NIGERIA - Economy
Critical Roles
Executive Secretary, the NCDMB
Ernest Nwapa has a degree in Civil Engineering from the University of Nigeria, Nsukka, and began his career in the Projects Engineering Division (PED) of the Nigerian National Petroleum Corporation (NNPC) in 1983. He has over 30 years of experience in Nigerian engineering projects, from design to supervision and project management. He was appointed Pioneer Nigerian Content Coordinator at NNPC in 2005 and rose to become the Group General Manager, Nigerian Content Division, NNPC in 2010. He is currently the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB).
/ Nigeria
"We want to reach out to other sectors of the economy and show them the progress that we have made."
How can indigenous participation in the oil and gas industry be increased?
This is actually already happening. In the past, the extent of participation was limited, yet upon the implementation of the Local Content Act, more Nigerians have become participants. We now have many new areas of focus, and can measure the number of Nigerians working in the oil and gas industry. We can measure the number of man hours of engineering completed in Nigeria and the number of vessels maintained. More Nigerians are playing critical roles in the leadership of the industry. For example, all the major operating companies have a top hierarchy of Nigerians, and many service companies have Nigerian CEOs. The expatriate management system is such that Nigerians have a say in who comes to work here. The Board has to certify that we don't have a Nigerian suitable for a job before an expatriate can occupy that position. The number of loans that Nigerian banks are issuing is also growing. In short, we are confident of increasing the level of indigenous participation. Now, we have to get back to grassroots. Our focus is to translate what is being done by Nigerian companies to more directly and positively impact the Nigerian people.
In which way have you partnered with other governmental bodies to extend the benefits of the oil and gas industries to other sectors of the economy?
We want to create more synergy around what we are doing. We want to reach out to other sectors of the economy and show them the progress that we have made by relying on the Nigerian local content policy. This works in two ways. First, they can benefit by applying the same principles to their own activities. Secondly, the oil and gas industry drives a large market. We are trying to convince other agencies that we can implement this same model to achieve economies of scale and gradually reduce price. Regarding funding, we believe that the Bank of Industry is experienced in supporting entrepreneurial activity, and we want to work with it to use our funds and its funds to support SMEs that manufacture. Original equipment manufacturers (OEMs) are now required to manufacture certain components in Nigeria. Among the challenges will be how to fund these new ventures. It is important to give these new players adequate financial support. We want SMEs to show their potential to OEMs, which can subsequently create companies that supply SMEs with components produced in Nigeria. Meanwhile, the Presidential Task Force on Power is the driving force behind cooperation between government agencies and the private sector in the power sector. We want to bring them closer to the Nigerian local content philosophy, which many people now understand is essential in developing the national economy.
"We want to reach out to other sectors of the economy and show them the progress that we have made."
How is the Nigerian local content development board working to build local capacity?
The first dimension involves understanding the gaps. There is sufficient capacity, but it is not organized or certified. We need to determine what is needed today, and what will be needed in five years' time. With that in mind you need to figure out the optimum technology to use. The other aspect is practical training. We have many training programs for Nigerians in technology and science. As the industry continues to mature and new projects arise, we see that the reluctance of companies to employ local Nigerian workers is waning. What we normally do is use our training as pilot schemes where we show a model that the industry should use while working with the international operating companies and agencies like the Petroleum Technology Development Fund. Over the past few years, we have trained more than 1,000 people. For every project that is completed in the oil and gas industry today, we train a significant number of people and attach them to projects. Anybody who wants to work in Nigeria can do so; however, this requires a certain degree of upgrades and additional facilities. We have certified that over $7 billion has been invested in the acquisition of assets, upgrades, and setting up of requisite infrastructure across numerous locations. For example, GE has a $1 billion investment.
Many indigenous companies are pursuing the same contracts. How do you see everyone getting a slice of the cake in the future?
Ultimately, we are talking about competition. Not everyone is going to get that slice of the cake and that was part of my message in the beginning. Some companies will have to start doing other things. Before, everyone wanted to do business in pipes. If Shell wanted pipes, 50 companies would try to supply them; however, only one or two would actually get to do it. We are trying to put an emphasis on manufacturing. We have four pipe mills in Nigeria. Shell would use a procurement system to buy pipes from four companies using specifications. Were we to do that in many locations, it would reduce the amount of people who are looking to supply services such as welding, roads, or equipment. Instead of having 50 contractors, there will be four supplying through their vendors. The other suppliers will be supplying these manufacturers, meaning you build a supply chain. The industry will be streamlined once we get companies that have assets and certain knowledge in the industry. As we start moving along the trajectory, we are going to start seeing Nigerian companies that boast assets, knowledge, and specialization. This is a new phase where you have to give everyone a chance. After time you will be able to separate the weak from the strong. You need many companies to change their business strategy to own certain equipment. And every participant in the industry must have a Nigerian local content certificate. The way you obtain an equipment certificate is to show evidence of a strategy to build manufacturing capacity. What we want to do for job creation is to expand the shop floors in Nigeria, where people can work 24/7 to supply products to the common market. The moment we create platforms for people to innovate, we will be able to move away from a system in which everyone is pursuing the same contracts.
Education is a challenge, as not everyone has had the necessary training. What do you think about foreign companies that bring international expertise and partner with local companies that possess local expertise?
That is natural progression. We have had foreign partnerships for decades; however, the emphasis has often been on having a local partner who helps you run some errands. This process is changing. If a drilling company has a local partner, that local partner should be engaged in drilling as well, allowing the partnership to become a technical one. The law is quite prescriptive about things like that. We have to see that assets are registered and owned in the Nigerian economy, and bring value to the Nigerian economy.
Over the past 10 years, people have started returning to Nigeria to reinvest their money. What accounts for this development?
The government is creating an enabling environment. We are trying to overcome challenges, such as a deficient power supply. The power situation today is much better than it was three or four years ago. Infrastructure is being built as we speak. Telecommunications have also dramatically improved, and roads are being built. That is what most serious investors are concerned with.
© The Business Year – October 2014
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