Just Before the Local Content Bill Is Passed

May 20,2008.

By Chidi Nwachukwu

The local content bill has been in the public glee in the recent time. The bill when passed into law will ensure that both men and materials are sourced locally in building our industries especially the oil and gas sector of the economy. Since oil exploration about 50 years ago, foreigners have dominated the industry while their Nigerian counterparts are left in the sidelines or meant to take up crumbs. No industry has patronized the “rentier economy” like the oil industry, where the tenant is richer than the property owner. However, the question is how realistic is the local content before 2010?

The above question has become pertinent in the light of a seeming rush to pass the law of which some operators believe that the industry do not have the necessary infrastructure to implement. Specifically, the General Manager of Shell petroleum, Dr. Eddie Wikina as reported in Thisday Newspapers of March 4^th 2008 had stated that, the necessary modalities have not been put in place, and for a place that there are no infrastructures as Nigeria 70% Nigerian content is much. He further cited example of Malaysia, Norway and some other countries to have started by putting necessary infrastructure in place first.

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Operators have argued that the comment from the General Manager of Shell should be taken seriously especially to avoid the repeat episode of Telecom Deregulation. The new GSM operators were unable to deliver effective service for long because there was absence of adequate infrastructures, even they have paid so much as license fee to the government who appeared to be in hurry to collect same. So it is not enough to pass the local content bill, enormous concern should be given to the ability of the oil industry to continue to produce in full capacity and of high quality soon after the passage of the bill.

However, we must quickly remind ourselves that Local Content is not an end in itself but a catalyst for the industry and the ancillary sectors to develop as fast as possible the most needed strategy to sustaining itself locally. To wait for all infrastructures to be in place would be to wait forever. Some measures of challenges are expected of which solutions are equally expected to be proffered in the course of implementation. A closer case in point is that of Zambia. When the country on August 11^th, 1960 announced that it was nationalizing its mining industry, pronto the decision affected the Zambian Anglo America Ltd and Roan Selection Ltd who earlier dominated the industry. This decision threw up a lot of challenges ranging from technical skills, tools and machineries as well as capital, which was the most scarce in Zambia. Yet the policy paid off as it was used eventually to fast track development of mines as well as ensure that resources were mobilized and utilized locally largely in the interest of the country.

To imagine that Local Content if well implemented could keep back 20 billion dollars at home as stated by the general manager of Shell is worth trying. It could now be said that this policy is one of the strongest possible measures government can take in bringing about economic development in Nigeria. Even industrial states such as Great Britain, France, and States fully committed to Communism such as former Russia and Poland at some point used such policy as Nationalization as an instrument for restructuring in substantial degree their national economies.

Economic development is country specific and for Nigeria, the outcome of effective implementation of the Local Content Bill would depend generally on the political and economic context of the country. Context is the key to determining whether Local Content or Nationalization of industry would boost economic development in Nigeria. Take the case of human capital development, the government would have to take funding of our universities and training institutions seriously to create the kind of skilled personnel that will match the foreign trained we are trying to substitute. In a situation where our universities are under-funded is not healthy to absorb the kind of information and policy we are trying to implement.

The implementation should also proceed on adequate good governance base. Corporate governance issues and concerns have become very important in determining economic growth and transaction integrity even in local content implementation. It must be carried out in a manner that is not subversive of the constitution and the law. But more importantly it must show clearly that it is not intended to undercut vital stakeholders or enable a few to appropriate the commonwealth.

A good local content policy should be benchmarked or how it helps to realize the fundamental objectives of efficient utilization of natural resources, a self-reliant economy, equity and social justice. It must be processed in such a way that less privileged lives are improved by giving them a stake in the ownership structure or a lifeline through productive engagements.

Perhaps one at this juncture could appropriately forecast the end to abduction and reckless criminality surrounding the oil industry. The participation of oil communities in whichever capacity they can to earn a living, and absence of strong perception that the policy is designed to benefits a few influential persons are some of the factors that will secure legitimacy for the policy.

Nwachukwu, Barrister & Solicitor is also a development expert and lives in Lagos