The mandate of the Nigerian Oil and Gas Industry Content Development Act is primarily to provide for the development of Nigerian Content in the Nigerian Oil and Gas Industry by encouraging participation of Nigerians. Indeed, the true measure of the success of content development in Nigeria is in the amount and complexity of works and role played by Companies wholly owned and managed by Nigerians, whose focus is on developing Infrastructure and Technology in Nigeria, thereby encouraging profits to be retained and reinvested into our economy. Consequently, these Companies are building and developing capabilities towards ultimately exporting Nigerian products and services, rather than relying on importation, which is an absolute characteristic of a Nigerian Indigenous Companies.
The focus of the Act primarily is on Nigerian indigenous companies. Therefore, any amendment to the Act must be to protect and encourage an environment for exponential increase in their numbers and rapid growth in size, so as to pull along the Nigerian economy. Just as the most developed Oil and Gas countries have done, they have prioritized the interests of indigenous companies by enacting laws that will foster and encourage their participation on the sector that is driving their economy. The glass ceiling which is preventing our economic growth will go away when we prioritize indigenous companies in the dealings of the sector that corners us the most revenue annually.
The Act has fallen short of providing a comprehensive definition as to what constitute the entities regarded as “Nigerian Indigenous Companies”, rather it resorted to using terms such as “Nigerian Independent Operators” and “Indigenous Service Companies” in making reference to exclusive and first consideration to Nigerians as stipulated in the Act. Furthermore, Section 106 (interpretation Section), defines “Nigerian Companies” thus:
“A company formed and registered in Nigeria in accordance with the provision of Companies and Allied Matters Act with not less than 51 % equity shares by Nigerians”.
A cursory study of judicial pronouncements on the definition of what constitutes a Nigerian Company, will reveal that the meaning provided by the Courts over time, appears to be at a sharp variance with what the Act envisages, which apparently allows room for foreign ownership of equity shares in a company considered Nigerian. A classical case in point, is SIKIRU AGBOOLA LASISI v. REGISTRAR OF COMPANIES [I176] LPELR-SC.301/1975, where the Supreme Court laid down the correct test for determining whether a company is a Nigerian association or not, in these words:
“It is clear from the definition under Section 16(1)(c) of the Nigerian Enterprises Promotion Decree, 1972 that the correct test for determining whether a company is a Nigerian association or not is to discover the owners of its capital and other financial interests. If its capital and other financial interests are wholly and exclusively owned by Nigerian citizens, then it is a Nigerian Association. If, however, a portion of its capital or other financial interest is owned by an alien then, except as otherwise prescribed by or under the Decree, it is an alien association”. (Underlined is ours for emphasis).
The Act having defined the term Nigerian Company makes no further mention of a “Nigerian Company” at all, rather it resorted to various vague variations; “Nigerian Indigenous Operator”; “Nigerian Indigenous Service Companies”; “Nigerian Indigenous Contractors”; “Nigerian Contractors and Service or Supplier Companies”, and “Indigenous Companies” to reference sector participants contemplated under each relevant provision. Although, the Act has implicitly substituted the term “Nigerian Company” with the above-mentioned phrases, it nevertheless still intends for the word “indigenous” to remain in the Act so as to portray its very meaning and objective.
The ambiguity created by the above mentioned words has opened the provision to different constructions, with stakeholders having to rely on the comprehension of industry best practice or formally recurring to the interpretation of the Nigerian Content Development and Monitoring Board (the “Board”) in line with S. 70(1) of the Act, which permits the Board to “provide guidelines, definitions and measurement of Nigerian Content and Nigerian Content Indicator to be utilized throughout the Industry”.
The Bill attempts to cure this ambiguity by proposing to replace the terms “Nigerian Independent Operators” with “Nigerian Companies”, and “Nigerian Indigenous Service Companies” with “Nigerian Service Companies”. Regrettably, this has failed to fix the uncertainty occasioned by the Act, instead, it moved further away from the purpose the Act is designed to attain, which is the exclusive consideration and participation of Nigerians. Hence, the proposition by the Bill to erase outright, the term “Indigenous”, nullifies the true meaning and intention of the Act.
Undoubtedly, what gauges the achievement of content development in Nigeria and especially in the oil and gas industry, rests on the intricacy and aggregate of works done and the contributions made by Nigerian domestic companies concerned with the development of infrastructure, technology and building galvanized human capacity in Nigeria, thereby assuring the reflow, retention and reinvestment of profits in our economy. Accordingly, these Companies are forming and expanding the required competence geared towards the ultimate exportation and transatlantic trading of Nigerian goods and services, in place of protracted dependence on importation, which typifies the precise features of Nigerian Indigenous Companies.
A brief study of some oil producing countries shows how their Local Content Laws focus on participation of its citizens in the Oil and Gas Sector and have reflected same in their laws. We can take a cue from our sister nation, Ghana, having passed a similar Law three years after the enactment of the NOGICD Act. The Petroleum (Local Content and Local Participation) Regulation, 2013 (Ghana), passed in 2013, was enacted with the purpose of enhancing the capacity of indigenous Ghanaian companies and to promote their participation in the Oil and Gas Industry.
Regulation 49 of the country’s Petroleum (Local Content and Local Participation) Regulations, 2013, defines an “indigenous Ghanaian Company” as
“A company incorporated under the Companies Act, 1963 (Act 179) that: a) has at least 51% of its equity owned by a citizen of Ghana; and b) has Ghanaian citizens holding at least 80% of executive and senior management positions and 100% of non-managerial and other positions”.
Similarly, resource rich countries; Kuwait, Qatar, Saudi-Arabia and the United Arab Emirates (UAE) etc. also focus on local content requirements to maximize the gains of foreign participation in their Oil and Gas Sectors. The aim is to provide opportunities for local industries to participate in Oil and Gas activities. Although, several of these countries do not exactly define the term “local” in their Local Content Regulation (LCR), generally it means; nationals, and companies owned, or majorly controlled by nationals.
It is owing to this prevailing reason, that Nigerian Indigenous Companies must assume a central place within the covers of our Local Content Act. Therefore, any amendment to it must be anchored on providing and encouraging an atmosphere for a flooding increase in their numbers and rapid growth in sizes, in order to redefine the Nigerian economy.
This work recommends that the term “indigenous” be retained and consequently, the interpretation Clause of the Bill should interpret “Nigerian Indigenous Companies” to mean;
“A company with 100% equity and assets owned by Nigerian Citizens with its head office/parent company located in Nigeria”.
It is only a clearly worded and purpose-driven definition of this kind that can adequately foster the existence of a truly Nigerian Indigenous Company and guarantees an all-round local content development in our dear Oil and Gas Sector.