Local content in Nigeria

I have often said that for West Africa to succeed, Nigeria must lead the charge. One of the first steps in this charge is to develop robust real local content – local content referring to homegrown labour, services and resources, all things that Nigeria has in swathes but has until recently struggled to mobilise.

Nigeria is brimming with potential. Being Africa’s most populous nation there is no shortage of keen, enthusiastic, and promising people. This pool of potential talent is perhaps our most valuable, though largely untapped, resource. Nigeria is currently home to just over 100m young people (62% of the country’s population is under 25). The petroleum sector is one of Nigeria’s biggest industries, and yet it has been slow to implement meaningful local content initiatives and take advantage of the country’s ample human capital, which is set to increase to 300 million people by 2030.

Historically the IOCs and related service providers have brought in their own expert workforce and/or taken 90% of the Nigeria related engineering and fabrication work abroad. Our people have largely been used for low to unskilled positions with no real possibility of advancement or long term career sustainability. This is, however, a shortsighted approach as many of these companies will have learnt in this low oil price environment. It is now becoming unreasonably expensive to bring skilled workers from abroad, so companies will need to adapt or will find themselves becoming uncompetitive in the market. In this way the drop in oil price has been a secret blessing for Nigeria.

In April, 2010 the Nigerian Oil and Gas Industry Content Act, or the Local Content Act as it is more frequently known, was signed into law. The Act prescribes minimum thresholds for the use of local services and materials with the overarching objectives to ensure on-going job creation and up-skilling of the local labour force, participation and ownership for local Nigerians in the country’s developing oil and gas industry, and therefore to ensure investment and growth in the industry, which is crucial to Nigeria’s ongoing overall economic growth.

Since coming into force the Nigerian Content Development and Monitoring Board (‘NCDMB’) has reported that the Act has generated US$4 billion of investments for the Nigerian economy and led to the creation of around 38,000 jobs in the country’s oil and gas industry.

That said, local content in Nigeria’s petroleum sector only accounts for around 15 percent, and is heavily weighted to procurement rather than areas that contribute to sustainable job creation. This means that there is still a lot of work to be done in developing a ‘real local content’ base and creating sustainable local content that stimulates the country’s economy.

A major requirement for developing long term sustainable local content is adequate formal training – something Nigeria currently lacks. Despite a large percentage of the Nigerian population having undertaken higher education, there is a clear mismatch between the skills taught at universities and those needed to enter the industries that are most prevalent in Nigeria. Proof of this can be found in the Nigerian graduate unemployment rate, which is estimated to be around 80 percent.

With the lack of jobs available to Nigerians due to the fact that most work is still done outside Nigeria, and the fact that graduates are deterred from applying for low level jobs that have little to no career progression we are faced with a catch 22. It isn’t feasible to remove all foreign labour from Nigeria because there are not enough trained nationals to take up their positions, but at the same time it is impossible for these locals to get the on the job training required to replace the foreigners because we do not do enough work in Nigeria to keep these graduates perpetually employed.

It is for these reasons that we founded the LADOL Upskilling Academy which will provide a new generation of Nigerians with lifelong learning. Based on the cluster community business model principle – in which businesses deliberately situate themselves in the same free zone or industrial port so that they can freely share people and technology in order to reduce costs and increase efficiency – it will consist of a group of schools that cover differing areas of learning from welding and NDT (non-destructive testing) to catering and QHSE (quality, health, safety, environment). Private companies will be able to support the development of academies and set-up their own schools, providing them with a stream of well-trained local workers to join their ranks. By housing the Academy inside the free zone the students will be constantly exposed to the best in class companies and colleagues, allowing them to hone the high level of expertise needed to be successful in the petroleum industry.

Unfortunately, training alone is not enough to increase local content. Once a workforce is trained it will need somewhere to work, and as such capacity needs to be developed alongside human capital. This is an area in which LADOL is seeking collaboration from existing and potential Nigerian facility owners and operators. The vessel fabrication and integration yard in LADOL will increase local demand for fabrication and engineering fourfold, but this means new capacity must be developed across the country to fulfil this demand and keep graduates perpetually employed. LADOL is keen to help new facility owners develop and existing ones expand, as this will boost the entire economy. The zero sum game is over and Nigeria lost, now we have to come together collaborate for mutual benefit and growth. If we are successful in this effort Nigeria looks set to follow Brazil’s pattern of economic success and join the G20 within the next two decades.