My greatest achievement is the LOCAL CONTENT Intervention fund
……… 1.8m Jobs to be created.……….Engr Wabote
The Local Content policy of the President Muhammadu Buhari’s led administration is recording massive achievements under the direction of the Nigerian Content Development and Monitoring Board (NCDMB). In an Interview with Journalists, its executive Secretary Engr Simbi Kesiye Wabote speak on the short and long term vision of the organization.
Question: You have consistently clamoured for the Extension of Local Content into other sectors, arguing that it would boost the Economy and add to the Nation’s GDP. How so.?
Answer: I think it is very important we do that. When we started the discussions around the Local Content some years back the intent is on how to retain value in Country and also create the needed jobs and also create opportunity for our people. For a very long time since the discovery of oil in Nigeria, the government focused primarily on revenue, taxes from the activities of oil and Gas sector and also Royalties without necessarily dwelling on the value chain that is associated with oil and Gas industry. So, in the process, we did not derive enough benefit from that sector. Oil was discovered in Nigeria about 56 years ago and during the exploration and exploitation of hydrocarbon in oil and Gas sector, we have lost a lot of revenue as a country. Prior to the discussions and enactment of the Local Content Act , only about five percent of what is gotten in the oil and Gas sector value chain was retained In Country. The bulk of it was exported out of this country, nothing was done in Nigeria apart from the fact the oil is in the ground., they couldn’t extract the oil elsewhere but they have to come here. So, everything related to the industry from fabrication, work activity, Engineering design, conceptual design, front end Engineering design, all of these were done outside the country. And it is only when it comes to installation that the work happens in country and through that , we derive less than five percent in the value chain associated with the oil and Gas sector. So the discussion started years back on how do we plough back some of these revenues that are being lost and jobs that are being lost in the country. In total, Nigeria lost about $350billion on capital flights as a result of taking work out of the country while nothing was coming into the country. I recall when I started my career in Shell in 1991 as an oil and Gas Engineer, we were in the envy of our colleagues who read Law, Economics because for every projects that is executed in the industry, we had to travel either to Houston, Aberdeen or Calgary to do front end engineering work, detailed engineering design work and the rest of it all. In the process , we lost two million jobs out of the country. So when the Local Content discussion started, it was all about how do we plough back and derive benefits apart from what we were depended on in the past which are taxes and Royalties. So, we started looking at the process where we bring back jobs into the country. Up until a policy on Local Content was enunciated during the Buhari regime and then discussions were around how do we institute that policy and who is going to drive that policy. The policy then was to increase Local Content to 45 percent by 2027 and to 75 percent by 2050 as the case may be. But the truth is, there was no driving force behind that. So when the government decided to institute that within NNPC, of course the NNPC being the senior partner in most of the joint ventures with IOCs, they were given the responsibilities to drive that policy. So they did their best with all manner of directives that they give to the oil industries in order to drive the Local Content and even coming out with what is called the 23 directives at some point. And some of these were the initial building blocks to the Local Content Law. So the department was created in NNPC , they pushed the needle a bit, but there was serious resistance by most of the International oil companies. At some points they tried their best but when push came to shove, they tell you that there is no legal basis with which they had to what they had to do. So, the then National Assembly saw the opportunity to say look, we need to need to back up this policy with some legal framework that would drive local content development. The discussion started for almost about eight years. The Law was in the National Assembly, so they kept on pushing the boundaries up until 2010 when eventually the ACT was signed into Law, by the Jonathan Administration and then this organization called the Nigerian Content Development and Monitoring Board (NCDMB) was created as a Regulatory Agency with the Legal backing to drive the development of the Local Content in Nigeria. So since then, we have made tremendous progress. Don’t forget from less than five percent when we started, today we about 32 percent in terms of local content attainment, which is phenomenal . And when you talk about the spending in the Industry, on the average in the past, the industry spends about $21b year on Year. So with the establishment of the Board and until date , we have been able to plough back substantial amount of money from $21billion . Almost $5b were retained in country and our objective is to plough back 70 percent of that annual spend by the year 2027. So with the Buhari Administration coming on Board, I was appointed in September 2016 and the first thing we set out to do , given the vision of the Administration , to drive long term planning , was to develop our strategic 10 year road map , which we did in 2017.
