Lecture: The Nigerian Content Act:Issues and Workers Concerns-By Comrade Hyginus Chika Onuegbu

The Nigerian Content Act:Issues and Workers Concerns-By Comrade Hyginus Chika Onuegbu (delivered in 2012)

PROTOCOLS!
1.     Introduction

The clamour for Nigerians to take centre stage in the oil and gas business is not new[1]. In fact as early as 1970s, Nigerians have started seeking for the Nigerianisation of the strategic oil and gas industry[2]. This should not be a surprise considering that the sector contributes some 90% of Nigeria’s gross earnings[3] and over 40% of Nigeria’s GDP[4] while only 5% of all goods and services used in the industry are in-country spend[5].However, it was not until April, 2010 that a law to enforce the Nigerian Content -the Nigerian Oil & Gas Industry Content Development Act 2010 (the “Nigerian Content Act”), received presidential assent. Until then, only all efforts at increasing local content  also known as Nigerian Content were mere policy directives  which lacked legal backing and hence not taking seriously by the operators in the oil and gas industry[6].

Let me also make it clear that the concept of local content isnot restricted to Nigeria, as it has for long been operated, and is still being operated in several other countries[7]. The fact is that every country in the world has one law or policy that is aimed that enhancing local content and giving first consideration to its nationals in employment and other economic activities within and beyond its borders. The challenge we have is that sincemost countries have even extended their local content laws and policies to operations outside their borders,many International Oil and gas companiesoperating in Nigeria are more predisposed to obeying their home countries local content laws and directives than that of Nigeria[8]. This explains why many of these international oil and gas companies continue to look for innovative ways to undermine Nigeria’s local content Act and regulations. Unfortunately, our usual Nigerian factor and defective policy implementation are making it easy for them to do so.

Let me also state that the  Nigerian workers  and the unions that represent them especially the Petroleum& Natural Gas Senior Staff Association of Nigeria(PENGASSAN) have always  championed  the struggle for the increased participation of Nigerians in the oil and gas industry.  However our experience, currently, is almost that of regret as the same Nigerians who are beneficiaries of our struggles are the ones that now devise all manner of anti-labour schemes aimed at strangulating and undermining the same group that fought for the Nigerianisation and Nigerian Content. This should be food for thought!

2.     The Nigerian Oil and Gas Industry Content Development Act 2010 (aka The Nigerian Content Act)

This is an Act to provide for the development of Nigeria content in the Nigerian oil and gas industry; for Nigerian content plan; for supervision, coordination, monitoring and implementation of Nigerian content and for matters incidental thereto. The Act contains a little above 100 sections detailing legislated obligations. It also sets up a monitoring board(NCDMB) to supervise, coordinate and ensure compliance.The Act is the outcome of a 2008 bill sponsored by Senator LeeMaeba, who himself was a former Zonal officer of the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) Port Harcourt Zone. The act is preserved in its entirety in the 2012 Petroleum Industry Bill and draws great inspiration from the many struggles of PENGASSAN and NUPENG for the development of Nigerian content and Nigerianisation of the oil and gas industry. The Act defines Nigerian Content as:‘the quantum of composite value added to or created in the Nigerian economy by a systematic development of capacity and capabilities through the deliberate utilization of Nigerian human, material resources and services in the Nigerian oil and gas industry’[9].

The key provisions of the Act regarding Labour include the following[10]:

