RESEARCH AND DEVELOPMENT AS A KEY LEVER FOR LOCAL CONTENT IMPLEMENTATION IN NIGERIA’S OIL AND GAS INDUSTRY
Introduction
The domination of expatriates in Nigerians oil and gas sector was a long term hindrance to local and indigenous participation which has in turn cause the country numerous losses both economically and socially. In order to rectify these and encourage local participation, the Federal Government of Nigeria in March, 2010 signed the Nigerian Local Content Development Act in recognition of the deficiencies in indigenous human capital development in the oil and gas industry in Nigeria. In a bid to fully implement the Local Content Act, some problems came up which have affected the effective implementation of the policy.
Research and development is the main sources of competitiveness among leading nations that produces oil and gas as it serves as building block and a rudimentary factor used to strengthen and support firm’s core business.
The Federal Government of Nigeria enact the Local Content Development Act to encourage the participating companies to transfer technology, create job opportunities and at the same time patronize the local supply industry while they are exploiting her national resources. But in a bid to fully implement this, some problems came up which includes, but not limited to: Lack of Infrastructural Base, Lack of Funds for Indigenous Companies, Political Instability and Bad Investment Climate, Discrimination and Under-Utilization of Nigerian Services, Issues of Non Compliance, Corruption, Inadequacy of Educational System, Insufficient sanctions for breach and many more.
Research and Development
Research and Development plays a critical role in the development and innovation in any industry be it a business firm or organization process. It’s essentially an investment in technology and future capabilities which is transformed into new products, processes, and services. In industry and technology sectors R&D is a crucial component of innovation and a key factor in developing new competitive advantages. Research and Development is of great importance in oil and gas sector especially with regards to the current revolution and diversification taking place in Nigerian’s oil sector, as the level of competition, production processes and methods are rapidly increasing among the oil producing countries.
Local Content Policy
Local Content Policies in the most expansive definition, include all government interventions, measures or programmes that aim to increase shares of employment, services, manufacturing provisions and overall financial value to the local industry value chain. They also comprise initiatives that target the strengthening of the productive sectors of the national economy-be it in manufacturing or agriculture-and are measured by the achieved growth or competitiveness of the targeted sectors. ‘Their final objective is to raise growth and improve the competitiveness of the overall economy while maintaining a rising trend in living standards.
Local Content Development Act in Nigeria
the act was projected and aimed at developing the Nigerian content in the Nigerian oil and gas industry thereby increasing the participation of Nigerians in the oil and gas industry positively impact on the economy; to provide for the Nigerian content plan, coordination, supervision, monitoring and implementation of Nigerian content; and for related matters.
The Act gives priority to Nigerian operators, goods and services, and prescribes minimum levels of Nigerian content to be achieved within a specified time-frame. It establishes the Nigerian Content Development and Monitoring Board (NCDBM) to monitor, coordinate, and implement the provisions of the Act and establishes the Nigerian Content Consultative Forum to provide the platform for information sharing. Implementation of the Act is centred on several core principles, including: (i) preference for Nigerian content; (ii) financial thresholds and ancillary service requirements; (iii) exclusive consideration for indigenous operations; (iv) minimum content requirements; and (v) workforce indigenization.
Section two of the Act gave all stakeholders’ and sub-contractors licenses to develop a local content plan and consider it as part of their policy. The Act establishes a legal and regulatory framework for the growth of the indigenous oil and gas companies, by giving priority to Nigerian independent operators in the award of oil blocks, oil field licenses, oil lifting licenses and all projects, subject to the fulfillment of such conditions as may be specified by the Minister.
Problems of Local Content Development in the Oil and Gas Industry in Nigeria
The executive secretary of NCDMB during a session lamented that Nigeria currently face many pressing R&D challenges, including inadequate facilities and infrastructure, weak framework for protection of intellectual property; lack of funding and low technological development and inadequate educational infrastructure and curriculum to support and foster innovation in our higher institutions.
Other challenges include inability to retain most of the best brains in-country and inability to employ or re-integrate those sponsored by government on scholarships to apply knowledge acquired.
Other problems are:
Lack of Infrastructural Base : Nigeria is underdeveloped in terms of infrastructural provision e.g. inadequate power supply, poor transportation, educational facilities and telecommunication network, health care facilities etc. all these factors are the major stumbling block in making sure that local content policy is fully implemented in Nigeria.
Lack of Funds for Indigenous Companies : Political instability in the Niger delta lead to the reduced rate of investment both locally and globally. There have been frequent attacks on the foreigners and the the foreign interest in the region in the past few years. The indigenous companies lack access to financial aid which will enable them to function effectively and efficiently This is certainly detrimental to industrial growth.
Discrimination and Under-Utilization of Nigerian Services : Allegations of discrimination have been made with particular regard to project rates and also remuneration in relation to Nigerian man hours when compared to the value of expatriate man hours.
Issues of Non Compliance : One of the core allegations that have been raised is that some multinationals have continued to violate the provisions of Nigerian Content Act through the use of expatriates, who perform job functions that Nigerians have capacity to execute. It has also been alleged that instead of resorting to the sanctions provided by the Act to enforce compliance, the Nigerian Content Development and Monitoring Board (NCDMB) instead resorts to a more collaborative or persuasive approach to get the erring multinationals to comply with the provisions of the Act.
Inadequacy of Educational System : There are no adequate training facilities in the Nigerian educational sector. This is as a result of poor funding by government which is opined to have compromised technical education and research initiatives. There is no Research and Development (R&D) collaboration between the multinational oil companies operating in Nigeria, universities and other research institutions due to the omission of research and development in the Nigerian content policy. When appropriate skill is lacking in any production system, it results in poor quality output which undermines capacity building and sustainable development in any nation. This has made it difficult to produce balanced indigenous engineers and technicians to satisfy the local content requirements of the Act.
Way Forward: Research and Development in the full implementation of Nigerian’s local content development act
The R&D, as the center of this complex process of innovation, is closely linked to science and technology, which implies in the need of interaction between R&D departments and the system that promotes the advancement of the frontiers of human knowledge such as universities and research institutes. This partnership is an important and growing contributor to industrial innovation and without it the university research is not always transferred to industry researchers.
Investing in research and development (R&D) would drive innovation and create new and improved technologies to meet up with the global demand as the level of competition, production processes and methods are rapidly increasing. Majority of the international oil companies (IOCs) and national oil companies (NOCs) have increased their spending on R&D consistency over the past years.
The success for the coordination of these projects depends on the synergy among these levels, especially when unexpected bad situations occur. Therefore, R&D work requires significant coordination.
However, in a progressively technologically-driven age, diversification in the oil and gas industry is changing in two underlying ways:
1. Utilization of sophisticated technologies to discover and produce hydrocarbons in future is becoming imperative due to the limited ‘easy oil’ globally.
2. High profile disasters such as the recent Deepwater Horizon accident (Perrons, 2014), has resulted in a significant shift in the expectations of the oil and gas industry in regards to safety, environmental stewardship and human welfare. Thus, in the face of these challenges, technology and innovation will play a pivotal role in the success or failure of the future of oil and gas firms.
Conclusion
There is a need for private-public partnership to reinforce the implementation of human capital development agenda for the Niger Delta. Emphasis should be placed on the provision of modern technological facilities and social welfare package that can transform the region from its present situation to an industrial area. Also, research grant process should be accessible by the public and should be corruption free in order to ensure transparency and different approaches and solutions.
