Spillovers of Local Content Policies in Nigerian Oil and Gas Industry

Abstract

Many citizens of resource-rich nations tend to be mere observers despite huge
exploration activities in their land. Nigeria oil and gas industry is a classic
instance of an enclave sector of the nations economy where employments
opportunities are not only limited but the requirements of available jobs are not
readily available locally. This paper examined the value that oil and gas
operations pass to the local and national economy beyond the resource proceeds.
To accomplish the objective of this paper, a systematic review of literature was
presented and discussed. The paper deliberated that the discovery of natural
resources in Nigeria comes with much exhilaration/expectations, propelling the
need to extend the benefits of the extractive industry through local content (LC)
initiatives. The paper discovered that LC is designed to enhance value-added,
correct market failures/externalities, and support employment and other social
objectives. Unfortunately, the policy has fueled distortion among policy
objectives, global regulation, and institutional structures in addition to
misallocation of resources and ineffectiveness in the system. However, providing
benefits to the communities where extractive companies operate is no longer a
choice but a commercial necessity that is increasingly mandated through law.
Nevertheless, creating strong LC outcomes can be very challenging because of the
technical requirements of the industry, which often limit the possibility of
developing backward and forward links into the local economy. The paper
concluded that LC policy if properly implemented can improve local capabilities
that will make oil and gas work for Nigerias economic development. The paperrecommended the need for improved policy measures and legal framework to
strengthen the Nigerian oil and gas industry.