Adewale Sanyaolu
MORE facts have emerged on why only two indigenous firms benefitted from an estimated $600 million Nigerian Content Fund established by the Federal Government to boost participation of Nigerian enterprises in the oil and gas industry.
Stakeholders have been wondering why despite being in operation for close to six years only Lagos Deep Offshore Logistics Limited (LADOL) and other indigenous operator have so far received some facility from the fund out of the thousands of local operators in the oil and gas seaving subsector.
It was learnt that the fund which has United Capital and BGL Limited as advisers may have further toughened its guidelines to make difficult for some operators to scale through the conditions for access loans.
This is even as one of the Financial advisers – BGL is going through a very difficult times which hasforced the Securities and Exchange Commission (SEC) to ban its Managing Director, Albert Okumagba and his Deputy, Chibundu Edozie, from participting in capital market activities for 20 years over market infractions.
The ban may have equally put integrity question mark on the NCDF and the role played by BGL in emerging as the Funds Financial adviser.
The development has made Nigeria, Africa’s leading and world’s eight biggest oil exporter to remain a fringe player in the oil and gas turf where it ought to play big. That was because the absence of indigenous players in the industry where about 90 per cent of the equipment and personnel used in the industry are imported.
But with the introduction of the local content law in 2010, the Federal Government took some deliberate steps to increase indigenous participation by prescribing a minimum threshold for the use of local services and promoting the employment of Nigerian staff in the industry.
Leveraging NOGICD Act to boost indigenous operations
Six years into its implementation, the NOGICD (Nigeria Oil Gas Industry Content Development) Act has already created a national consciousness on posible socio-economic benefits of promoting Nigerian content as a national development agenda.
“Having successfully established indigenous oil and gas companies of the future with capacity to deliver high-end services, Nigerian jobs and money are no longer being exported to foreign countries.
Industry experts are however of the view that the board’s interventions on compliance have increased participation of Nigerians in oil and gas contracts from less than 10 per cent to over 80 per cent presently.
But according to its acting Chief Executive, Denzil Kentebe there still exist capacity gaps on which the board is implementing flagship programmes, especially in the areas of infrastructure, equipment, assets and facilities. The NCDMB Acting Executive Secretary, disclosed at a recent industry event that in an attempt to further boost local capacity, the NOGICD Act 2010 established the Nigerian Content Development Fund (NCDF) to address financial and liquidity challenges of Nigerian companies operating in the industry.
The fund, which has grown to about $600 million is to support local firms operations. It represents the sum of 1 per cent from every contract awarded to any operator, contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity or transaction in the upstream sector. The money is to be deducted at source by contract awarding entities and paid into designated accounts kept with custodial banks under the programme.
In actualising the NCDF’s mandate, the Act also empowers the NCDMB to engage financial advisers to define modalities for the fund’s utilisation as well as identify and attract other sources of funds to augment the aspiration. The joint financial advisers to the NCDF are BGL and United Capital Plc.
Industry stakeholders have lamented that so far only two firms have been able to access a little out of the NCDF fund, though the NCDMB fund is legally open to any operator that can meet its set targets.
Meanwhile, former Chairman, PETAN, Mr. Emeka Ene, noted that improved indigenous participation is critical for the sector, adding that the solution in the industry does not rest with only the International Oil Companies (IOCs).
He explained that there are many ways in which Nigerian companies are doing a lot to grow the sector, adding that they can offer more with the right support.
He said: “We can achieve quick wins, for example, in the area of gas supply. Nigerian companies are helping to decentralise the process, contributing to gas supply and planning increased production but this will only work if we work together as an industry.
“We shouldn’t lose sight of the fact that the industry is long term. We have to face the reality that we are stock with $40 and $50 a barrel oil,” he said. To this end, he stressed the need for investing in existing capacity, pointing out that reserves and production levels are best established during a tight oil market. “The basic street sense is buy low and sell high. The time to increase reserves is now not when oil price is at $100, so we need to focus on growing our reserves during a tight oil market,” Ene stated.