Operators must give Nigerians first consideration for employment and training in respect of all executed projects and may be required by the Board[11] to maintain a reasonable proportion of employees from areas of significant operations;
Submission of an Employment and Training (E&T)Plan which shall include hiring and training needs of the operator, and its contractors, breakdown of required skills and shortages in the Nigerian labour force and anticipated training requirements and expenditure for such training;
a time frame for employment opportunities for each project phase;
specific quarterly reports of the employment and training activities of the operator;
evidence of reasonable efforts by operator to within a reasonable time, train Nigerians to fill skills shortages in the industry;
Submission of succession plan for the Nigerianisation of expatriate positions; The Act specifically provides that:For each of its operations, the operator shall submit to Board a succession plan for any position not held by Nigerians. Such succession plan shall provide for Nigerians to understudy each incumbent expatriate for a maximum period of four years. At the end of the four year period the position shall become nigerianised.
Approval of the Board must be sought prior to the application to the relevant authority for expatriate quota positions;
A maximum of 5% of expatriates may be maintained by an operator for management positions in respect of each project. The Act also empowers the Minister to make regulations requiring compulsory registration of operators, companies, or its professional employees engaged in the provision of engineering or other professional services in the petroleum industry with relevant professional bodies in Nigeria.[12]
Operators are mandated to employ only Nigerians in their junior and intermediate cadre.
Any collective agreement entered into by the operator or other body submitting the plan with any association of employees respecting terms and conditions of employment in the project shall contain provisions consistent with this section[13].
Obviously the intention of the Act is laudable. However, the devil is in the details.Moreover, our culture of ineffective execution, corruption and the so-called Nigerian factor has denied  Nigerians  and Nigeria the much expected benefits from the Act.



3.     Nigerian Content Act 2010: The Key Issues:
Permit me to highlight some of the key issues that affect or may affect labour:

