Engr Simbi Wabote

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.

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