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Nigeria risks losing $67bn on local content
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Nigeria risks losing $67 billion in oil and gas industry expenditure if it does not accelerate efforts to increase local content in its vital petroleum sector. This is the warning oil industry stakeholders issued at a recent consultative forum in Abuja.
Nigeria, Africa’s largest producer of petrol, has one of the lowest levels of local content in its petroleum industry, compared to countries such as Mexico and Brazil which have largely domesticated the oil industry. The effect of this scant Nigerian presence in the oil industry and its associated activities is that it is foreigners who would once again stand poised to grab the main chunk of the money.
The national target to achieve 45 per cent local, Nigerian content by 2006 was missed, making the 2010 target of 70 per cent look increasingly like a mirage. By comparison, both Malaysia and Brazil have reached at least 70 per cent local content.
This dismal level of Nigerian content is said to explain the low level of participation of Nigerians in the oil industry as contractors, suppliers, skilled technicians and entrepreneurs. This situation, oil industry sources say, is also responsible for the oil industry appearing to be an enclave, aloof from the rest of the economy, apart from the considerable sums it brings to the national coffers from exports of oil and gas. Thus despite the oil and gas industry being both a creator and heavy user of technology, Nigeria is missing out on capturing this technology and transforming into a creator and supplier of technology the industry.
Experts say the $67 billion represents total petroleum industry expenditure for the five years between 2008 and 2012. Of this figure, oil expenditure for both onshore and offshore will take $34.4 billion, while spending on natural gas would reach $32.7 billion. In the absence of vigorous pursuit of a robust local content policy, most of these monies would go to foreign firms and individuals, leaving Nigeria with precious little by way of financial, technological and broader economic gains.
Chief Henry Okolo, CEO of Dorman Long, told the Abuja meeting that local content should be treated as a national strategic imperative. Indeed, the government’s economic strategy document requires the oil industry to contribute to economic development and employment creation through the enforcement of a Nigerian content policy. Central to this policy is a domiciliation of oil industry technology within Nigeria as against the current practice where engineering design, seismic analysis, structural steel, pipes and technicians are largely imported.
Okolo emphasised the gains the nation stands to reap from increasing Nigerian content. These include accelerated economic growth, employment creation, technological acquisition and development and enhanced national security.
George Osahon of the Nigerian Content Division of NNPC admits that much remains to be done to attain higher levels of local participation. Drastic measures are required to achieve 70 per cent local content by 2010, he told the Abuja gathering. He conceded that there has been an overwhelming interest by Nigerian investors to establish manufacturing plants, engineering companies and fabrication yards to service the oil and gas industry.
Nigeria, Africa’s largest producer of petrol, has one of the lowest levels of local content in its petroleum industry, compared to countries such as Mexico and Brazil which have largely domesticated the oil industry. The effect of this scant Nigerian presence in the oil industry and its associated activities is that it is foreigners who would once again stand poised to grab the main chunk of the money.
The national target to achieve 45 per cent local, Nigerian content by 2006 was missed, making the 2010 target of 70 per cent look increasingly like a mirage. By comparison, both Malaysia and Brazil have reached at least 70 per cent local content.
This dismal level of Nigerian content is said to explain the low level of participation of Nigerians in the oil industry as contractors, suppliers, skilled technicians and entrepreneurs. This situation, oil industry sources say, is also responsible for the oil industry appearing to be an enclave, aloof from the rest of the economy, apart from the considerable sums it brings to the national coffers from exports of oil and gas. Thus despite the oil and gas industry being both a creator and heavy user of technology, Nigeria is missing out on capturing this technology and transforming into a creator and supplier of technology the industry.
Experts say the $67 billion represents total petroleum industry expenditure for the five years between 2008 and 2012. Of this figure, oil expenditure for both onshore and offshore will take $34.4 billion, while spending on natural gas would reach $32.7 billion. In the absence of vigorous pursuit of a robust local content policy, most of these monies would go to foreign firms and individuals, leaving Nigeria with precious little by way of financial, technological and broader economic gains.
Chief Henry Okolo, CEO of Dorman Long, told the Abuja meeting that local content should be treated as a national strategic imperative. Indeed, the government’s economic strategy document requires the oil industry to contribute to economic development and employment creation through the enforcement of a Nigerian content policy. Central to this policy is a domiciliation of oil industry technology within Nigeria as against the current practice where engineering design, seismic analysis, structural steel, pipes and technicians are largely imported.
Okolo emphasised the gains the nation stands to reap from increasing Nigerian content. These include accelerated economic growth, employment creation, technological acquisition and development and enhanced national security.
George Osahon of the Nigerian Content Division of NNPC admits that much remains to be done to attain higher levels of local participation. Drastic measures are required to achieve 70 per cent local content by 2010, he told the Abuja gathering. He conceded that there has been an overwhelming interest by Nigerian investors to establish manufacturing plants, engineering companies and fabrication yards to service the oil and gas industry.
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