Be Local, Buy Local

By November 19, 2018Country Quirks

In the United States, the phrase “It’s not what you know; it’s who you know,” is frequently repeated (and oftentimes accurate) in business. What if the expression went one step further, becoming even more exclusive? In the world of Nigerian oil and gas, it’s not just what and who you know, it’s who you are.

Nigeria is Africa’s largest exporter of crude oil. In 2017, Nigerian exports of crude oil brought in a whopping $33.3 billion, making it the eighth-largest exporter of crude oil in the world.1

In 2010, with the objective of promoting local participation and growth in the oil and gas industry, then Acting President Goodluck Jonathan signed the Nigerian Local Content Act (NLCA).2 The act effectively strengthens and stabilizes the country’s portion of the global oil and gas markets. The legislation mandates that Nigerian operators and contractors receive first consideration for any oil/gas contracts and clarifies exactly how first consideration is given.

One of the many stipulations is that the lowest bidder is not automatically awarded the contract. For example, if a foreign contractor submits a bid for a certain contract, a competing Nigerian contractor does not have to meet its competitor’s price. Instead, the local contract only needs to be within 10 percent of the foreign contractor’s price. Beyond that, if multiple Nigerian companies have comparable prices, the company with the largest Nigerian “content” (percentage of employees) wins the contract.

Similar guidelines are in place regarding individual employment: Nigerians must be given first consideration when hiring and awarding promotions, and Nigerian contractors may only employ natives in their junior/intermediate positions. At the management level, foreigners are only allowed to occupy five percent of available, permanent positions.

Nigerian oil and gas contractors are also limited in who they may enlist for external guidance and consultation. For example, they may only contract the help of Nigerian legal and financial services where at all possible.3

At times, many of these guidelines are neither practical nor feasible. For this purpose, the act provides a provision for the creation and maintenance of the Nigerian Content Monitoring Board (NCMB). The board’s main functions include implementing policy, supervising compliance, evaluating performance, awarding contracts, and establishing audit procedures.4

Ultimately, the NCMB aims to uphold the NLCA and keep a larger portion of the Nigerian government’s spending in the oil and gas industry at home. Nigeria currently boasts Africa’s largest GDP, and the NLCA is helping the Nigerian economy to maintain its top rank.

In the Nigerian oil and gas industry, it pays to be Nigerian.

  1. Workman, D. (2018, October 06). Crude Oil Exports by Country. Retrieved from http://www.worldstopexports.com/worlds-top-oil-exports-country/
  2. Oil Producers Trade Section. Nigerian Content Act. Retrieved from http://www.opts-ng.com/index.php/knowledgebase/nigerian-content-act#2076
  3. Okusami, D. (2010, September 29). An Overview of the Nigerian Local Content Act. Retrieved from https://www.templars-law.com/wp-content/uploads/2015/05/AFRICA-ENERGY-WEEK-PRESENTATION.pdf
  4. Goitom, H. (2010, April 30). The Law Library of Congress. Global Legal Monitor. Retrieved from http://www.loc.gov/law/foreign-news/article/nigeria-local-content-bill-signed-into-law/