January 15, 2019
Recently, the Nigerian Content Development and Monitoring Board (NCDMB), the government body responsible for administering the provisions of the Nigerian Oil and Gas Industry Content Development Act (NOGICDA or the Act), has been conducting compliance reviews on companies operating in the Nigerian oil and gas industry. The aim of the compliance exercise is to confirm whether the affected companies fully complied with provisions of the NOGICDA regarding the deduction of the National Content Development (NCD) levy and ensure recovery of the unremitted amounts from these companies. Some of the affected companies have been assessed to huge liabilities arising from non-compliance with the provisions of the NOGICDA.
The NOGICDA, enacted in 2010, governs the administration and enforcement of Nigerian content in the Nigerian oil and gas industry. The NOGICDA was conceived to replicate the successes recorded in the implementation of similar local content policies in countries such as Norway, Brazil and Indonesia. The primary objective of the NOGICDA is to ensure a measurable and continuous growth of Nigerian content in all oil and gas arrangements, projects, operations, activities or transactions in the Nigerian oil and gas industry.
In order to achieve the above objective, the NOGICDA established a Fund known as the Nigerian Content Development Fund for the purpose of funding projects, programmes, and activities directed at increasing Nigerian content in the oil and gas industry. The NOGICDA further stipulates that the sum of 1% of the contracts awarded to any company involved in any project, operation or transaction in the upstream sector of the Nigerian oil and gas industry should be deducted and remitted into the Fund.
One key area of contention for companies seeking to comply with provisions of the NOGICDA is the ambiguity regarding the nature of transactions that should be liable to the 1% NCD levy. It appears there are varying interpretations on the nature of transactions liable to the NCD levy.While the NCDMB posits that all contracts in the oil and gas industry be subjected to the levy, other stakeholders in the oil and gas industry are of the view that the levy should apply to only contracts for upstream oil and gas projects.