IMPORTATION OF WELDED PRODUCTS All operators, project promoters, contractors and any other entity engaged in the Nigerian oil and gas industry shall carry out all fabrication and welding activities in – country (Section 53).  

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  Above is subject to where it can be shown to the Minister of Petroleum Resources there is no capacity for in-country fabrication. In this circumstance, the Minister may approve importation of welded products for a period not exceeding 3 years as stated in Section 11 of the Act.   NIGERIAN CONTENT MONITORING BOARD The Act establishes the Nigerian Content Monitoring Board (“the Board”) which is the regulatory agency vested with the responsibility of regulating Local Content. The Board shall implement the provisions of the Bill with a view to ensuring a measurable and continuous growth in Nigeria content in all and gas arrangements, arrangements, projects, projects, operations, activities or transactions in the Nigerian oil and gas industry.   Some of the functions of the LOCAL CONTENT Board include: – Approval of Nigerian Content Plan – Issuance of Certificate of Authorization – Setting minimum Nigerian content level for project or project items which were not included in the Schedule A to the Act   THE BOARD ALSO HAS POWERS TO: – Determine if Nigerian indigenous contractors have the capacity to perform services listed in the schedule of services – Issuing Regulations for the industry regarding Local Content.   NIGERIAN CONTENT DEVELOPMENT FUND The Act establishes a Nigerian Content Development Fund managed by the Board and funded through a 1% deduction at source of every contract awarded to any operator, contract, subcontractor, alliance partner or any other entity in any project, operation, activity or transaction in the upstream sector on the industry.   FINANCIAL SERVICES All operators, contractors and any other entity requiring financial services shall retain only the services of Nigerian financial institutions, except where to the satisfaction of the board this is impracticable. The Act further provides 10% of total revenue from Nigerian operations be retained in a Nigerian bank account. (Effect may be minimal if quantum required to be retained in Nigerian banks is equal or less than Nigerian payment obligations Nigeria (e.g. salaries, rent, supplies etc )   Also Schedule to provides lower thresholds, thresholds, e.g. Credit Granting Services (50%); Financial Management Consultancy Services (70%); etc   LEGAL SERVICES Section 51 makes it mandatory for operators, contractors and other entities engaged in the Nigerian Oil and Gas industry to retain the services of only Nigerian legal practitioners or a firm(s) of Nigerian legal practitioners whose office is located in any part of Nigeria as well as submit a legal services plan (LSP) to the Board.   The Act further provides in its schedule a 50% threshold of Nigerian Content for legal services relating to project management and consulting services.   OFFENCES AND PENALTIES TO LOCAL CONTENT ACT Section 68 spelt out offences and penalties for the operators, contractors or subcontractors who carries out any project contrary to the provisions of the Bill, commits an offence and is liable upon conviction to a fine of 5% of the project sum for each project in which the offence is committed or cancellation of the project.  