Definition of Nigerian Company:  A Nigerian Company is defined under the Act as a company registered under the Companies and Allied Matters Act and having not less than 51% Nigerian shareholding. Such a company is to be given first consideration in the award of oil blocks, oil field licences, and oil lifting licences and in all project awards in the Nigerian oil and gas industry[14]. This has only led to many spurious and preposterous mergers in the Oil and Gas industry thereby scuttling the real intentions of the Act.
The sanctions for non-compliance under the Act are negligible (5%) and therefore insufficient to prevent breach. Remember that many countries give tax advantages and incentives to these companies for obeying their home country’slocal content policies, laws and directives. Moreover under the Nigerian JV system, some 60% of this negligiblepenalty(5%) will eventually be paid for by Nigeria through NNPC. This means that only 2% will be the actual penalties for breach. Juxtapose this with the heavy tax benefits for obeying their home country’s local content laws and policies to our detriment!
No role for PENGASSAN and NUPENG in the Act. The implementation of the Act can only be effective to the extent that the NCMB is effective.The experience of NIMASA in the management of the Nigerian CABOTAGE ACT shows clearly that any lapses in implementation will spell a doom as the benefits of the ACT will elude Nigerians and Nigeria[15]. It is thereforevery pathetic to note that unlike similar laws in the Industry, the oil workers unions (PENGASSAN and NUPENG) and the Labour centres (i.e. Trade Union Congress (TUC) and Nigeria Labour Congress (NLC) are not represented on the board of the Nigeria Content Monitoring Board (NCMB). The omissions of unions who are on the field and whose members have been fighting for the greater and effective involvement of Nigeria creates doubt as to whether the government really wanted the Act to be effective or merely passed it to stave-off pressures over the vexed issue[16].  This reasoning is strengthening by the fact that many previous attempt at passing a Nigerian Content bill since the advent of this democracy failed woefully[17].
The ‘first consideration’ was not defined in the Act. Neither did the Act spell out the guidelines for the Board to determine the veracity of the criteria employed by the operator in determining first considerations within the provisions of the Law. Moreover, the Board is under a time-frame of 30 days to issue a Certificate of Authorization for every project and this will definitely query the credibility of any exercise of the nature of public review within 30 days. How will all the unclear issues be resolved within this specified period without undermining the objectives of the Act?
Misinterpretations and lacuna in  the Nigerian Content Act:
The Act is now being used as an excuse for contract staffing and casualization of Nigerian workers. Many Operators now claim that the Act mandate them to outsource 90% of all jobs in their organisation and therefore an excuse to embark on all manner of contract staffing and casualization. I have repeatedly asked them to show me the specific provision(s) in the Nigerian Content Act that allows them to do so. I am still waiting for their response. Let me however state that the law is clear on casualization- it is illegal. For contract staffing the “Guidelines on Labour Administration Issues in Contract Staffing/Outsourcing in the Oil and Gas Sector” issued by the Federal  Ministry of Labour and Productivity in May of 2011 is also clear. In fact the guideline is now a regulation and the Minister of Labour has promised to work with the Minister of Justice to Gazetteit soonest.You may wish to recall that this is also the same way that the Free trade Zone laws is beingmisinterpreted to deny Nigerians working in the various export FTZ the right to join trade unions and bargain collectively. It may interest you to know that  majority of the companies in the Onne Oil and Gas Free Zone , for instance, do not respect the right of their workers and have refused the workers the right to be   unionised. Permit to restate thatSection 40 of the 1999 Constitution of the Federal Republic of Nigeria and Article 10 of the African Charter on Human and Peoples’ Rights (Ratification and Enforcement) Act, ILO Conventions 89 and 98 and even the OECD guidelines for multinational enterprises give these workers the right to join a trade union for the protection of their interest.
“For each of its operations, an operator or project promoter may retain a maximum of 5% of management positions as may be approved by the Board as expatriate positions to take care of investor interests…” (Section 32): What is the definition of management position?Is it the Board?The Management Committee? Or projections of management? Clear guidance was not given and so implementation is being undermined as various companies adopt their own interpretations while the NCDMB watch.
“All operators and companies operating in the Nigerian oil and gas industry shall employ only Nigerians in their junior and intermediate cadre or any other corresponding grades designated by the operator or company” (Section 35): What is the meaning of intermediate cadre? Again, various companies manufacture their own interpretations to the detriment of Nigerians. Consequently we have seen the influx of all kinds of expatriates(foreigners) into Nigeriato do jobs that would ordinarily fall into this category. Of course in the absence of clear definition, discretion will be the order of the day. And our experience has shown that discretionary powers are more often a source of corruption and are usually abused.
“Where Nigerians are not employed because of their lack of training, the operator shall ensure, to the satisfaction of the Board that every reasonable effort is made within a reasonable time to supply such training locally or elsewhere. Such effort and the procedure or its execution shall be contained in the operator`s E & T plan” (section 30): What is reasonable time? Of course there is no evidence that the Act has given rise to capacity development of would-be Nigerian employees as stipulated herein. The result is that the international oil companies continue to hide under capacity gaps to undermine the law, bring in their nationals and deny Nigerians of this important opportunity. Even partnership with Nigerian universities which will promote collaboration in research and technology transfer is being relegated to the background, while they extend financial support and research grant to the universities in their home country.
Waivers[18] . Section 11(4) gives the Minister of Petroleum the Power to grant waivers. This is a huge discretionary power that is susceptible to abuse. In deed our experience has shown that discretionary powers are a major source of corruption and all kinds of untoward practices in Nigeria. Moreover similar power to grant waivers in the CABOTAGE Act etc. have only succeeded in denying Nigerians the benefits of that Act.
The deliberate undermining of the spirit and intent of the Nigerian Content Act by the Nigerian Content Development and Monitoring Board (NCDMB) through ineffective implementation , arm-chair monitoring  and production of self-serving regulations.
4.     Nigerian Content Act 2010: The Key Concerns of the Nigerian workers:
a.      The number of Expatriates (foreigners)working in Nigeria is seriously increasing instead of decreasing.  In fact only on Friday September 21 2012 PENGASSAN had to direct all its branches in Nigeria to engage their various management over the unprecedented influx of expatriates through all manner of guises into the Nigerian oil and gas sector. The Ministers of Labour, Petroleum and Interior were all copied in that letter. A report issued in October 2010 even has it that expatriates constitute a third of the workforce[19]. One can only imagine the actual number now? Please take note that when a foreigner comes to a developing country like Nigeria he is called an expatriate irrespective of his professional standing, but when a Nigerian goes to Europe and America or a more developed country, he is called an immigrant[20]. Immigrants are poorly. But expatriates enjoy unimaginable pay and dreamland privileges, which is very high even by the standard of their home country.
b.     Poor monitoring and implementation of the Nigerian Oil and Gas Content Development Act 2010:It is rather very disheartening that two years after the passage of the Nigerian Oil and Gas Industry Content Development Act, 2010, the country is yet to notice any positive impact of the Act. The Nigerian Content Development and Monitoring Board (NCDMB) need to wake up and aggressively pursue and deliver dividends to our people, communities and Country. We will not be deceived by stage managed events, adverts and proclamations. The truth is that we will continue to challenge these fictitious statistics with reality. We want to see our people being trained and assigned accountabilities in critical disciplines of the Oil and Gas Sector, not as figureheads for purpose of statistics.
c.      Misinterpretation of the Act leading to abuse and unrestrained use of contract staffing and casualization. This is the only visible ‘benefit’ of this act today in Nigeria. This is very pathetic and contrary to the global trends in the employment in the oil and gas industry.For instance the Oil& Gas Global Salary Guide 2012 published by the Hay Group shows that the year 2011 saw a sharp rise in permanent staff as a percentage of the overall workforce[21].
Unsupervised and spurious Mergers between multinational companies and Nigerian companies leading redundancies and loss of jobs. This is a grave concern as the Act which intended to have more Nigerians on the job is now being used as a ploy to  embark on corporate restructuring, downsizing , right sizing and all manner of ‘sizings’ to the detriment of Nigerians.
Increased labour crises as Nigerian companies and Nigerians in management positions seem to have suddenly developed a culture of disrespect for workers’ and human rights. For instance some 90% of the industrial relations crises in the oil and gas industry today are in these companies.
Faulty and unpatriotic regulations by the NCDMB:It is very surprising and disheartening that the spirit and intent of the Nigerian Content Act is being seriously undermined by unpatriotic and illegal regulations made by the NCDMB. In fact at a recent workshop last week in Lagos organised by NEITI on PIB attended by PENGASSAN and other stakeholders in the Oil and gas industry, Senator Lee Maeba who was the sponsor of the Nigerian Content Act 2010 made it clear that the many provisions of the NCDMB Guidelines are void to the extent of their conflict with the NCA provisions.
Capacity gap. Any Concrete plan to close the gap? This is a major challenge to having Nigerians take up the quota allocated to them in the Act. What is the NCDMB doing to enforce the law and close the gap? Remember the Act provides that “Where Nigerians are not employed because of their lack of training, the operator shall ensure, to the satisfaction of the Board that every reasonable effort is made within a reasonable time to supply such training locally or elsewhere. Such effort and the procedure or its execution shall be contained in the operator`s E & T plan (section 30)”.


