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On 28 February 2024, the President of the Federal Republic of Nigeria issued a directive on Local Content Compliance Requirements (the Directive) aimed at improving foreign participation in the Nigerian oil and gas industry (the industry) and attracting investments into the industry by enabling a conducive operating and investment environment.
The Directive was issued pursuant to Section 100 of the Nigeria Oil and Gas Industry Content Development Act 2010 (the NOGICD Act) and was published in a Federal Government Gazette on 6 March 2024.
16 April 24
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Highlights of the Directive
- Enforcement of Local content requirements
Nigerian Content Development and Monitoring Board (NCDMB) in its regulatory oversight must take into consideration the practical challenges of insufficient in-country capacity for certain services; and act in a manner that does not hinder investments or the cost competitiveness of oil and gas projects. - Guidelines for Approval of Nigerian Content Plan
NCDMB shall not approve any Nigerian Content Plan (NCP) that contains intermediary contractor entities without the capacity to perform the required services which may constitute a violation of the local content requirements.NCDMB shall only approve NCPs which consist of contractors that meet the legal definition of Nigerian content and demonstrate genuine, substantial, and tangible capacity to independently execute projects in Nigeria.
- Guidelines for Assessing and Verifying Capacity of Companies
NCDMB shall develop guidelines for assessing and verifying the capacity of contractor companies seeking provide or undertake services or specified activities in the oil and gas industry, in consultation with industry stakeholders.
Implication of the Directive on the Nigerian Oil and Gas Industry
The Directive seeks to make the industry more competitive and to limit any negative impact of local content regulations on investments and operations. Its immediate effect should result in a mitigation of the risk of approval of unqualified contractors on projects as well as the establishment of a system for verifying contractors’ capabilities to undertake the activities they seek contracts for.
The Directive also seeks to improve the timeline for approval of expatriate quota positions for the employment of expatriate personnel in the industry.
The Directive does not appear to specifically address the tonnage, equipment, and machinery aspects of contracting in the industry which are also crucial elements for achieving competitiveness.
Should you have any questions on this legal alert, please do not hesitate to contact Oghogho Makinde or Olagoke Kuye.
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Contributor
Michael Iwuoha – Senior Associate