Full Project – The economic implication of the local content policy on industrial production in Nigeria

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CHAPTER ONE

1.0  INTRODUCTION

1.1  BACKGROUD OF THE STUDY

Local Content Policy is defined as the quantum of composite value added or created in the Nigeria economy through the deliberate utilization of Nigeria human and material resources and services in the exploration development exploitation transportation and sales of Nigerian crude oil and gas resources to the development of indigenous capabilities and to encourage foreign investment and participate without compromising quality health safety and environment standard. (Adepetun, 2010)

The oil and gas industry in Nigeria plays a crucial role to the sustenance of the nation and fuel her economic and development activities Nevertheless an estimated 58 billion is spent annually on serving the industry in operation such fabrications, engineering, procurement construction, front end engineering design conceptual design sums of proportion of the amount accruable profit is spent abroad where most of the equipment are manufactured and proceeding employment opportunities for other countries. The major reason of this situation has been attributed to how local content which is a situation where most of the service contracts are awarded to foreign firm because local indigenous firms lack the requisite capacity like, skills man power and production capacity to complete favorably.

In the light above, this paper is part of an extended study attempting to appraise the efficiency of local content policy and how it has been able to add valve to the economy, create job, develop local infrastructure, stimulate higher participation of SMES and enhance the utilization of local human and material resources. This paper specifically focus on how the content policy has impacted on small or medium size all serving firms operating within Nigeria.

The reason the federal government enact the law (local content policy) is to increase Nigeria participation in the upstream and in the sector as well. It was enacted by the federal government of Nigeria to upgrade her manpower capacity with result benefit to government private companies and Nigerian economy. Its objective includes;

• Transfer technology and develop local know -how if the objective of the policy is wisely implemented, it will turn out to be a major driver of the economy and will have a tremendous positive impact on all the sectors of the economy. Beyond the oil and gas it will lead to
• Employment
• social development
• security
• Discourage import and export.
• lead to patronage of local resources and human and materials.

Some companies have implemented the local content policy which has impacted positively on the economic and industrial production like:

• Shell companies: They have sponsored the tarring and professional certification of several Nigerians, including 12 engineers in FEED and detailed engineering of the shell feed office in port Harcourt. They will increase in-country in this field.
• Nigeria national petroleum cooperation (NNPC) has achieved over 40% in upstream segment which has substantially increased from 10% before the enactment of the law to more than 30% even in the deep offshore. The local content has helped offshore. The local content has helped the economy in terms of education and boosting skill through the farming undergo by workers by the organization which is done because of the policy enactment.

1.2  STATEMENT OF THE PROBLEM:

The statement of the problem is focused on the various problems encountered by the policy which oppose its effectiveness.

1. Insufficient skilled labour to support the growth of the oil and gas industry.
2. Consumer rejection of locally made products.

iii.    Inadequate capital to fund the business of the local       manufacturers.

1. Delay in contracts awarded or disappointment of the local companies that fail    to win contracts.
2. Low technology or technical know-how affecting the quality of work of    local.
3. Reluctance of investors to assist the local companies or manufacturers.

1.3 OBJECTIVES OF THE STUDY

1. To examine the cause of impact of Local Content Policy on Industrial Production in Nigeria.
2. To identify the reason why Nigerian consumers reject locally      made products.

iii.    To examine the cause of poor capital base of local manufacturers.

1. To examine the reason of delays of contracts awarded to local    manufacturers.
2. To identify the reason of the local manufacture not having access to capital equipment.

vii.   To examine why investors are reluctant to assist the     local companies or   manufacturers

viii.  To examine the new terms of education, employment   etc.

1.4.  RESEARCH QUESTIONS:

1. To what extent has the local content policy promoted employment and improved local skills.
2. To what extent has funding affected the business of the local manufacturers?

iii.    To what extent does delay in the award of contracts      affect the business of the  local manufacturers .

1. To what extent does low technology affect the quality of work done by local  manufacturers?
2. What makes investors reluctant to invest in local firms?

1.5.  THE STATEMENT 0F HYPOTHESES

Ho₁: The Local Content Policy has no significant                   impact on Industrial Production in Nigeria.

Ho₂: The Local Content Policy has not significantly                promoted employment

Ho₃: The Local  Content Policy is not significantly                 affected by lack  of funds.

Ho₄: The delay in the award of contracts does not                affect the business of the local manufacturers.

Ho₅:  The stage of technology does not affect the Local        Content Policy.

Ho₆: Investors do not hesitate to invest in local                    manufacturers.

1.6 THE SIGNIFICANCE OF THE STUDY

The study therefore identified the economic implication of the Local Content Policy on Industrial Production in Nigeria. Hence, this project will be beneficial to the following:

This study has made recommendations that will assist   companies come out with more realistic and implementable programmer in using Local Content Policy on Industrial Production in Nigeria.

The study will provide the required due for government to tackle challenges   arising from local content policy.

It will also be beneficial to consumers by enlightening them on the need to always patronize and use locally made products.

It will be beneficial to the researcher as it will serve as a partial fulfillment of the requirement for Higher National Diploma in Business Administration and Management.

Finally, it will be beneficial to future researchers as it will serve as a guide to them.

1.7.   SCOPE AND LIMITATION OF THE STUDY.

The study will be limited to studying the impact of the Local Content Policy on Industrial Production in Nigeria.

1.8    DEFINITIONS OF FIRMS

1. Economic:  Punishment of another country by            reducing or stopping trade with it.
2. Effect: Change produced by an action or cost.
3.  Fuel: Mineral resources that provide nuclear or    internal energy requirement.
4.  Scarcity: Something not been enough ,that less than is needed.
5. Depot:  A place where fuel or oil is being stored. A      warehouse.

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Full Project – The economic implication of the local content policy on industrial production in Nigeria