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Lagos Business School Breakfast Meeting

Extending the Local Content Drive Across the National Economy

Copyright © 2017 NG Content Future Concepts Ltd. All rights reserved. 2

Why Should We Care About Local

Content Development (LCD) Across the

Country?


Relatively low crude oil prices pose a continuous challenge to foreign exchange

earnings and Nigeria’s overall economic development

Analysts predict slow recovery of real GDP growth from the related recession of 2016, and a moderate but slow reduction in inflation as our currency stabilizes

14.2 percent unemployment rate, and 25.5 percent youth unemployment rate in

fourth quarter of 2016. Recent statistics show that this has climbed for 9 consecutive

quarters

However, Local Content in the Nigerian Oil & Gas industry has achieved significant

developmental gains in the areas of engineering, in–country fabrication &

manufacturing, and human capital development

Other resource – rich countries such as Ghana, Kenya, Gabon and Uganda are

leveraging the Nigerian experience to leverage their extractives sectors for

industrialization

Why Local Content Development? Development for our Oil-Based Economy


LCD strategically focuses on resource extraction for in-country value creation

• Operators seek cheapest fastest route to first oil

• Government uses taxes & royalties for development

• Little attention to value addition from operations

Revenue - Focused

• Operators consider long term value

• Government takes lower revenue for higher ICV

• Greater attention to life cycle support for ops

In-Country Value (ICV) - Focused

Oil Producers investment value levers

Local Content Investment value

levers

4. R

ev

en

ue

R

ete

ntio

n

Promotes import of goods and services Promotes development and use of local capacity

Pre NOGICD Act 2010 Since NOGICD Act 2010

Why Local Content Development? The Nigerian Oil & Gas Industry Leveraged In-Country Value Addition…


From 1958 - 2008 there was little value add from extractive activities due to absence of

participation in key areas of high impact, but this has improved since the NOGICD Act

Why Local Content Development? LCD Optimizes our Oil & Gas Value Chain

Value Chain Optimization Matrix

Owned

in Nigeria

Manufactured/

Produced

in Nigeria

O&M

by

Nigerian

Processed

in Nigeria

Installation,

Construction,

Fabrication

Engineered in Nigeria

Transported

by Nigeria

Financed

in Nigeria

Insured

by Nigerian

Oil Block

Concession NA NA NA NA NA

Drilling Rig NA NA

Pipeline, valves, pumps, equipment

NA

Production Platform/ Facility

NA

Marine Vessels

NA NA

Crude oil NA NA NA

Natural Gas NA NA NA

R&D NA NA NA NA NA NA NA


There is a necessary mindset change in the oil & gas industry, with a gradual shift away

from monitoring and compliance to capacity development actively supported by the

Operators

Policy changes in global industry practice

Various countries with companies operating in Nigeria lifting restrictions to align with

NC law

Increased Foreign Direct Investment into the country with OEMs setting up facilities

within Nigeria e.g. GE investing up to USD$250m in Calabar

Increased area of shop floors – fabrication yards, subsea and dry docking yards etc.

Increased asset ownership e.g. indigenous marine vessel and rig ownership

Increased quantum of goods manufactured and assembled in Nigeria e.g. 2 steel pipe mills now operational, and engineering companies actively participating in EPC

projects

Capacity building from projects with focus on legacy CDIs such as LADOL via the EGINA project

Why Local Content Development? Impact of Implementation in the Oil & Gas Industry


Why Local Content Development? LC Legacies: Engineering Design Capacity – Delta Afrik, Lagos

DA Engineering Office

Server Room

Multimedia/ Telecon Facility

Engineering Design Floor


Why Local Content Development? LC Legacies: Heavy Fabrication

AVEON OFFSHORE FABRICATION YARD

SAIPEM JUMBO FABRICATION YARD

Formerly Today


Why Local Content Development? Our FG is Leading with Policy Initiatives in Recognition of LCD

In support of Local Content Development, the

Federal Government has taken some steps in the right direction:

Acting President, Prof Yemi Osinbajo has signed an

Executive Order in support of Local Content in Public

Procurement to support made-in-Nigeria products and

services

The Senate President, Dr. Bukola Saraki, in promoting

in-country value addition launched a national

challenge seeking manufacturers who utilize up to 70%

of locally available raw materials

The Chairman of the Committee on Local Content,

Hon. Emmanuel Ekon, has commenced efforts aimed

at reviewing the current local content laws in seeking

ways to provide similar benefits to other sectors of the

economy

c

c

The underlying philosophy of our Economic Recovery and Growth Plan is optimizing the use of local content and empowering local

businesses. - President M. Buhari At the presentation of the 2017 Budget of Recovery and Growth