Read: Permits and Licenses in Nigerian Oil & Gas Industry

  KEY LEVELS FOR SUCCESSFUL NIGERIAN CONTENT IMPLEMENTATION Short term directives have been issued by the NNPC to all stakeholders in the industry indicating the scope of work on all E&P projects that must be executed in Nigeria. These are as follows:
  1. FEED and detailed engineering design for all projects is to be domiciled in Nigeria.
  2. Project Management Teams and Procurement Centres for all projects in the Nigerian Oil and Gas industry must be located in Nigeria.
  3. Henceforth, all operators and project promoters must forecast procurement items required for projects and operational activities and forward the Materials List NCD on or before 31st January of every year. Also, a Master Procurement Plan (MPP) for ongoing and approved projects should be submitted to the Nigerian Content Division of NNPC on or before 31st January of every year.
  4. Fabrication and integration of all fixed (offshore and onshore) platforms weighing up to 10,000 Tons are to be carried out in Nigeria. For the fixed platforms (offshore and onshore) greater than 10,000 Tons, all items in directive 5, pressure vessels and integration of the topside modules are to be carried out in Nigeria.
  5. Henceforth, fabrication of all piles, decks, anchors, buoys, jackets, pipe racks, bridges, flare booms and storage tanks including all galvanizing works for LNG and process plants are to be done in Nigeria.
  6. Henceforth, all flow-lines and risers must be fixed and must be fabricated in Nigeria except for special cases to be demonstrated and approved by NCD.
  7. Henceforth, Assembling, testing and commissioning of all Subsea valves, Christmas trees, wellheads and system integration tests are to be carried out in Nigeria.
  8. All FPSO contract packages are to be bid on the basis of carrying out topside integration in Nigeria. A minimum of 50% of the total tonnage of FPSO topside modules must be fabricated in Nigeria.
  9. All third-party services relating to fabrication and construction including but not limited to NDT, mechanical tests, PWHT as well as certification of welding procedures and welders must be carried out in Nigeria. Nigerian Institute of Welding must certify all such tests in collaboration with international accreditation bodies
  10. All operators and project promoters must ensure that recommendations for contract awards in respect of all major projects being forwarded to NNPC/ constituted boards of such oil and gas companies for approval must include evidence of binding agreement by the main contractor with Nigerian Content Subcontractor(s). Such agreements shall indicate the cost and detailed scope  including  total  man-hours  for  engineering,  tonnage  and  man-hours  of fabrication and relevant defining parameters for materials to be procured locally as well as other services.
  1. Henceforth, all low voltage Earthing cables of 450/750 V grade and Control, Power, Lighting Cables of 600/1000 V grade must be purchased from Nigerian cable manufacturers.
  2. Henceforth, all Line-pipes, sacrificial anodes, Electrical switchgear paints, ropes, pigs, heat exchangers and any other locally manufactured material and equipment must be sourced from in-country manufacturers.
  3. All carbon steel pressure vessels shall be fabricated in Nigeria.
  4. All seismic data acquisition projects, all seismic data processing projects, all reservoir management studies and all data management and storage services are to be carried out in Nigeria.
  5. Henceforth, all waste management, onshore and swamp integrated completions, onshore and swamp well simulations, onshore fluid and mud solids control, onshore measurement while drilling (MWD), logging while drilling (LWD) and  directional  drilling  (DD)  activities  are  to  be  performed  by  indigenous  or indigenous companies having genuine alliances with multinational companies.
  6. Henceforth, coating of all Line-pipes and threading of all oil country tubular goods (OCTG) are to be carried out in Nigeria.
  7. Henceforth, all concrete barges and concrete floating platforms are to be fabricated in-country.
 

Read: How to Start LPG Cooking Gas Business in Nigeria

  18. Henceforth, operation and maintenance of offshore production units, FPSO and FSO in particular, are to be performed by Nigerian companies. 19. All international codes and standards used in the industry are to be harmonized to support utilization of locally manufactured product such as paints, cables, steel pipes, rods, sections, ropes etc and to improve capacity utilization in local industries. Clauses that create impediments for/exclude participation of local companies should not be included in any ITT 20. Operators and project promoters must ensure that recommendations for contract award for all drilling contracts shall include a binding agreement at Technical Evaluation stage for the sourcing of Barite and Bentonite form local manufacturers.
  1. Henceforth, all projects and operations in the Oil and Gas industry must demonstrate strict compliance with provisions in the insurance Act 2003 and submit a certificate of compliance issued by NAICOM to NCD as part of technical evaluation requirements for insurance or reinsurance Contracts.
  2. In this respect, NAICOM verified Gross underwriting capacity of Nigerian Registered Insurance companies must be fully utilized to maximize Nigerian Content before ceding risk offshore.
  3. Henceforth, all projects and operations in the Oil and Gas industry must demonstrate strict compliance with provisions of the Cabotage Act.
  4. All operators and service providers must make provisions for targeted training and understudy programs to maximize utilization of Nigerian personnel in all areas of their operations. All operators must therefore submit detailed training plans for each project and their operations
 

Read: LPG Plant License Requirements

 

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Local Content Policy (Local Content Act) in Nigeria

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