THE LOCAL CONTENT LAW AND ITS EFFECT ON JOB CREATION
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THE LOCAL CONTENT LAW AND ITS EFFECT ON JOB CREATION
ABSTRACT
The study examined the Local Content Law and its impact on job creation, using Capital Oil and Gas Nigeria Ltd as a case study. The survey technique was used in this investigation.
Structured questionnaires were used to collect data, which was then analysed using statistical tools such as frequency counts, charts, and simple percentages for demographic data, and inferential statistics such as chi-square (X2) to test all of the stated hypotheses at the 0.05 level of significance.
The respondents received a total of 89 copies of questionnaires. The study sought to analyse the impact of Local Content Law on job creation in comparison to government legislation and protectionist practices. After all relevant data were collected and analysed Two (2) hypotheses were examined, and all alternative hypotheses were accepted.
The results of the first hypotheses revealed a significant association between local content law and employment development in Nigeria. The results of the second hypothesis likewise demonstrated that government policies/legislations influence the growth of SMEs in Nigeria.
The study concludes that Nigeria’s current unemployment rate is a clear indication that government policymakers and upstream operators must adopt a responsible and dynamic approach to sustainable local content development in order to ensure a better future for the country’s teeming population.
Technological growth does not happen by luck; rather, it is the result of a country’s excellent economic management, policy reengineering, good governance, and a social value system that values hard effort and innovation.
Chapter one
INTRODUCTION
1.1 Background for the Study:
The Local Content Law (LCA) plays an important role in job development in the face of Nigeria’s rapidly increasing mass unemployment. Now, Nigeria’s Oil and Gas Industry (OGI) is critical to the nation’s sustenance and supports its economic and development operations.
The sector has been regarded as the nation’s live wire, and there is a wealth of literature on its role and relevance in Nigeria (Agusto 2002; Atakpu 2007; Odulari 2008).
Nonetheless, an estimated $8 billion is spent each year to service the sector in areas such as fabrication, engineering procurement, construction (EPC), Front End Engineering Design (FEED), conceptual designs, and seismic assessments.
This sum is expected to reach $15 billion in the next few years (Business Day, 2008). Unfortunately, despite the enormous sums of money spent to service the business, only a small fraction of the accruable earnings is spent in Nigeria.
The majority of the funds are remitted abroad, where most of the equipment is built, while also generating job opportunities for inhabitants of other nations. The primary cause of this situation has been identified as low local content (LC)
which occurs when the majority of service contracts are awarded to foreign firms because local indigenous firms lack the necessary skills, technical expertise, manpower, production capacity, and capability to compete favourably.
According to Oladele (2001), low LC in the Nigerian OGI is caused by: deficient capitalisation resulting from Nigerian entrepreneurs’ tendency to operate as ‘one man’ businesses; capital and structural deficiencies associated with poor training and low managerial ability; and inability to attract funds due to lack of suitable collateral and a positive corporate image.
Nigerians have historically received a little portion of the country’s oil riches, and there was an urgent need to alter this tendency following the country’s restoration to democracy. To remedy this anomaly, the Federal Government of Nigeria in the early 2000s launched the Local Content (LC) programme, christened
Nigerian Content (NC) was primarily intended to promote the participation of local indigenous enterprises in OGI. The policy aimed to transform the industry by developing in-country capacity and indigenous capabilities in the areas of manpower development, facilities, and infrastructure
with the goal of ensuring that a greater representation of local indigenous companies participate actively in the industry (Lawal, 2006; MacPepple, 2002; and Nwapa, 2007) in order to create job opportunities for Nigerians.
Local Content (LC), also known as ‘Nigerian Content’, is defined as ‘the quantum composite value added or created in the Nigerian economy through the utilisation of Nigerian human and material resources for the provision of goods and services to the petroleum industry’ (NNPC Website).
The notion of “local” is worldwide and not limited to Nigeria, since it has previously been implemented in several other oil-producing countries. Warner (2007) views LC through the lens of ‘community content’, arguing that ‘Ultimately, community content is about achieving a competitive advantage for an oil and gas development business in the eyes of both the local populace and the country’s guardians of economic policy’.
According to the National Manpower Board (2009), the Nigerian labour market could only absorb 10% of the roughly 3.8 million people produced by the Nigerian school system each year.
In summary, Nigeria’s employment patterns suggest that unless a determined effort is made to address the issues of unemployment and underemployment, the situation would deteriorate.
Job creation is one of the developmental challenges confronting all developing economies in the twenty-first century (Patterson et al, 2006), and Nigeria is no exception. Youth unemployment is exacerbated by a lack of job opportunities.
Poverty and unemployment among youngsters are contributing factors to human trafficking and child labour. For those who are able to find job outside of the country, their departure has diminished the country’s human capital resources.
The Nigeria Local Content Law aims to transform the petroleum industry into an economic hub that promotes higher SMEs participation, job creation, and a foundation for industrial growth, as well as preventing capital flight from the country (Binniyat et al, 2008; Chukwu, 2005; Gilbert, 2007).
Against this backdrop, this study was inspired to analyse “the Local Content Law and its effect on Job Creation” with a special reference to Capital Oil and Gas Nig. LTD.
1.2 Statement of the problem:
The route to industrialization is not limited to the oil and gas sub-section. The whole footwear and leather industry has been essentially wiped out. Even the print media relies on imported newsprint, as local newsprint industries such as Oku-Iboku, Iwopin, and Jebba are a mere shell of a once-thriving industry.
In the construction business, numerous local enterprises have closed their doors, while giant international corporations are decreasing their workers in considerable numbers, according to the union’s leadership.
The thriving petroleum business is based primarily on extraction rather than value addition, while Kaduna, Warri, and Port Harcourt refineries remain dormant.
Unfortunately, the whole oil business relies on contract and informal workers. In reality, no industry is spared: air transportation, retail and distribution, steel, engineering, and automobiles. The railway sector, despite massive investment in recent years, has yet to show signs of resurgence. The industrial ruin is simply massive.
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