It is Possible to Extend this Impact to other

Sectors of our Economy


There are synergies our local supply chains for human and material resources can

benefit from the progress in the oil and gas industry

Institutional collaborations linking the oil and gas industry to the rest of the Nigerian

economy will support sharing of strategies for improving training opportunities,

domiciliation of capacity, technology & services, and development/ upgrade of our facilities and infrastructure – critical focus areas for our underdeveloped

manufacturing and agro industries for example

Nigerian capabilities latent within infant businesses will compete better and provide a return on investment should local patronage and technical partnerships to execute

benchmark projects be legally required

Broadening local value addition by extending legislation to prioritize Nigerian goods and services in all sectors of the economy will create jobs, diversify our revenue base

and strengthen our currency

Extending the Local Content Drive Local Value Addition Will Benefit Other Sectors


Extending the Local Content Drive Possible Synergies with Critical Industries

Agriculture

Manufacturing

Engineering &Construction

Transport & Storage

Finance & Insurance

Power – Electricity

ICT/Telecoms

Local Content

in

Oil & Gas

Industry

Legislation to encourage indigenous companies to partner with established international firms to take up larger and more complex projects, while simultaneously maintaining standards and governance

Train carriages, tankers and trailer bodies can be competitively built in engineering fabrication yards originally fitted to serve the oil and gas industry

Support for partnerships can be encoded into law to ensure Nigerian financial institutions are involved in funding and assurance

The industry has reached adequate maturity to facilitate increased transfer of skills and technology

The Nigerian Electricity Supply Industry, with its critical investment in meter manufacturing for example, will receive a boost from local content laws which encourage Nigerians and electrification

LC laws to support SME development will encourage capabilities latent within new and infant businesses. These can become regionally competitive within a decade

Local content will enhance domiciliation of industry spend, improved training, funding and development of our agro technology


Extending the Local Content Drive Immediate Synergies for LC Development in other Sectors Non- Exhaustive

O&G Industry Capabilities in Nigeria

Line Pipe Mills

- SCC Nig. Ltd - Yulong Steel Pipe Mills - Others underway (Technova, Brentex etc.)

FPSO Living Qtrs Fabrication

- Nigerdock Nig. PLC - Nestoil Ltd.

Works/Construction

- Water Supply pipes

Fabrication Yards

- Nigerdock Nig. PLC - LADOL

Electricals

- GE - Siemens

Engineering Design Capability

- Delta Afrik - NETCo.

Transport

- Train carriages, steel rails

Marine

- Vessel outfitting (living qtrs.)

Telecoms

- Communication Masts

Power/Instrumentation

- Electric Panels, Power Meters

Power Generation

- Turbines for IPPs


We can benefit from lessons learnt to achieve the significant success recorded so far in the oil and

gas industry

Extending the Local Content Drive Key Considerations for other Industries

• Championed from the top

• Part of overall national development program

• Inter-agency collaboration and synergies required

• Must be supported by fiscal incentives, to attract and sustain investments

• Requires policy consistency and political will

2. Must be a National agenda

• Independent institution required to superintend over the local content policy for sustainability

• Compliance requirements must be tied to contracting process

• Ensuring strict compliance without disrupting industry activities

• Ensuring quality of service delivery by the local supply chain

• Requires robust database and information management system

3. Requires dedicated local

content organization with

effective enforcement

systems

• Will be resisted globally and locally

• Quick wins yield early acceptance

• Requires special funding pool to develop local capacity - skills acquisition, infrastructure development, facilities upgrade etc.

• Focused on in-country value creation, not indigenization

1. Is a major game changer

Local Content…


Extending the Local Content Drive Key Considerations for other Industries

• Manufacturing capability must be present

• Building confidence to use locally made goods by the oil &

gas industry

• Must integrate grassroot SMEs into the value chain

• Ensuring R&D linkage with industry to build efficiency into local operations

4. Requires a robust

manufacturing and R&D

base

• Long term financing required to support activities of local supply chain

• Competitively priced short term loans for contract execution

• Special funding arrangements for asset acquisition, infrastructure development etc.

5. Access to competitively

priced finance


What Next?

Copyright © 2017 NG Content Future Concepts Ltd. All rights reserved.

