Local Content Law - OICS to Use Nigerian Banks, Insurance Coys Only

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The Nigerian Content Act has made it mandatory for all operators and contractors engaged in oil and gas business to only patronise the services of the local banks and insurance firms in the country.

Over $18 billion spent annually in the oil and gas sector has not been felt in the Nigerian economy. Large part of the money goes to foreign firms through financial deals, insurances and legal services.

The Act which was signed by President Goodluck Jonathan recently stated that "All operators, contractors and any other entity engage in any operation, business or financial transaction in the Nigerian oil and gas industry requiring financial services shall retain only services

Nigerian firms participating in the oil and gas industry accounts for less than 40 percent at the moment, which is well below the target of 70 percent for 2010.

According to the Act: "All operators shall submit to the Nigerians Content Monitoring Board every six months of its Financial Services Plan (FSP). The FSP shall include a financial services utilised in the past six months by expenditure and a forecast of financial services required during the next six months and the projected expenditure for the services".

On the insurance business, the Act states that no insurance risk in the Nigerian oil and gas industry shall be placed offshore without the written approval of the National Insurance Commission which shall ensure that Nigerian local capacity has been fully exhausted.

"All operators, project promoters, alliance partners and Nigerian indigenous companies engaged in any form of business, operations, or contract in the Nigerian oil and gas industry, shall insure all insurable risks related to its oil and gas business, operation or contracts with and insurance company(s) , through an insurance broker registered in Nigeria under the provisions of insurance Act, 2003."

The Act has since generated debate in the oil and gas industry where some international oil companies doubt the capacities of the local business entities to handle some of their activities.