Part of the strategic road map is to take local content to about 70 percent attainment trajectory . When we took over , we had attained almost about 20percent , we are about 32 percent attainment now. So it’s a gradual growth because of the nature of the local content development. It involves a lot , it involves Research and Development , it involves Capacity building , it involves setting up capabilities in country . I usually say local content is not a sprint , it’s a marathon, because when you look at those building blocks , you have to develop them over time. It takes a lot of time to develop human capacity . it is not a flicker of the switch where you put it off and on and it happens. So when you look at a trajectory to develop it, it takes quite sometime. And we have been able to push the boundaries, primarily because of the belief by this administration to remain focused on policy direction and to support strategic plans. It is not a knee jerk reaction. Its about what are the plans and you need to put them in place and conscientiously follow through on the development of those plans. So far so good. For the past four years , we have achieved quite a lot. Just a quick example, there was no fabrication that was done in Country prior to the enactment of the ACT today, Nigeria can actually fabricate 120,000 tonnes per annum in terms of fabrication capacity , because we have been able to develop a lot of world class fabrication yards. And it might interest you that the world’s largest floating production system was integrated here in Nigeria, about 200,000 barrels per day at the Samsung/Ladol facility in Lagos , so the clamour for push of local content to other sectors, you could make a business case for it. If you take the oil and gas sector as an example. But the idea is that you have to be focused in the area you want local content to be introduced. An example is the construction sector , it has come of age. A lot of Nigeria companies have been established to get into housing, roads, bridges and stuffs like that. That’s a good area to look at.
The mining sector is also another good area to look at. What people forget is that it is the maturity of the oil and Gas sector that enabled the local content journey. For certain sectors that are not matured enough, there is no point trying to introduce local content, because you would stifle that development of that particular sector . A good area to also at is the ICT sector. So, we need to look at strategic sectors that has huge capital spend and also huge potential.
Question: Talking about attaining 70 per cent Local content by 2027 that brings us to the deregulation of the downstream sector. One of the strategies of the government is the opening up of modular refineries to develop local refining capacity. Can we achieve this objective in the nearest future.
Answer: Absolutely, in the short and long term, we are ready. When I joined the oil and gas sector all the upstream operations in the country were handled by expatriates. They dominated it. As Nigerians , we never saw an opportunity to become managers not to talk of Directors. But today, you have companies with Nigerians as Managing Directors, as well as Directors within those International Oil Companies.
Today Nigerians are running the upstream sector and they have been very successful . An example is Seplat. When Seplat bought that acreage from SPDC , It was producing about 15,000 barrels per day. Today that acreage is producing almost 100,000 barrels per day, And 98 percent of the Management of the Seplat are Nigerians . Same thing you could say about Aiteo and others. These are all Nigerian managed upstream companies. So in terms of getting ready for the downstream, I think we have the capacity for us to get into it.. NCDMB like you know is a regular and part of our mandate is to develop capacity in Country and we find ourselves fixated to government policy in terms of where government wants to add value. So, government came out with the policy of establishing modular refineries in order to augment the refining capacity of the country and save huge sums of money in foreign exchange that we spend in importing petroleum products.
So we got into partnership with Walter Smith as a catalyst for the development of modular refineries. Today there are about four modular refineries that we are supporting.
Question: Going into specifics now, your Board believes that by boosting local Content about 300,000 jobs would be created and an addition of $14 billion to our local GDP. Can you dwell more on this.
Answer: As part of our strategic road map which has a 10 year outlook, we have done three years already, so we are looking at a seven year window . like I said because we spend an average of $21billion in the oil and gas industry, we believe that between now and 2027 we should be able to plough back $14billion , which would be in country value addition through the participation of Nigerians in the oil and gas sector, both downstream, upstream and midstream. Through the policy of domiciliation and domestication , we would add in country value. And in the process, we hope to create 300,000 direct jobs . Now it is important to break that down, The oil and gas industry is not known to create so many jobs, because of the high equipment, intensive and high technical nature of it, however the supply chain that it creates has the capacity that 300,000 by six, for every one direct job you create in the oil and gas sector, you create six others in the supply chain that follows it. So you can as well multiply that 300,000 by six talking about the Direct, Indirect and the induced jobs that are going to be created. Look at the Walter Smith refinery, which is probably not going to employ more than 50 people running it. But think about the truck drivers that will come to lift AGO, think about the food vendors that would set up shops around where you have the trailer parks that would feed those truck drivers, think about the young men and women that would support the truck drivers as they crisscross the country with their products, think about the hotels that would be created around it.
