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SMEs now playing big role in oil and gas sector – Nwapka

By BusinessNews Staff on August 11, 2014

Executive Secretary of the Nigerian Content Development and Monitoring Board, Engr. Ernest Nwapa, shared his views on opening up the oil and gas sector for Nigerian SMEs participation and the role of the Nigerian Content Development and Monitoring Board in a Fidelity Bank-sponsored SMEs Forum on radio monitored by Festus Akanbi

Why did the government set up the Nigerian Content Development and Monitoring board?
The Nigerian Content Development and Monitoring Board is an agency set up by the Nigerian Oil and Gas industry Content Development Act 2010. This is an act that was signed by the President in April 2010. The agency is set up to ensure that local content is developed in the oil and gas industry.

Essentially, its core mandate is to drive the utilisation and development of local capacity, to retain a substantial proportion of the spend in the oil and gas industry in Nigeria, to create opportunities for other sectors of the economy to be linked to the oil and gas industry, and to bring the impact of the oil and gas industry down to the level of the communities, especially in the oil producing areas because that’s actually where most of the negative impact are felt most.
In doing this, the bottom line is job creation and also getting Nigerians to own assets that are being used in the industry. It also enables Nigerians to learn more about how the industry operates and to participate in critical activities in the industry. Last but not the least, we have the mandate to enforce compliance.

Can any SME in any part of the country with something relevant to supply or deliver in the oil and gas sector, take advantage of the board’s mandate?

Absolutely. The story of Nigerian participation started a long time ago. Some events in the past indicated that some directions taken were not the right way to go. So the local content discussions started again after 2000. It went into National Assembly in 2002 and went through all the requisite processes. But as you know in a democracy, even after the law is passed in the national assembly, the President still needs to assent to it before it becomes law. The issue of local content is so important to Mr. President that one of the first things he did when he became acting President in 2010, was to sign the bill into law and this provided the legal backing for the Honourable Minister to commission this board. As a result of this Act, the board explicitly oversees the country’s oil and gas industry.

However the training opportunities and new industries stemming from this law are not exclusively for the oil and gas industry alone. Given the collection of opportunities in the oil and gas industry, the aim is to create proficiency, procure equipment and place executive capacity in the hands of Nigerians, so that they can use it in servicing the entire national economy.
As the industry is ultimately segmented into Upstream and Downstream, does the law apply to all facets of the sector, or only to Upstream?
The law is for the entire oil and gas industry. For instance, in some areas, like power, where you are taking gas from the oil and gas industry, the law has elements of it that apply to the power sector. Furthermore, just because of the way that this particular law has been implemented and the impact that people are seeing, even other sectors are tapping into it.

What are some of the major accomplishments of the agency so far?

Let me first start with the intangible elements; the mindset shift from a situation where people thought that Nigerians could not do anything serious in the oil and gas industry. They just assumed that the oil and gas industry is too critical to the economy and so we shouldn’t have been playing an integral part in the industry. They saw it as being too technically advanced, too capital intensive and that the offshore is too deep for Nigerians to participate in.
Today, we have cracked that mindset. There is a serious paradigm shift. We have also brought in a lot of Nigerians into real participation. We’ve changed the agency concept into an institution where Nigerians are real partners in the businesses. We demonstrated successful international and local collaborations whereby there are real and mutually rewarding partnerships between foreign companies and Nigerian companies. In this instance, Nigerians are in control of these partnerships and the foreign companies come in to support rather than just having Nigerian agents.
In the SME space, we have begun to see that SMEs are servicing the industry in the areas that they can and we are also beginning to redirect these SMEs into participating more in production, rather than servicing or chasing contracts. These are very major steps.
As for the tangibles, you have increased knowledge of fabrication being done in Nigeria. You can see that every yard in Nigeria today doing servicing in the oil and gas industry is making investment. They are making investments because the law places higher responsibilities on them to do things that have never been contemplated in the past 20 years. Engineering in oil and gas, procurement and all sorts are being done in Nigeria today.
If you have these things going, it means you are bringing in foreign direct investment just for upgrading and building new sites. For example, we have recorded over $5billion as at 2013 ending, just to prepare the yards. On the upside, the foreign investment that will come, will be outstanding because unlike in the past, we are now going to put what would otherwise have gone outside the country, in those yards. There’s a lot going on and other ministries are looking for ways to increase indigenous participation in their respective sectors.

