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An Overview of Local and Foreign Participation under the Nigerian Oil and Gas Industry Content Development Act

The Nigerian Oil and Gas Industry Content Development Act (“the Act“) which established the Nigerian Content Development and Monitoring Board (“the Board“) was enacted in 2010. The purpose of the Act is to create the framework for growth of Nigerian content in respect of all operations and transactions in Nigeria’s Oil and Gas Sector (“the sector“). The Act which defines a Nigerian Company to mean a Company registered in Nigeria in accordance with the provisions of the Companies and Allied Matters Act with not less than 51% equity shares owned by Nigerians mandates investors in the sector to consider Nigerian content as an important element in their project development and management philosophy. The Act provides that subject to fulfillment of the conditions that may be specified, Nigerian operators and indigenous service companies shall be given first consideration in award of oil blocks, licenses and works in the sector. Consequently, the Board is empowered to execute its duties under the Act as well as ensure that the provisions of the Act are compiled with by stakeholders in the sector.

Under the present legal regime, an operator bidding for any license, permit or interest before carrying out any project in the sector must demonstrate compliance with the Nigerian content requirement of the Act and submit a Nigerian Content Plan to ensure that the services shall be provided within Nigeria, the goods to be used are manufactured in Nigeria and that Nigerians shall be given first consideration for training and employment in the work programme for which the plan was submitted. Any collective agreement entered into by the operator with its association of employees must be consistent with the provisions of the Act.

The plan to be submitted by the operator shall contain an Employment and Training Plan (“E and T Plan“) which shall include hiring and training needs of the operator, anticipated skill shortage in Nigeria labor force, project specific training requirements, anticipated expenditures that will be made directly by the operator in implementing the E and T Plan and a time frame for employment opportunities for each phase of the project operation. Where Nigerians are not employed because of lack of training, the operator shall ensure that every reasonable effort is made to supply such training locally or elsewhere. For each of its operation, the operator shall submit to the Board a succession plan for any position not held by Nigerians and the plan shall provide for Nigerians to understudy each incumbent expatriate for a maximum period of 4 years and at the end of the 4 year period the position shall be occupied by a Nigerian.

The minimum Nigerian content in any project in the sector is as set out in Schedule A of the Act (“the Schedule“). Where the Nigerian content for a project is not specified in the Schedule, the Board shall set the minimum content level for that project pending the inclusion of the minimum content level for the project through an amendment of the Schedule by the National Assembly. However, where there is inadequate capacity to any of the works stated in the Schedule, the Minister of Petroleum Resources (“the Minister“) may authorize the importation of the capacity. The Board shall ensure that the operator maintains a reasonable number of personnel from areas it has significant operation. All operators shall employ only Nigerians in their junior and intermediate cadres or any corresponding grades designated by the operator.

Furthermore, for each of its operations, an operator may retain a maximum of 5% of management positions as may be approved by the Board as expatriate positions to take care of investors interests. The operator shall make application to the Board and receive its approval before making any application for expatriate quota to the Ministry of Interior. The application to the Board shall contain the job titles; description of responsibilities and duration of proposed employment in Nigeria. Nonetheless, all projects whose total budget exceeds US $ 100, 000, 000 shall contain a “Labor Clause” mandating the use of a minimum percentage of Nigerian labor in specific cadres as may be stipulated by the Board.

International or multinational companies working through their Nigerian subsidiaries shall demonstrate that a minimum of 50% of the equipment deployed for execution of work are owned by the Nigerian subsidiaries. Each operator shall carry out a programme in accordance with the country’s own plans and priorities for the promotion of technology transfer to Nigeria in relation to its oil and gas activities. Operators or their professional employees engaged in the provision of engineering or other professional services in the sector are required to be registered with the relevant professional bodies in Nigeria. The Minister shall consult with relevant arms of government to provide tax incentives for foreign and indigenous companies which establish facilities, factories, production units or other operation in Nigeria for the purpose of carrying out production, manufacturing or for providing services and goods otherwise imported into Nigeria.

All operators in the sector requiring legal services shall retain only the services of a Nigerian legal practitioner or a firm of Nigerian legal practitioners whose office is located in any part of Nigeria. Likewise, all operators requiring financial services shall retain only the services of Nigerian financial institutions or organizations except where to the satisfaction of the Board, this is impracticable. The operators shall submit to the Board, their Legal Services Plan and Financial Services Plan every 6 months.

Within the first 60 days of every year, each operator shall submit to the Board their annual Nigerian Content Performance Report (“the report“) covering all its projects and activities for the year under review. The Board shall undertake regular assessment and verification of the Nigerian Content Performance Report filed by operators in compliance with the provisions of the Act as may be considered appropriate by the Board. For the purposes of assessment and verification, all operators shall provide the Board with access to their facilities, documents and information to substantiate their reports. An operator who carries out any project contrary to the provisions of the Act commits an offense and is liable upon conviction to a fine of 5% of the project sum for each project in which the offense is committed or a complete cancellation of the project.

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