Boosting the capacity of indigenous firms

IN its resolve to boost local content, the Federal Government recently announced that contracts not above N5 billion would no longer be awarded to foreign companies operating in Nigeria. The government said its decision was part of measures to patronise indigenous firms in line with the Local Content Laws in the country. The Minister of State, Works and Housing, Engineer Abubakar Aliyu, disclosed this at a public hearing organised by the National Assembly joint Committees on Local Content. He said henceforth, contracts worth N5billion and below will be exclusively reserved for Nigerian-owned companies. According to him, this is one of the ways the indigenous companies can bring in their professionalism to bear on the different areas of the economy, infrastructure and oil and gas, and strengthen local content laws. In this regard, proper catergorisation will be done to determine how the policy will affect big construction companies operating in the country. In addition, other measures that will give local firms a cutting edge, government said, will include registration of expatriates and proof of valid residence permit. This is one of the recommendations to update the Local Content Law. The overall aim of the policy is to build the capacity of indigenous firms and provide them with more opportunities for participation in business execution and performance.                                        
While we commend the government for being thoughtful that our indigenous firms deserve to be given opportunity to prove themselves in the bidding process and execution of contracts, their performance profile should not be sacrificed just to award them contracts.

In other words, their capacity to deliver on the job is very important and should not be seen as mere political patronage. If our economy should grow at a reasonable level, the input of local companies with the necessary professional know-how is critical. However, local contractors should see this as a challenge to do excellent job. It is also a call to prove their competency. Boosting the capacity of local firms is one way to stop the capital flight.
No sustainable economic development takes place without the indigenous companies playing a significant role in that country’s economy, especially in construction, manufacturing and other essential services. This is the driving force behind the Local Content Law. This is why President Muhammadu Buhari signed an Executive Order specifically for planning and execution of projects, as well as promotion of Nigerian content in contracts, science engineering and technology. The Order stipulates, among other things, that Ministries, Departments and Agencies (MDAs) should “engage Small and Medium Enterprises (SMEs) in accordance with the Public Procurement Act 2007 for the local construction of materials”.
Besides, local firms, especially those that have proved their professional competence in building and infrastructure development are encouraged with incentives, including access to loans at single digit interest rates. The Nigerian Oil and Gas Industry Content Development Act (NOGICDA) aims at optimising local content in the oil and gas sector of the economy. A few months ago, the government commissioned a multi-billion Local Content Development Office in Bayelsa State. It is believed that NOGICDA will assist in achieving at least 70 per cent in the use of indigenous labour and material in oil and gas projects in the country. Beyond that, it has the objective of ensuring the acquisition of skills and other technical know-how that will help develop the economy, especially at this time that the economy is in need of recovery.
It is obvious that technology transfer will be a mirage without the indigenous companies being active participants in the critical sectors of the economy. Now, foreign firms are in almost total control of the oil and gas sector as well as the construction/infrastructure sector of the economy. The economic development in advanced countries was achieved through a deliberate and sustained policy enunciation and implementation that gave qualified, competent indigenous professionals priority attention in contract bidding and execution.   While we support the need for our local firms to be given more contracts, foreign firms which are competent in specific areas such as road and bridge construction need to be retained. But as localisation skills grow, so do localisation opportunities. We, therefore, urge the National Assembly to closely look at some of the extant laws that can give more opportunities to indigenous companies without compromising quality and professional competence. Supporting local companies is good for the economy but should be done with utmost caution.