What is your take on the issues of skill, capability and financing for the capital intensive oil and gas sector, especially Upstream business operations?

Firstly, let me address the capital intensive nature of operations. Capital runs after opportunity. By making it a requirement that Nigerians must participate, and making it very clear and also demonstrating the political will of government at the highest level of government that this is one law that is dutifully constituted. What has happened is that investors see Nigerians as a channel for making investment, so Nigerians are now able to go to banks and get funding for buying assets that ordinarily, no bank would have been willing to sponsor, such as buying vessels, the way they are doing now and this is a testament to the Act.
For the skill, I would say that there is no skill that you can actually pick up in a school. You can learn it but you can pick up some of the rudiments but you become proficient by practising. The law encourages Nigerians to actively participate so that overtime, we become experts. With respect to refineries, I want to say that it is not the lack of skills but the fact that it is presently a public sector operation.

In your agency’s act, there is a fund set aside for contracts in the oil and gas sector. What is that fund used for?

The law envisaged that we are asking people to participate in activities within the sector that they most likely do not have the capacity for today. Therefore there are gaps. But as a board, we’ve identified those gaps in human capital and infrastructure and that fund is set aside to assist Nigerian companies to build their capacity in these areas. For instance, a portion of it is used to facilitate bank loans by serving as guarantees and also bringing down rate charges.

How can SMEs and small businesses benefit from this fund?

We are training SMEs and giving them access to funds. One of the major criteria for participating players is their demonstrated competency and commitment to the sector i.e. we want to see what they have been doing for the oil and gas industry especially SMEs.

What are the opportunities in the gas sector for SMEs and Nigerian businesses?
The industry is actually moving towards gas and Mr. President recently launched a gas revolution which is anchored in the gas master plan. He is trying to change the entire architecture of our energy by focusing more on gas which is friendlier and also putting the infrastructure in place. There are so many opportunities. The gas master plan will include pipeline infrastructure, a lot of processing facilities and also a lot of gas to power projects. They’ve actually been doing these things already. Our focus is to move SMEs to become small manufacturing entities. We believe that it’s SMEs that can create the employment and not necessarily the operators or these government agencies that we work for.
The SMEs have opportunities to organically grow in a system. So we are organising SME fairs to bring Nigerian SMEs who have a manufacturing pedigree together with original equipment manufacturers who are supplying these valves, pipes and other fittings. The requirement that the board is making is that you have to discover an SME from an SME fair, either the one organised by the board or you organise an SME fair by yourself and identify some people that can manufacture some of the inputs you are using for your big equipment. That’s a starting point and it’s a process that we call the Nigerian Content Equipment Certification Process. It’s going to go deeper and deeper and we are working to identify those companies and SMEs that have knowledge of manufacturing. We know that 70% of SMEs in Nigeria today have a manufacturing outfit and we want to climb up to that and use the SMEs as a vehicle for creating employment.

For SMEs that are eyeing the oil and gas sector, what process of registration are they expected to undergo?

What we want to focus on now for SMEs is for them not to go after whistles running after to supply papers and pens. We are trying to develop a culture where we manufacture. So we sit in our plant, and the oil and gas industry comes to buy things from us. Procurement officers from Shell will be running after you to buy your goods. Oil and gas vendors will come to buy your goods. You don’t need to be an oil and gas SME, you just want to be an SME manufacturing something relevant. That is the mental shift we must go for. Oil and gas industry cannot take everybody in Nigeria but the capacity we help build in SMEs can be used to supply every part of the economy.
We are building industrial parks and the aim is to make it easy for SMEs to walk into a place and rent a space to carry out their business without worrying about how to buy land and erect structures and fittings. That project is ongoing and its going to help SMEs that are really serious, and we are going to give priority to those that are in manufacturing because we want to drive industrialisation from the grass root to the top.
And it is when we have them in such clusters, that we are able to bring international original equipment manufacturers to come and mentor them and then make them suppliers of components to their big equipment manufacturing companies. That’s the way to go and more of such efforts will soon be seen going public.

[This Day]

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