G/TRIMS/W/142  
 
17 September 2014  
(14-5254)  Page: 1/3  
Committee on Trade-Related Investment Measures  Original: English  
 
NIGERIA – CERTAIN MEASURES TAKEN BY NIGERIA IN THE 
"ACT TO PROVIDE FOR THE DEVELOPMENT OF NIGERIAN 
CONTENT IN THE NIGERIA OIL AND GAS 
INDUSTRY OF APRIL 2010" 
 
QUESTIONS FROM THE EUROPEAN UNION 
The following communication, dated 16 September 2014, is being circulated at the request of the 
Delegation of the European Union.  
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Background:   
The Local Content Act was passed in April 2010. Unde r the Act, all listed activities, services and 
materials used in the oil and gas sector must achieve a specified level of local content and every operator in the sector must submit a plan demonstrating the compliance with local content 
requirements before bidding for any license or carrying out any project.  
 The law's coverage is exceptionally broad, applying in respect of "all operations or transactions carried out in or connected with the Nigerian oil and gas industry," and creating requirements on 
"all regulatory authorities, operators, contract ors, subcontractors, alliance partners and other 
entities involved in any project, operation, acti vity or transaction in the Nigerian oil and gas 
industry." Beyond a general requirement to "consider Nigerian content as an important element of 
project development and execution," the law creates mandatory local purchasing and local content 
requirements with respect to a comprehensive range of specific activities.   
The EU, together with the US raised concerns about this law repeatedly during its draft stages, and 
has communicated these concerns post-passage in bilateral discussions, as well as during Nigeria's June 2011 Trade Policy Review and the previous meetings of the CTRIMs and of the CTG.  
 
As Nigeria has not yet replied to a list of previously submitted questions related to this law and its 
local content requirement, in particular as to its compatibility with the provisions the TRIMs Agreement, GATT 1994 and the GATS, the EU would like to submit again a list of questions. 
 
Questions:  
Regarding specific provisions of the Act, the EU  would like to raise questions on the following 
issues of concern:  Competitiveness and efficiency considerations in Local Content 
 
As we understand it:  
'Schedule A' of the Nigerian Content Development Act specifies the level of Nigerian Local Content 
to be achieved per each activity or input used by operators in the oil and gas sector as outlined by 
the provisions of the Act. For some goods and services, the local content requirement reaches 
100% (e.g. steel pipes and plates, audit services or geophysical survey services) and is often 
higher than 80% (for 40% of the goods and services listed in the Schedule).  G/TRIMS/W/142 
 
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   What are the measures taken to ensure that the local content requirements reflect the 
productive capacity and supply possibilities of the affected Nigerian sectors?  
 Has any assessment been undertaken as to the effectiveness of the favoured domestic 
sectors, and the competitiveness of the price at which they are able to provide the listed 
products and services?  
 More specifically, how does the best available market price for key products, for example 
steel pipes, compare with that of a locally produced good that operators must purchase 
in order to comply with the local content requirement? 
 Is the efficiency, supply capacity and the pric e competitiveness of these sectors seen as 
satisfactory, or could the net cost of the lo cal content requirements incurred by the oil 
and gas sector be in fact undermining the developmental objectives of the Act? 
Expatriate positions 
 As we understand it: 
 
Article 31 (1) of the Nigerian Content Development Act states that " For each of its operations, the 
operator shall submit to Board a succession plan fo r any position not held by Nigerians. […] At the 
end of the four year period the position shall become Nigerianised ." 
 Article 32 of the Nigerian Content Development Act states that " For each of its operations, an 
operator or project promoter may retain a maximum of five per cent of management positions as 
may be approved by the Board as expatriate positions to take care of investor interests ." 
 Article 35 of the Nigerian Content Development Act states that " All operators and companies 
operating in the Nigeria oil and gas industry sh all employ only Nigerians in their junior and 
intermediate cadre or any other corresponding gr ades designated by the operator or company ." 
 
 What consideration has been given to possible skills shortages on the Nigerian labour 
market and what solution is on offer if no Nigerian candidate with the required skills can be found? 
 How does the government intend to reconcile the objective of attracting new investment 
to the oil and gas sector with such far-reaching obligations regarding the nationality of 
management and staff that limit the investors' control of their enterprises?  
 What measures is the government undertaking to provide appropriate education and 
training opportunities, alongside those provid ed by the operators themselves, resulting 
in a more skilled and educated workforce capa ble of fulfilling both the job requirements 
and the local content requirements? 
 
Investments  
 Under "Schedule A" a number of requirements  are defined in terms of "Spend". Could 
you please clarify the meaning of this expression? Should it be interpreted as amounts 
invoiced to Nigerian entities? Would, in that case, a Nigerian company defined according to Section 106 as a company with no less than  51% equity shares held by Nigerians? If 
so, such provision would appear to discriminate against investors establishing 
themselves in Nigeria and bringing added value and jobs to the Nigeria but to the benefit of other entities which, by virtue of their Nigerian ownership, may limit themselves to 
procure goods and services from abroad (and with an extra agency cost for operators) 
with no value accruing to the economy. According to reports, this appears in fact to be the case in various sectors (such as telecoms). Such situation creates a strong disincentive to foreign investments and fosters inefficiency to the detriment of the entire 
supply chain. G/TRIMS/W/142 
 
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  Review 
 As we understand it:  
Article 105 of the Nigerian Content Development Act states that " Subject to the approval of the 
Minister, the Board shall conduct a review of schedule of this Bill at such intervals as it may determine but not later than every two years  […]." 
 
 Has the date for the first review of the schedule been set? 
 How is the review to be carried out? Are public hearings or other transparency measures 
allowing for operator input foreseen? 
 What preparations for the review are being undertaken in order to ensure that operator 
experience with the implementation of the law so far is properly reflected, and that the review realises its full potential to match the Schedule to the current productive 
capacities in the Nigerian economy? 
 We understand that an Amendment Bill is pending before the National Assembly which 
could provide an opportunity to review certain provisions of the Act, including Schedule 
A, and address questions beyond the issue of WTO compatibility. Still, the review can 
look more closely at whether the legislative scheme at stake, and especially its local content requirements, provides the appropriate tool to achieve the stated goal of enhancing domestic capacity in the oil and gas industry. What is the state of adoption of 
this Bill 
 Until the mentioned Bill is adopted, we understand that derogations from the 
requirements of the law can no longer be awarded under the specific mechanism 
provided for under Section 11 of the Act, as this possibility expired in April 2013. Could 
you please explain how operators are currently allowed to face capacity shortfalls? 
 
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