Delivering Local Content Local Value Addition for Other Sectors

Leading with the recently signed Executive

Order from the Presidency, successful

implementation must note the following to

support the policy statement:

A transformational program such as this must now be

driven by a national campaign backed with strong

political will

Implementation must be anchored in capacity

development else growth will likely remain flat

Specific targets must be set, with clear consequences for non-compliance

A responsible and accountable party, clearly identified

and tasked with monitoring and periodic reviews to

handle issue resolution and inter-ministerial synergy is necessary

Specifically, LC migration tracking, a framework for MDA monitoring and compliance, with a clear

roadmap and milestones need to be defined

Highlights of the EO on Support for Local Contents

1. MDAs shall grant preference to local

manufacturers of goods and services in

procurement

2. RFPs will clearly state a preference for

domestic manufacturers, contractors and

service providers, who will provide a verifiable

statement on their local content

3. At least 40% LC required in specific

procurement of listed items including motor

vehicles, construction materials, ICT, furniture

and fittings etc.

4. All MDAs to monitor, enforce, implement,

comply and propose policies to maximize LC

in the country

5. Ministry of Industry, Trade & Investment to

coordinate findings and provide

recommendations to strengthen the

implementation LC laws, policies and

programmes


Delivering Local Content Stakeholder Roles

2. Financial Institutions

1. Government

Lagos Business School

Host for Local Content

Consciousness

Integration of local

content policy as part of National development agenda

Policy harmonization and conflicts

resolution

Support integrated R&D in collaboration with industry

Facilitate inter-agency

synergy to address issues

Support government facilitated SPVs for fiscal issues

Provide Industry support

Policy support

Policy influencing and shaping

Support

consultative forums across various industries

Lagos Business School is key to LCD in Nigeria. As a leading academic institution, it

attracts key stakeholders who can make a difference in our attitudes to in-country value addition


Delivering Local Content Local Content Council

Policy Making

Conflicts Resolution

Industry players – investors, business/ project owners etc.

Identify Opportunities

Clearing House

Conflicts Identification

Create Interactions

Generate opportunities

Consultative Forum of stakeholders

Policy Formulation

Working Group - Nig. Content Development and Monitoring Board (NCDMB) - Petroleum Technology Dev. Fund (PTDF) - Nigerian Electricity Regulatory Commission (NERC) - Nigerian Communications Commission (NCC) - Nigerian Maritime Administration & Safety Agency (NIMASA)

- Financial Reporting Council of Nigeria (FRCN) - Other Ministry reps in charge of LCD e.g. in Min of ICT - Raw Materials Research and Development Council (RMRDC)

Presidency

Policy Implementation

Support in Shaping

Policy

Inter-Ministerial Local Content Council (ILCC)

- Minister of Petroleum Resources - Minister of Works, Power and Housing - Minister of Transportation - Minister of Finance - Minister of ICT - Minister of Trade and Industry

Illustrative/ Non- Exhaustive


Delivering Local Content NG Content Future Concepts Ltd.

Having worked extensively on Local Content Development, NG Future Concepts Ltd was founded

to assist developing economies in finding practical approaches to LC development and

implementation.

Our capacity to deliver is based on our extensive network and experience working with the

Nigerian Government to develop and implement its local content agenda from inception to date.

We have a full grasp of the successful LC Development and Implementation Programme in the country

2001

National

C’ttee

assesses level

of LC in the

Nigerian Oil &

Gas industry

2003

2005

2006

2007 2010

2008

Presidential C’ttee charts

way forward on LC

agenda – Presidency

announces LC targets to

be driven by National Oil

Company, NNPC

Phase 1 commences:

NNPC kicks off

implementation with

emphasis on structured

capacity development,

stakeholder

collaboration, and

promotion of in-country

value addition

Launch of industry network

to draft a Nigerian Content

Implementation Bill to

address lapses in existing

laws relating to LC in the

industry

Phase 2 commences:

Implementation of capacity

development initiatives based on

gaps identification – Focus on Human

Capital Development, Infrastructure

Development and Facilities upgrade,

and building collaboration between

NNPC’s Nigerian Content Division and

other Govt and non - Govt institutions

Phase 3 commences: Emphasis on Infrastructure

Development Initiatives to lead to significant

domiciliation of work in Nigerian facilities,

promoting acquisition and ownership of assets by

Nigerians, and fostering collaboration among

institutions that interface on LC development

Benchmark

study of leading

National Oil and

Gas companies

who had

successfully

implemented

LC

Nigerian Content

Development and

Monitoring Board

(NCDMB) established


Copyright © 2017 NG CONTENT FUTURE CONCEPTS LIMITED All rights reserved. The contents of this document or any portion thereof

may not be reproduced or used in any manner whatsoever without the express written permission of NG Content Future Concepts Limited.

Some images reproduced with permission from the Nigerian Content Development and Monitoring Board.

NG Content

Future Concepts

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