Nigeria urged to ‘fast track’ local content bill for construction industry

Out-Law News | 14 Apr 2014 | 2:53 pm | 2 min. read

Construction and civil engineering staff in Nigeria have called for proposed legislation aimed at setting minimum local content criteria for construction industry contracts to be “fast tracked”.

The Construction and Civil Engineering Senior Staff Association (CCESSA) has urged the National Assembly to speed-up consideration of the proposed local content law, because “the influx of expatriates into the construction industry is still a common occurrence and still unabated”. 

The Local Content in Building and Construction Industry Bill seeks to widen and deepen local content regulations in the hope of placing indigenous construction companies on a level playing field with their international counterparts.

CCESSA’s National Executive Council meeting in Kaduna last month resolved that the construction industry “cannot move forward” until the bill becomes law.

The bill follows on from the Nigerian Oil and Gas Industry Content Development Act, which established the Nigerian Content Management Development Board – and stipulated minimum targets for the amount of Nigerian created content in various categories of activity across the oil and gas industry.

Construction as a percentage of government capital expenditure in Nigeria is extremely high. In spite of this, overseas firms continue to dominate the Nigerian construction market often importing their own resources and labour.

Additionally, CCESSA has also criticised the “huge debt” owed to construction companies by Nigeria’s government. CCESSA said debts to the industry across various sectors of government currently amount to more than 100 billion naira ($620 million). Layoffs across the industry are likely to be “massive” unless debts are paid immediately and a system for future prompt payments is set up by the government, CCESSA added.

Last year, the professional body Engineers Against Poverty heavily criticised the proposed local content bill in a report (26-page / 478KB PDF). The report also criticised the bill for being too heavily based on the Nigerian Oil and Gas Industry Content Act and therefore failing to reflect the characteristics of the construction industry.

In spite of this, Nigeria's construction industry continues to outperform expectations. The country is now Africa's largest economy, and with strong current and projected fiscal growth, a rising middle class wanting better housing, shopping, power supply and transport links, demand for infrastructure will continue to soar over the next decade.

Nigeria has emerged as the largest economy in Africa, after the country rebased its gross domestic product (GDP) data for the first time in 20 years. Nigeria’s statistician-general Yemi Kale said earlier this month that GDP gross domestic product stood at $510bn, compared to $262.6bn in 2012 under data compiled by the World Bank.

Africa expert Akshai Fofaria of Pinsent Masons, the law firm behind Out-Law, said: “The Nigerian government is increasingly able to dictate the terms of engagement. Although difficult to navigate, international companies should seek to stay ahead of the local content curve and protect their licences to operate.”

Fofaria added: “Local content legislation is here to stay and firms should expect requirements to be extended into the majority of sectors in the coming years. Those that can adapt swiftly by engaging with the local environment will benefit from lower risks and greater competitive advantage. Those that don't comply may find themselves quickly falling behind.”