Business Regulations, Law & Practice | |
Business Regulations, Law & Practice | |
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Thursday, 23 May
2019 / 09.55AM / By Oserogho & Associates / Header Image
Credit: NCDMB
Introduction
The impact of the Nigerian Oil and Gas Industry Content Development Act,
2010 (“the Act”) on indigenous participants in the Nigerian Oil and Gas
Industry, and on the larger economy especially, remains dismal when compared to
the size of the entire oil and gas industry itself.
The above development has resulted in the on-going legislative initiatives
to amend the Act to achieve more optimal development in the competitive
capacity of indigenous participants in the Oil and Gas Industry. The Amendment
initiatives also seek to block the inimical loopholes that are currently
exploited to undermine the principal objectives of the Act.
Some highlights of the provisions of the Act with some of the proposed
Amendments to the provisions of the Act are provided in this paper to enable
you have a better appreciation and understanding of this subject.
New Definition –
Nigerian Indigenous Company
The Nigerian Oil and Gas
Industry Content Development Bill (“the Amendment Bill”) seeks to now describe
a Nigerian Company under the Act to be a Nigerian resident incorporated company
with its entire shareholders, directors and asset owners made up solely of
persons who are of Nigerian descent. This is in contrast with the description
in the Act which describes a Nigerian Company as a company incorporated in
Nigeria with not less than 51% equity shares held by persons who are of
Nigerian descent.
First Consideration
and Exclusivity
The Bill reinstates the
provisions of the Act which requires first consideration to be given to
Nigerian indigenous operators in the award of Oil Block Licences, Oil Field
Licences, Oil Lifting Licences and in all other contract awarding aspects of
the Nigerian Oil and Gas Industry.
Exclusive consideration is also granted to Nigerian owned indigenous service companies with
demonstrable ownership of equipment, qualified personnel and capacity to
execute work on land and swamp operating areas of the Nigerian Oil and Gas
Industry. Such indigenous exclusiveness is also reserved for Insurance,
Reinsurance, Legal and the employment of junior and intermediate cadre
employees.
Indigenous Content
Plan
All commercial
participants in the Nigerian Oil and Gas Industry are now contemplated in the
Amendment Bill to submit a Nigerian Indigenous Content Plan (“the Plan”) which
Plan must fulfil the minimum Nigerian Oil and Gas Indigenous content
requirements, some of which are enumerated above. The Plan is therefore no
longer restricted only to Operators in the Oil and Gas Industry; especially as
the Bill has expanded the meaning of “Operator” to include all Oil and Gas
participants.
Also, all Indigenous
Content Plans must be pre-qualified and pre-approved by the Nigerian Content
Development and Monitoring Board (“the Board”) using the first consideration,
exclusivity and other indigenous content development criteria before any
commercial award can occur in the Nigerian Oil and Gas Industry.
Content Development
Fund
In the Act, a sum equal
to One Per Cent (1%) of every contract awarded in the upstream of the Oil and
Gas Industry must be deducted at source and paid into the Nigerian Content
Development Fund (“the Fund”).
In the Amendment Bill to
the Act, it is further proposed that not more than 10% of the contributions in
the Fund should be spent by the Board on its general and administrative
operations. Seventy per cent (70%) of the Fund is to be disbursed to qualified
Nigerian Indigenous companies for these companies to undertake in-country
capacity development in the oil and gas industry.
Conclusion
Some of the key content
development provisions in the Act and in the Amendment Bill, which delegates
government indigenous manpower development responsibilities to Oil and Gas
Practitioners, who are also required to pay taxes to government, are an illogical
long-term strategy. Lopsided legislation by itself will not enable real,
competitive, indigenous manpower development in the Oil and Gas Industry, and
in the larger economy.
The proposal to disburse
seventy per cent (70%) of the Fund to private indigenous companies, instead of
to specialised government established and funded vocational schools and
institutions, will be counter-productive, encourage fraud and corruption.
Disclaimer:
This is a free educational material. It does not serve as a
source of solicitation, advertisement or the offering of legal services or
advice of any kind. No Client/Attorney relationship is therefore
created. Readers are strongly advised to always seek from qualified Legal
Practitioners, competent legal counseling to their specific factual situation.
Intellectual Property Protected!
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and Regulations. This material can therefore only be reproduced or
re-distributed for non-profit educational purposes under the strict condition
that our Authorship of this material is explicitly acknowledged, and our above
Disclaimer Notice is prominently displayed. [ contactus@oseroghoassociates.com
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