Local Participation Requirements
The NOGICD Act goes beyond setting general targets - it establishes detailed, enforceable requirements for Nigerian participation across every segment of the oil and gas value chain. From the first consideration principle to exclusive consideration for specific activities, the Act creates a tiered system of preferences designed to channel work toward Nigerian companies while ensuring that technical standards and project delivery timelines are maintained.
The First Consideration Principle
Section 3(1) of the NOGICD Act establishes the foundational principle that Nigerian independent operators shall be given first consideration in the award of oil blocks, oil field licences, oil lifting licences, and all projects for which contracts are to be awarded in the Nigerian oil and gas industry. This first consideration principle applies across all contract categories and is the cornerstone of the local content framework.
In practice, the first consideration principle means that when a Nigerian company demonstrates the technical capability, financial capacity, and relevant experience to execute a scope of work, it must be preferred over a foreign competitor. Operators are required to demonstrate to the NCDMB that they conducted a genuine assessment of Nigerian company capabilities before awarding any contract to a non-Nigerian entity.
The principle does not mandate that Nigerian companies win every contract regardless of competence. If no Nigerian company possesses the requisite technical capability, the contract may be awarded to a foreign company - but the operator must provide documentary evidence of the bidding process and the evaluation criteria used, demonstrating that Nigerian companies were given a genuine opportunity to compete.
The NCDMB reviews all contract award recommendations above a defined threshold before final approval. The Board's Nigerian Content Division examines the bid evaluation matrix, the technical scores of Nigerian bidders, and the justification for any award to a non-Nigerian company.
Exclusive Consideration Activities
For certain categories of work where Nigerian capacity is deemed sufficient, the Act goes further than first consideration and mandates exclusive consideration for Nigerian companies. These activities must be performed entirely by Nigerian entities, with no exceptions.
Services Reserved for Nigerian Companies
- All legal services related to oil and gas operations in Nigeria
- Environmental impact assessments and environmental studies
- All onshore pipeline construction and installation
- Catering, security, and logistics services for onshore operations
- Supply of cement for well cementing operations (manufactured in Nigeria)
- Laboratory analysis and testing services available in-country
- Banking, insurance, and financial services for oil and gas operations
Rationale
The NCDMB designates activities for exclusive consideration when it determines that Nigerian companies collectively possess the capacity, equipment, and expertise to meet industry demand. This list can be expanded over time as Nigerian capabilities grow in additional service areas.
The NCDMB periodically reviews and updates the list of exclusive consideration activities. As Nigerian companies build capacity in new service areas, additional categories may be reserved exclusively for Nigerian entities.
First Consideration List Categories
The Act categorises services and goods into tiers based on existing Nigerian capacity. The table below shows key categories and examples of services and goods reserved for Nigerian companies.
| Category | Consideration | Examples of Reserved Services/Goods |
|---|---|---|
| Professional Services | Exclusive | Legal, accounting, environmental studies |
| Financial Services | Exclusive | Banking, insurance, brokerage |
| Onshore Construction | Exclusive | Pipeline installation, flow stations, tank farms |
| Support Services | Exclusive | Catering, security, onshore logistics |
| Materials Supply | Exclusive | Cement, sand, gravel, locally manufactured goods |
| Drilling Services | First | Rig operations, mud engineering, directional drilling |
| Offshore Fabrication | First | Platforms, jackets, FPSO modules |
| Deepwater Operations | First | Subsea engineering, ROV operations, well control |
Participation Thresholds by Activity
The Act's First Schedule sets out minimum Nigerian content levels for specific categories. These percentages represent the minimum proportion of work that must be performed by Nigerian entities.
| Activity Category | Minimum % | Notes |
|---|---|---|
| Engineering and Design | 45% | FEED and detailed engineering |
| Fabrication (onshore) | 100% | Tanks, vessels, flow stations |
| Fabrication (offshore - shallow) | 60% | Platforms, jackets |
| Fabrication (offshore - deep water) | 45% | FPSO modules, subsea structures |
| Seismic Data Acquisition | 45% | Crew, equipment, vessels |
| Seismic Data Processing | 70% | In-country processing centres |
| Drilling Services | 45% | Land and swamp rigs |
| Well Services | 45% | Completion, workover, wireline |
| Marine Vessel Operations | 45% | Cabotage Act also applies |
Joint Venture and Partnership Requirements
When a contract is awarded to a foreign company because no Nigerian company possesses the full range of technical capabilities, the Act requires that the foreign company enter into a joint venture or partnership arrangement with a Nigerian company. The Nigerian partner must hold a meaningful equity stake and must be involved in the execution of the work - not merely included as a passive partner to satisfy regulatory requirements.
The NCDMB monitors these JV arrangements to ensure that the Nigerian partner is genuinely participating in project execution and gaining technical knowledge. The Board has issued guidelines specifying that Nigerian JV partners must be involved in a minimum proportion of the engineering, procurement, and construction work, and must have Nigerian staff embedded in key technical positions within the project team.
The NCDMB has taken enforcement action against arrangements where Nigerian companies were included as JV partners in name only - a practice sometimes called "fronting." Companies found to be fronting face debarment from the NOGICJQS database and exclusion from future contract awards.
Technology Transfer Obligations
Sections 43 and 44 of the NOGICD Act require all operators and contractors to submit a programme for technology transfer to the NCDMB. The transfer programme must identify the proprietary technologies and specialised skills being deployed in the project and set out a plan for transferring these capabilities to Nigerian employees and partner companies over a defined timeline.
Technology transfer takes multiple forms under the Act. It includes formal classroom and on-the-job training for Nigerian staff, the establishment of in-country research and development centres, licensing of proprietary technologies to Nigerian companies, and the progressive Nigerianisation of technical and management positions currently held by expatriates.
Operators must also provide succession plans demonstrating how expatriate positions will be replaced by qualified Nigerians over time. The NCDMB reviews these plans and tracks progress, requiring operators to report annually on the number of expatriate positions that have been successfully Nigerianised and the training programmes that have been completed.
Advantages for Indigenous Nigerian Companies
The NOGICD Act defines an "indigenous Nigerian company" as a company formed and registered in Nigeria with at least 51% equity owned by Nigerians. Indigenous companies enjoy several statutory advantages under the local content framework.
Preferential Contract Awards
Indigenous companies receive first consideration for all contracts and are the sole eligible bidders for activities reserved under the exclusive consideration category. In bid evaluations, indigenous companies may receive a price preference margin, meaning they can win contracts even if their bid is marginally higher than a foreign competitor's.
Access to Concessionary Finance
Indigenous companies can access the Nigerian Content Intervention Fund (NCIF), which provides loans at below-market interest rates for the acquisition of equipment, vessels, and technology. This fund, administered by the Bank of Industry, has disbursed billions of naira to qualifying Nigerian companies since its establishment.
Marginal Field Awards
Under the marginal field programme, indigenous Nigerian companies are given exclusive rights to bid for and develop marginal fields - discovered but undeveloped oil fields that the original licence holders have been unable or unwilling to develop. This programme has enabled Nigerian independents to become oil producers in their own right.
Training and Capacity Support
The NCDMB provides targeted training programmes, mentorship initiatives, and technical assistance to help indigenous companies build the capabilities needed to compete for contracts in increasingly complex service categories, including deepwater operations and subsea engineering.
Sources
- NCDMB, "First Consideration List and Guidelines"
- NCDMB, "Nigerian Content 10-Year Scorecard: 2010-2020"
- NEITI, "Nigerian Content Performance Assessment Report"