Stories by Adewale Sanyaolu
The Nigerian content law may fail to yield its desired dividend to the country if urgent steps are not taken to address rising complaints of indigenous contract operating in oil and gas sector.
The local content law, which came into existence in 2010 was geared at addressing the over 30 decades dominance of foreign firms in the execution of contracts in the sector, a trend that led to massive capital flight out of Nigeria. The Federal Government felt that through the local content law, more local companies would be able to benefit from the over $1 billion annual contracts awarded in the industry by International Oil Companies (IOCs) to grow their technical and manpower capabilities.
However, some concerned stakeholders who gathered in Eket, Akwa Ibom State, for the commissioning of the multi-million naira operational base and fabrication yard of Engineering Automation Technology Limited (EATECH) decried the non-commitment of some of the IOCs to the local content law. They expressed the fear that if regulatory agencies in charge of enforcing the local content law did not step up their game, the purpose of the law could be defeated.
The challenges
Managing Director/CEO of EATECH, Mr. Emmanuel Okon, in a presentation listed the challenges that have continue to confront local contracting to include difficulties in accessing finance, poaching of staff, poor perception of the capabilities of local firms by multinationals, and the low level of patronage from IOCs.
Okon, who said his company had been doing projects for IOCs in the last 10 years, said most locals, in their bid to build their capabilities, had to ignore high profit margins to build working capital, competence and capacity.
“We face a myriad of challenges from customers, suppliers, regulators and even from host communities where we execute the projects,” said Okon. “Like most local contractors, access to working capital remains cumbersome for us because of the lack of appropriate collaterals. Customers’ expectation of quality project delivery from indigenous contractor is usually bench-marked against expatriates.
“On the other hand, considerations for the same goods and services are based on perception that the jobs done by Nigerians are of low value. As such, premium for service excellence remains skewed to expatriates,” he lamented.
Okon who said local firms had braced up to the challenge of having the same pre-qualification and performance assessment criteria with expatriate firms, noted, however, the harsh climate where local firms had to prepare for delayed payment when negotiating contract financing with banks. This, he noted, was as a result of the prevalence of delayed payment suffered by local companies because of inequalities with customers like the IOCs.
Breach of trust by partners
Daily Sun also learnt that another challenge that local firms face had to do with series of betrayals by foreign firms they seek to embark on Joint Venture (JV) partnership deals with for the execution of contracts in Nigeria’s offshore oil and gas sector. It was learnt that such local firms are also lamenting the breach of most of the contract terms by their foreign partners.
It was also learnt that following the signing into law of the Local Content Act in 2010, some local companies seeking to take advantage of the law, but lacking in the requisite technical expertise, had opted to partner with foreign firms to boost their technical capabilities, especially in the bidding for drilling contracts advertised by IOCs.
It was, however, learnt that in recent years, some of such partnerships had gone sour once the bids were finally won. The Nigerian Content Development and Monitoring Board (NCDMB), it was learnt, is currently handling some of such cases, though at a pace which has drawn more criticisms than applauds.
Another stakeholder, Mrs. Ugochi Amugo, also spoke of the challenge of staff poaching faced by local contracting firms. “Local contracting firms continuously battle the problem of staff poaching,” she said. “It is that bad and inimical to our business when you have to invest so much in hiring and training a staff, sometimes sending the person abroad, and having to watch the person being taken away by another bigger player who adds a little to the remuneration and you are helpless,” she added.
Secretary to the State Government (SSG) of Akwa Ibom State, Mr. Etekamba Umoren, who spoke at the EATECH 10th anniversary celebration in Eket, Akwa Ibom State, also decried the situation where local firms would invest in the acquisition of infrastructure, technology, and personnel in readiness to take advantage of the local content law but would not see the jobs to do.
Umoren, who represented the Akwa Ibom State Governor, Mr. Udom Emmanuel, at the event therefore demanded greater patronage of local firms by IOCs, noting that that remained the best way to boost their capacities in line with the aspirations of the local content law.
“We thank the Federal Government for the local content law and we want to see more of our young men go into areas that were hitherto the exclusive of foreigners,” said Umoren. “And the only way this can be achieved is for them to get the jobs. We have to believe in ourselves. A company like EATECH has just made an investment in a facility here in Eket and they want to leverage on the local content law and they must be supported,” Umoren added.
Way forward
What most stakeholders desire is the stepping up of monitoring and enforcement duties by relevant regulatory agencies in the industry. It is not as if they are dormant; no, the issue is that they are not doing enough to stem some of the breaches still ongoing in the industry.
“In an economy going through a recession with citizens looking for jobs, we still have a situation where some IOCs bring in storekeepers, cleaners, public relations officers, divers, welders and so many of such personnel that abound in Nigeria,” said Ndidi Okezie.
On his part, Managing Director of EATECH, Mr. Emmanuel Okon, said “the National Petroleum Investment Management Services (NAPIMS), in conjunction with NCDMB should encourage a paradigm shift in the way contracts are skewed towards expatriates.
“There should also be a deliberate collaboration between NCDMB and financial institutions in the development of a framework for local contractors to access funding. The NCDMB should also encourage operators through the introduction of incentives to grant mobilisation to local contractors who demonstrate commitment and verifiable proof of technical competence.
Local firms should also build their corporate capacity on the tripod of business integrity, work excellence and transparency,” Okon added.