5.     CONCLUSION AND WAYFORWARD:
Let me state by way of conclusion that PENGASSAN support the Nigerian content Act and any genuine effort to grow Nigerian content not just in the oil and gas industry but in all other sectors of the Nigerian economy. What we will not support is any manipulation of the process to deny our members, other Nigerians and Nigeria the well-intended and laudable benefits of the Act. We call on the Nigerian Content Development and Monitoring Board (NCDMB) to wake up and aggressively pursue and deliver dividends of the Nigerian Content Act to our people, communities and Country.  The NCDMB should actively partner with labour Unions especially PENGASSAN and NUPENG as well as the Civil Society to be successful.

Let me state that poor or non-implementation of the Nigerian Content Act will amount to economic sabotage and undermining the national security giving the laudable objectives of the Act!

Let me quickly add that the effective implementation of the Nigerian Content Act is not a task to be left to NCDMB alone. This calls for the active support of statutory bodies such as the Immigrations, Customs, and Nigerian Police etc.  In addition, the National Assembly, the Rivers State House of Assembly and indeed all the StateHouses of Assembly in Nigeria need to monitor the implementation of the Act to deliver greater dividends to their constituents. Host communities and the various community development committees are also enjoined to do the same.

Finally, we hope that the issues and concerns raised in this paper will be thoroughly and adequately addressed in the interest of industrial peace and harmony.

Thank you for your attention and may God help Nigeria.



