Wabote Strengthens Commitment To Rewarding Local Contents In The Upstream Sector As Lamikanra Fuels Legal Fire Works

The expected revenue generation of, at least, $10 billion every year when all the oil and gas industrial parks being built by the Nigerian Content Development and Monitoring Board, NCDMB, fully take off in different oil producing states in the Niger Delta, appears to be the most assuring signal from the South South geo political zone that commencement of sustainable developments is no longer a function of speculative endeavour.

In a recent disclosure by NCDMB Director of Corporate Communications, Engineer Ginah O. Ginah, the monies are expected to be generated from world standard parks that are at different stages of construction across the Niger Delta region which is part of the Engineer Simbi Kesiye Wabote’s led NCDMB efforts to significantly increase local contents in the oil and gas industry and generally drive Nigeria’s industrialisation.

Already, the first of such parks built at Odukpani in Cross River State is ready to commence business as many manufacturers and industrialists have indicated their interests to take advantage of the scheme.

But legal attempts to create a clog on these implementable initiatives were recently addressed by a Federal High Court sitting in Yenagoa, Bayelsa State, which, on Tuesday, May 9, 2023 delivered a landmark judgment confirming the authority of the Nigerian Content Development and Monitoring Board (NCDMB) to collect the one percent Nigerian Content Development Fund (NCDF) levy from every contract awarded in the Nigerian oil and gas upstream transaction as mandated under section 104 of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act.

The upstream section is the exploration, drilling and production end of oil industry as opposed to the downstream sector – which is the product refining and marketing sector.

Earlier, a group of Nigerian Drilling Companies known as Incorporated Trustees of the International Association of Drilling Contractors, IADC, had instituted a case against the NCDMB, seeking to stop the collection of one percent NCDF levy.

In the lawsuit – Suit No.FHC/YNG/CS/178/2022, IADC challenged the powers of NCDMB to demand the one percent NCDF levy from their members and contractors.

They averred that the demand is contrary to the clear provisions of section 104(2) of the NOGICD Act which states that “the sum of one percent of every contract awarded to any operator, contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity, or transaction in the upstream sector of the Nigeria oil and gas industry shall be deducted at source and paid into the Fund.”

The group also obtained an ex parte injunction against the Board prohibiting the demand, collection or anything whatsoever either by itself or through its agents, representatives, or privies in relation to NCDF payment or remittance from their members and contractors pending the final determination of the lawsuit.

But an experienced and highly respected Counsel in Oil & Gas legal space, Oladejo Lamikanra, SAN, who represented NCDMB, argued that section 104 of the NOGICD Act is charging section and a revenue clause of the Act and so must be construed liberally in favour of the operator.

Oladejo Lamikanra, SAN, asked the court to set aside the interim orders granted the Drillers and dismiss the case.

Oladejo Lamikanra argued further that there is no double taxation but rather reading the NOGICD Act as a whole, NCDMB has acted properly and fairly within its statutory powers.

The Drillers association, represented by Adedapo Tunde-Olowu, SAN, of the prestigious Lagos based Lawfirm AELEX, argued that the association should be exempted from the 1% levy and that NCDMB has no power to impose the statutory levy.

Tunde-Olowu, SAN pressed further that once an operator in the upstream sector has paid the 1% levy, their subcontractors to (whom they issue ancillary or subsidiary contracts) should not be subject to another 1% levy. He emphasized that it amounts to “ double taxation” and so have refused to pay the levy.

In further submission, the NCDMB’s representative said the case of the Drillers amount to biting the same fingers that has fed them and allowed them to flourish and prosper.

The legal expert noted that section 104 is the revenue base and life-blood of the Nigerian Content Board, stressing that if the Drillers ( an association of over 60 members in the oil & gas industry) succeeds, it would mark the demise of the Nigerian Content Board and with it, the accrued benefits of progressive development and promotion of Nigerian participation and local content in the oil & gas industry would be destroyed.

On Tuesday May 9, 2023, the Court upheld all the submissions of the NCDMB based on the arguments of Dejo Lamikanra, SAN of the Port Harcourt & Abuja based prestigious law firm-Creeks & Shield, Solicitors.

The court said that even if the preliminary objection against the case has not succeeded, it would still have dismissed the Drillers case on the merits because the burden of proving their case was on them ( the Drillers) and that on balance, the plaintiff failed to supply any credible evidence to support their claims in the originating summons.

The presiding judge Honourable Justice Isa H Dashen disagreed with the Drillers case. The court set aside the interim orders it granted against NCDMB in July 2022.

Further the Court dismissed the case of the Drillers as totally lacking in merit and incompetent. It held that NCDMB has the statutory power to impose 1% levy on all operators in the upstream sector of the oil and gas industry and that the levy on subcontractors of Drillers does not amount to double-taxation as claimed by Plaintiff Drillers.

While the case was on, the Committee on Oil & Gas of the National Assembly attempted to wade into the dispute but the interim ex parte order of court granted the Drillers in August 2021 frustrated the two hearing dates scheduled by the NASS.

For context, since 2010 when the NOGICD Act was enacted by the Goodluck Jonathan’s administration, local content and participation of indigenous oil & gas operator has increased from less than 10% to over 35% and growing.

Meanwhile, reports have it that the legal battle may be far from over as the theatre of “ war” has only shifted from Federal High Court to Court of Appeal where Tunde-Olowu, SAN and Oladejo Lamikanra SAN would further slug it out.

Available information indicates that one of the judicious applications of the Fund by NCDMB is the credit scheme extended to Nigerian oil and gas businesses through the Nigerian Content Intervention Fund (NCI Fund), managed by the Bank of Industry (BoI) and the Nigerian Export-Import Bank (NEXIM-Bank).

Other notable utilizations of the NCDF are the development of Nigerian Oil and Gas Parks Scheme (NOGAPS), equity participation in notable third-party ventures, Human capacity development initiatives, and the institution of the Nigerian Content Research & Development Fund as well as other R&D initiatives.

Other applications are the construction of the 17-storey Nigerian Content Tower, entrepreneurship schemes and competitions, and the ongoing construction of the Conference Hotel Project (CHP).