The Pros and Cons of Developing Manpower in the Nigerian Petroleum Industry through the Local Content Policy: Part 2
THE IMPACT OF THE NIGERIAN LOCAL CONTENT POLICIES ON HER INTERNATIONAL TRADE OBLIGATIONS
While the NOGIC Act principally entrenches local content in the Nigerian petroleum industry, on the other end of the tunnel, Nigeria is a member of the World Trade Organization (“WTO”) and a signatory to the WTO Agreements, some of which prohibit the institution of local content policies by Member States which discriminate between foreign goods and services and local goods and services in favour of local goods and services.
It suffices to say that the NOGIC Act runs contrary to Nigeria’s international trade obligations as created by the various WTO agreements.
Nigeria has been a member of the WTO since 1 January 1995 and a member of GATT since 18 November 1960. As a member of the WTO, Nigeria is a signatory to the agreement establishing the WTO and consequently the WTO Agreements.
ENFORCEABILITY OF THE WTO AGREEMENTS IN NIGERIA
In determining if the WTO Agreements are enforceable in Nigeria, reference would necessarily be made to the 1999 Constitution of the Federal Republic of Nigeria. Section 12 of the 1999 Constitution of the Federal Republic of Nigeria provides that no treaty between the Federation and any other country shall have the force of law except to the extent to which any such treaty has been enacted into law by the National Assembly. Unfortunately, WTO agreements have not been enacted by the National Assembly, However, section 12 would only apply to treaties which are sought to be enforced in Nigerian courts and to treaties which cannot be enforced in Nigerian courts. The WTO Agreement falls into the category of treaties which cannot be enforced in Nigerian courts. One reason for this is that the WTO Agreements is a multilateral agreement involving other countries over which the Nigerian Courts cannot exercise Jurisdiction. And in view of the fact that claims of rights or liabilities under WTO Agreement can only be instituted by Member states themselves, the appropriate body with jurisdiction to entertain such claim would be one established under the multilateral agreement and which has jurisdiction over the Member states. Consequently, by being a member of the WTO, Nigeria is bound by the WTO Agreements by the National Assembly. The only way not to be bound is by withdrawing from the WTO Agreement .
THE WTO AGREEMENTS AND LOCAL CONTENT
One of the fundamental objectives of the WTO Agreements is the need to reduce barrier and eliminate discrimination in international trade. To this end, the principle of National Treatment (NT) is one of the principles at the heart of the WTO Agreements. National treatment has been defined as a principle whereby a host country extends to foreign investors treatment that it accords to its national investors in like circumstances.
This principle of NT exists in the General Agreement of Tariff and Trade (GATT) 1994, the Agreement on Trade – Related Investment Measures (TRIMs) as well as the General Agreement on Trade in Services (GATS), which governs trade in goods, investments measures related to trade in goods, and trade in service respectively. There is also the Agreement on subsidies and countervailing Measures which relate to the payment of subsidies by Member states.
PROBLEMS FACING MANPOWER DEVELOPMENT IN NIGERIA
1. Socio-economic realities; The Local content Act constitutes a forced arrangement between multinational oil corporations operating and proposing to operate in Nigeria and the indigenes or locals without taking cognizance of the evident constraints of the practical application of most of its provisions.
Both schedule A to the Act and “Labour Clause” which provide for mandatory local contents (Section 11(1) and 34 of the Act) provide a threshold which could prove impossible for Nigerians to surmount. This is because it is the lack of adequate manpower that has been at the core of Nigeria’s underdevelopment. This necessitated the sourcing for foreign investors and their experts to develop the economy. The 5 percent management position allocated to expatriates is insufficiently protective of their interest or investment in the sector. This could generate anti investment sentiment in potential investors as well as result in a flight of capital.
2. Conflict of laws: The Act did not also take cognizance of the investment of multinationals operating in the oil and gas sector engaged in joint venture agreement with Nigeria. It is evidently not predicated on negotiations with such multinationals. Arbitrarily skewing the provision of the Act in favour of locals which negates Nigeria’s World Trade Organisation (WTO) obligations to engage in free and fair trade. Already the European Union and the United States said they had raised issues about Nigeria’s local content measures in the oil and gas industry in the TRIMs Committee but had not yet received any response from them. Australia said also that it has questions about these measures. It is likely consultations would be requested by these countries with Nigeria which would likely see the dispute referred to the Dispute Settlement Body (DSB) of WTO. If that happens, the Act would most likely be found inconsistent with the WTO Agreements as has been decided in similar cases by the Panel and the Appellate Body.
3. Corruption: This is endemic in Nigeria there is no necessary evidence that there is a safeguard for this. In the light of this, the likelihood of politicians frustrating the spirit and intendments of the Act by utilizing the local content requirement in all transaction in the oil and gas industry to further their personal interest, installing their cronies in choice positions and plundering the sector constitutes an inherent challenge to the implementation of the Act.
• People, skills and availability: Nigeria must refocus on education with resources specifically devoted to developing the service and information technology skills of students. The curricula of universities and schools could be revised to give students the specific skills that offshoring firms seek. This is a policy that has been successful in India and more recently, Egypt .
• Legal framework: From a regulatory standpoint, the Nigerian government must also address the lack of a robust legal framework for offshoring local content, which is currently deterring Manpower Development in the petroleum industry. The legal framework should be conducive to emerging industries and enable business to start up without presenting an array of administrative barriers.
• Incentives are created for education: While manufacturing outsourcing relies on a cheap, low-skilled workforce, services outsourcing relies on a well-educated and skilled workforce. The employment of a relatively skilled labor force in services trade increases the returns to education, and in this way creates incentives to acquire skills that are marketable in the global economy.
• Quality of Education: On the other hand, Nigeria needs to expand its tertiary education and offer more technical and scientific subjects. Nigeria lags behind other offshoring destinations in tertiary education enrollment, a trend that could hamper the potential growth of a highly skilled labour force.
• Technical training: The quality and availability of technical and vocational training, particularly in oil and gas related disciplines, must be improved. Nigeria has very few specialized technology, IT, and management colleges, and the effectiveness of existing schools is typically hampered by financing and human capacity constraints.
• Technology and knowledge are transferred. Repeated and frequent interactions with foreign firms increase knowledge transfers. This is not limited just to technical knowledge, but also includes the business standards and managerial know-how that feature prominently in the long-run growth trend for any developing country.
- Harrison Declan “The Compatibility of Nigeria’s Local Content Policies to her International Trade Obligations” Nigerian Journal of Energy and Natural Resources Law, p. 044
- Dr. Violet Aigbokhaevbo; Nigerian Oil and Gas Industry Content Development Act 2011: Mediocrity on the Prowl” University of Benin Law Journal Vol 2, 2011, P. 203
- Trade Concerns raised against Ukraine, Russia, Brazil, Japan, Indonesia and Nigeria’, WTO; 2013 News Items, 11 July 2013, www.wto.org Accessed on 29/11/2019
Ibrahim Oluwadamilola Enifeni is a 500level Law student at Lagos State University, you can reach him via firstname.lastname@example.org or LinkedIn via Ibrahim Oluwadamilola Enifeni