November 07 2011
The Nigerian Content Development and Monitoring Board (NCDMB), which is responsible for monitoring and supervising the growth of local content in Nigeria, also has the power to issue guidelines and regulations for the implementation of the Nigerian Oil and Gas Industry Content Development Act, which came into force on April 22 2010.
Section 11(4) of the act empowers the minister of petroleum to authorise the continued import of items for up to three years after the commencement of the act where Nigeria lacks the capacity to meet the targets prescribed by the act. Although the minister may issue directives to the NCDMB with respect to the application, administration and implementation of the act, and may also issue general regulations for the purpose of giving effect to the act, the NCDMB can also set down procedures to guide the implementation of the act. In exercising these powers, the NCDMB has recently issued the Procedure for Waiver Approval to guide applications for the grant of waiver approvals subject to ministerial consent.
The new procedure requires an operator seeking a waiver approval to demonstrate that there is a lack of local capacity to execute projects and that this lack of capacity would disrupt its business. Applications for waiver approval must be accompanied by specific supporting documentation which demonstrates the need for the waiver and assures the NCDMB that similar waiver requests will not continue to be made.
Waiver requests are made in respect of each item that does not comply with Nigerian content, and the waiver guidelines outline the process and provide a list of the type of information that justifies the request for a waiver – for example:
In addition to the waiver justification, the NCDMB also requires that applications include a workable and achievable capacity gap closure plan, which shall incorporate proposals for manpower development and for establishing or upgrading existing facilities and completion schedules with timelines and cost estimates. Applicants are also required to provide the NCDMB with quarterly progress reports on the execution of capacity gap closure plans.
The applications are reviewed by the NCDMB's executive secretary, who then makes recommendations to the minister. The decision to grant or deny a waiver request is at the minister's discretion as the act provides that only the minister is empowered to authorise the waiver application.
The waiver guidelines should facilitate the implementation of the act in an environment where the focus on prioritising the use of indigenous goods and services is not always matched by the quantum and suitability of the materials and the resources available to petroleum sector participants in certain areas.
Similar waiver strategies in Nigeria (eg, in relation to the implementation of the Coastal and Inland Shipping (Cabotage) Act) have been criticised on the grounds of abusive and inconsistent application in execution which has not achieved the stated objective of boosting Nigerian participation in certain areas of the maritime industry. The NCDMB's commitment to developing local capacity and capabilities in the Nigerian oil and gas industry must be balanced against the need to maintain an operating environment in which government waivers are used as a tool to do business in key areas of the Nigerian oil and gas sector.
For further information on this topic please contact Folake Elias Adebowale or Nnewuoghor Okhai-Akhigbe at Udo-Udoma & Belo-Osagie by telephone (+234 1 263 4831), fax (+234 1 263 4541) or email (email@example.com or firstname.lastname@example.org). The Udo-Udoma & Belo-Osagie website can be accessed at www.uubo.org.
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Folake Elias Adebowale