Question: Fuel subsidy has been stopped now and the idea is to achieve self sufficiency in refined petroleum products. How soon can we make this happen.
Answer: There is a saying that necessity is the mother of invention. You have to take some very hard decision to be able to get people to think differently. If you continue to leave that decision to fester, people will never think differently. I believe that having taken the decision (fuel deregulation) give it a couple of months , you will see people beginning to see the opportunity to establish that refining capacity in country. The IOCs refused to invest in building refineries because of the subsidy. They didn’t think it was a good business to go into, because when I build my refinery and I sell fuel, I have to beg to be paid the subsidy associated with it.
That’s not a good business. I want to sell my fuel, I want to get my money, I don’t need to beg anybody. So, having taken that very hard decision, I sincerely believe that give it a couple of months, you would see people who would begin to think about in country, because we have got the market. 203 million people is a whole lot. We have got the market, we have got the consumption power and also when you look at the Sub Saharan Africa region, there are no flourishing serious refineries. So if you do it in Nigeria , you have the capacity to capture the Nigerian Market, as well as the Gulf of Guinea market as the case may be.
Question: Recently, the President transmitted the Petroleum Industry Bill to the National Assembly. Can you tell us the Implications of this to the development of Local Content in Nigeria.
Answer: It’s a separate bill focused on the upstream and downstream sectors. I have looked through it, its not directly conflicting with the Local Content Bill. But it would provide an opportunity for Local Content regulation to regulation to be a lot more robust and a lot more inclusive. And also every operator would be regulated by the ACT, because from what I read , NNPC would become a going concern which would also be regulated actively by the local content law itself. So I see a huge opportunity, I see casting away a lot of the unknowns, because of the greatest uncertainty that has bedeviled the industry is what comes out of the PIB. Moat of the IOCs are a bit wary, because of the uncertainty that it creates. If we are able to get this through either later this year or early next year. I think it would erase all the uncertainties and all the talks about not knowing the direction that the industry is going.
Question: I am aware that NCDMB manages the Nigeria Content Intervention Fund. How is that faring.
Answer: It has been excellent. That has been one of the most successful achievements so far by the Board that I lead. We started with the $200m collaboration with the Bank of Industry (BOI) and as at mid this year, that was exhausted and the council thought it was wise to extend that by another $150m, primarily to support the Nigerian businesses and to contributors to the fund. Don’t forget NCDMB does not get the subvention from government , it is contributed by the oil and gas contractors through the contracts that they enter into with the various Oil and Gas companies. We pegged the interest at eight percent but as part of our COVID 19 intervention, it was brought down to six percent. It’s fixed for five years and no matter what happens, that interest rate is not going to increase , because this is a fund they contributed in a holding basin that is being utilized to support them. As I speak to you, some other African Countries are currently looking at the model in order to develop the local content policy in their countries.
Question: Your Board recently commissioned a new state of the art complex in Yenegoa, Bayelsa state. We understand that the edifice was designed by a Nigerian and also built by a Nigerian. Tell us more about this.
Answer: According to what people say, practice what you preach, we set out on that project four and half years ago. It’s a 17 story building erected in a very difficult terrain. The design was by a Nigerian Architectural firm, Portman, Walters managed by Architect Odusote, while Megastar an indigenous construction company handled the real construction. Because of the terrain , I can tell you that half of the 17 story is underground based on the number of piles that we drove into carry the bulding, also 90 percent of the construction materials were sourced locally. All the granite tiles were made here. We got the bulk of it from Kaduna, the paints were manufactured in Nigeria, likewise all the cables. And in terms of the workforce almost 95 percent of them were Nigerians. We have to even build the capacities of some of the locals in order to be part of the projects. Its not just a 17 story , attached to it is 1000 seater auditorium state of the art and also a four story , four level car park , it’s a small building with all manner of technology in it. There is also a fire lift within the building in the event of a fir outbreak.
Despite the challenge in the Niger Delta , we achieved this within four and half years . we put up this structure in record time , thanks to the President and the Hon Minister state for Petroleum Resources for all the support to get us through with that project. We are very proud of it because it’s the tallest building currently completed in the South South and South East . We are indeed proud that we were able to set the record.