Comrade Hyginus Chika Onuegbu[22] JP, FCA ,National Industrial Relations Officer Petroleum & Natural Gas Senior  Staff Association Of Nigeria (PENGASSAN) Presented this piece to the 2012 port harcourt international oil and gas conference & exhibition  (PHIOG) VENUE: Auditorium, Rivers State House of Assembly, P/Harcourt,DATE: Sept. 26th2012




[1]Nwapa, E. (2009).Strategizing on Nigerian Content Implementation for Optimization – The Role of NNPC. A presentation by NNPC at the International Energy Roundtable, Imo State. P.3

[2] Ogbeifun, L.B; (2007).The role of Labour Unions in the Oil and gas Industry in Nigeria: A practitioner’s perspective. Nigeria. Lagos. Concept Publications Ltd. P.195

[3] NNPC. History of the Nigerian Petroleum Industry. Available on the NNPC website. Accessed September 22, 2012. See also, Political Economy of the Petroleum Sector in Nigeria by Alex Gboyega, Tina Søreide, Tuan Minh Le and G. P. Shukla. Policy Research Working Paper 5779. The World Bank Africa Region, Public Sector Reform and Capacity Building Unit, August 2011.

[4]Onyeukwu, H (2010).The Nigerian Local Content Bill: Is it the Game changer? 3rd May. Available on the internet (www.energyinst.org) and accessed 23/09/2012

[5] Okoye, Chris (2011).Nigerian Oil & Gas Industry Content Act:Impact on the Engineering Family. A paper presented to the 20TH COREN Zonal Engineering Assembly. ENUGU: 2nd – 3rd August, 2011. P.40

[6] Please take note that the following which had no sanctions were the basis of local content drive before the Nigerian Content Act 2010 was passed into law in April 2010 ;(1) The Petroleum Act (1969);(2) The Joint Operating Agreement JOA (1991) and Production Sharing Contract PSC (1993 Onwards) Agreements; (3) The Nigerian Content Policy (2005) and (4) Some provisions in the Cabotage Act 2003 and the Insurance Act 2004.

[7] IHUA, U.B. (2010). Local Content Policy and SMEs Sector Promotion: The Nigerian Oil Industry Experience. International Journal of Business and Management Vol. 5, No. 5; May 2010

[8] Many countries even go to the extent of   driving these policies through tax incentives and penalties.

[9] Section 106 dealing with definitions.

[10]Sections 28 to 35 of the Nigerian Content Act.

[11]NCDMB

[12]Section 42 of the Act.

[13] Section 10 (2)

[14] A Nigerian company is defined in section 106 of the Act as a company formed and registered in Nigeria in accordance with the provision of Companies and Allied Matters Act with not less that 51% equity shares by Nigerians

[15]Onyeukwu, H (2010).The Nigerian Local Content Bill: Is it the Game changer? 3rd May. Available on the internet (www.energyinst.org) and accessed 23/09/2012

[16]Onyeukwu, H (2010).The Nigerian Local Content Bill: Is it the Game changer? 3rd May. Available on the internet (www.energyinst.org) and accessed 23/09/2012

[17]Take note that the following previous attempts to pass a Nigerian Content bill into law failed in the National Assembly- re The Chibudom Nwuche Bill (1999-2003) and the Ofodili Bill (2004-2007) Legislature.

[18] Section 11(4). Gives the Minister the Power to grant waivers.

[19] The Solidarity Center (2010): Degradation of Work: Oil and Casualization of Labor in the Niger Delta. October.ISBN 0-9761551-6-8

[20] Wikipedia.

[21] The Hay Group and Oilandgasjobsearch.com Limited (2012). The Oil & Gas Global Salary Guide 2012.

[22]Comrade Hyginus Chika Onuegbu JP, FCA, is the National Industrial Relations Officer of Petroleum & Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the State Chairman, Trade Union Congress of Nigeria (TUC) Rivers State.  He is also a member of International Labour and Employment Relations Association (ILERA), a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and a Justice of the Peace (JP). He can be reached on: Tel 08037404222/ Email: chikaonuegbu@yahoo.com/ chikaonuegbu@tucrivers.org.  Please note that opinions and comments expressed in this paper are strictly made in my capacity as PENGASSAN National Industrial Relations Officer and should be construed as such.  For more information on PENGASSAN, please visit our website: www.pengassan.org