A critical evaluation of the effectiveness of local content policy (LCP) and transparency practices in LCP implementation in the Nigerian oil and gas industry.
Oguagha, Udechukwu Offordile
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OGUAGHA, U.O. 2017. A critical evaluation of the effectiveness of local content policy (LCP) and transparency practices in LCP implementation in the Nigerian oil and gas industry. Robert Gordon University, PhD thesis.
One of the aims of the Local Content Policy (LCP) is the economic development of Nigeria through the utilisation of local personnel and resources in the activities of the Nigerian oil and gas industry. Many studies have investigated the LCP, but limited work has been undertaken in investigating the transparency practices involved in the implementation of the LCP in the Nigerian oil and gas industry. The study critically evaluates the effectiveness of the LCP and the transparency practices associated with its implementation. A conceptual framework based on accountability was developed and employed in designing the research instrument. This framework was underpinned by the institutional theory, which links accountability discourse to regulatory institutions where organisations within a particular field are subject to pressures to exhibit legitimacy through socially and culturally authorised administrative routines that are intended to render accountability. The study employed a qualitative methodology and the data was collected through in-depth semi-structured interviews with respondents from twenty-three indigenous oil and gas companies, regulatory bodies, international oil and gas companies and non-governmental organizations. The research findings demonstrate that the various LCP stakeholders’ views on the definition and purpose of the LCP differ significantly. These diverse opinions affect the way in which the LCP is perceived and implemented in the oil and gas industry. The study has been instrumental in revealing a number of positive effects the LCP has generated since its implementation in the Nigerian oil and gas industry. For example, the LCP compelled IOCs to utilise local resources in their operations, resulting in the domestication of oil and gas activities. However, the findings also reveal that the LCP has been enforced despite the lack of local capacity and capability for its implementation. The findings, therefore, highlight a number of challenges associated with LCP implementation including: the lack of infrastructure; insufficient capital and manpower; absence of trust; and the lack of coordination between the regulatory agencies in the industry. The research findings also reveal that there are different levels of transparency in the implementation of LCP. Determination of the level of transparency in LCP implementation and compliance monitoring is at the discretion of the NCDMB and the oil and gas companies, which unfortunately facilitates corrupt practices. Therefore, this study argues that significant improvements are required in transparency practices in LCP implementation by strengthening the LCP’s monitoring and enforcement process. Further, enforcement should strictly be the responsibility of the NCDMB, with no interference from the Nigerian government. Some further recommendations arising from this research include the need for investment in infrastructure that will facilitate indigenous companies’ participation in the industry. Also, efforts should be made to promote partnership and collaboration between indigenous companies and IOCs, encouraging investment in world-class infrastructure that can compete with international standards. To foster this partnership, the government and IOCs must invest in educational institutions which could boost the knowledge and capacity of Nigerians. The research concludes with the development of two new models: (1) The LCP stakeholder perception model; and, (2) The LCP implementation model. These models, which are the main contributions of knowledge arising from this thesis, will potentially aid the effective implementation of the recommendations arising from this study.