Nigeria Plans Hike in Local Content Fees in New Legislation - Africa’s premier report on the oil, gas and energy landscape.

Nigeria Plans Hike in Local Content Fees in New Legislation

A doubling of the tariff paid by oil and gas operators into the National Content Fund is one of the key highlights of the ongoing revision of the 10-year-old Nigerian Oil and Gas Industry Content Development (NOGCD) Act in the country’ bicameral legislature.

The document, which has reached its second reading in the Senate, the upper house, proposes an increase, from one percent to two percent, “of every contract awarded to any operator, contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity or transaction in the upstream sector and designated midstream and downstream projects operation, activity or transaction in the Nigerian oil and gas industry shall be deducted at source and paid into the Nigerian Content Development Fund, established for purposes of funding the implementation of Nigerian content development in the Nigerian oil and gas industry”.  This is the amendment of Section 105 of the original act, which was enacted in 2010.

The new law also seeks to specify what percentage of a company’s gross earnings it must allocate for research and development and goes ahead to mandate companies to fund the country’s research needs. The amendment of  Section 38 says that: ”All operators shall set aside, annually and for the purpose of carrying out research and development activities in Nigeria, minimum 0.5% of the gross revenue received by the operator; The funds set aside under subsection(1) shall be applied as follows (a) fifty percent shall be allocated to Research and Development programmes in Nigeria; (b) Fifty percent shall be applied to research and development activities within the facilities of the operator established in Nigeria.”

The extant law also pays heed to Research and Development R&D, but neither decrees how it is funded, nor determines how much of a company’s earnings must be set aside for funding.

It simply states, in the same section: “The operator shall submit to the Board and update, every six

months, the operator’s Research and Development Plan (R and D Plan). (2) The Rand D Plan shall-

(a) outline a revolving three to five-year plan for oil and gas related research and development initiatives to be undertaken in Nigeria, together with a breakdown of the expected expenditures that will be made in

implementing the R and D Plan; and (b) provide for public calls for proposals for research and development

initiatives associated with the operator’s activities”.

The introduction of administrative sanction in Section 68 is another amendment that sticks out. In this proposal, the influence of the National Content Development Monitoring Board (NCDMB) has been expanded to include prosecutorial powers.

It says:  “A person who submits a plan, returns, report or other document and knowingly makes a false statement, commits an offence and shall be liable to administrative sanction which may include a fine of not more than five percent of the project sum, cancellation of the project or any other sanction as may be prescribed by the Board.  A person who submits a plan, returns, report or other documents and knowingly makes a false statement, and fails to provide satisfactory reason for the violation shall be liable to administrative sanctions including cancellation of project, withdrawal of certificates or any other sanction as may be prescribed by the Board.”

The story was earlier published in the June 2020 edition of the Africa Oil+Gas Report

 

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2 comments

  1. Edward Voelcker says:

    Before the Senate thinks of new laws, why don’t they ask for audited financials of NCDMB? Per NEITI NCDMB has received about US$1 Billion (yes Billion) from 2012 to present but has published NO auditted financials of what they have done with this money. They have in theory asked the Bank of Industry for assistance with a $200 million loan program to deserving businesses, but that again has no transparency around it.

    Note all of this also conflicts with the idea of LOWERING Opex in Nigeria. There is no “free lunch” and all of these issues INCREASE Opex in Nigeria so this is a direct conflict with one of the action items that NNPC GMD Kyari is supposedly working on – lowering Opex in Nigeria.

  2. Max Anibogu says:

    Edward-The Nigerian Senate is an integral part of the country’s political class; a rentier elite too lazy to do anything that involves thinking to build. Asking the NCDMB about its returns means having to evaluate the financials. That’s too much work

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