Academic journal article The Journal of Developing Areas

Relationship among Local Content Policy, Indigenous Oil Firms' Participation and Job Creation in Nigeria: A Theoretical Concept

Academic journal article The Journal of Developing Areas

Relationship among Local Content Policy, Indigenous Oil Firms' Participation and Job Creation in Nigeria: A Theoretical Concept

Article excerpt

INTRODUCTION

Job creation has been the main economic strategy crucial to many developing countries that face high unemployment rate. Particularly in Nigeria, particular, unemployment remains one of most intractable economic problems facing the country over the years. To meet this challenge of rising unemployment in the country, there had been several economic policies, such as National Economic Empowerment and Development Strategy (NEEDS) (2004), Nigerian Enterprises Promotions Acts (1977) etc., implemented in the past years. Most of these strategies often aimed to create and increase participation of local small-medium-scaled enterprises, in particular, through which productive employment could be generated for unemployed local labor force in the county. This had been the process of indigenization of entrepreneurial activities in the sectors as a way of increasing participation of indigenous firms during the agricultural economy priori to 1970s. Shortly after the Nigerian economy shifted from agro-based in the 1970s to oil and gas resource economy, the focus has been on the regulation of the oil and gas business activities to ensure increased participation of indigenous oil firms in the oil sector. Regulation of business activities in oil sector in favor of local firms has often been a practice in many oil rich countries. This is usually not to only ensure more participation of local oil service vendors in the sector but also to create more employment opportunities for local workforce. More so, this has been perceived as a premeditated approach to unemployment reduction through which sustainable economic value could be added to domestic economy. World Bank report (2009) indicates that it is through the creation of jobs that the rapid route to sustain unemployment reduction lies.

There is no doubt about the argument that oil and gas sector is regarded as a capital-intensive sector, which usually requires huge capital and rather creates small employment compared with labor-intensive sector. However, it has been argued that various small-medium-scaled services are more often required in exploration, development, production and transportation of oil and gas products. Some reports (UNCTAD, 2006), noted that these activities may potentially generate employment opportunities for a large number of local unemployed labor force. The report also claimed that one to four indirect jobs might be created in the processes of execution of oil and gas projects in the firms that supply the raw inputs. In addition, these firms in many cases often engage their workers in skill development training to enhance their productivities and competitiveness.

Based on this economic advantage, local content policy (LCP) has been a strategy that many oil-dependent economies, like Norway and Venezuela, usually employed to increase participation of indigenous oil firms in the business activities and generate more employment opportunities for their citizens in the oil and gas sector. And the available records show that the level at which the LCP has developed indigenous oil firms' participation in the hydrocarbon sectors in most of these countries exceeded 45% (Ariweriokuma, 2010; UNCTAD/CALAG, 2006). The process is that preferences most often given to indigenous oil firms in oil contracts award, and more importantly, a dignify number of local employment is required in oil companies' staff composition (Tordo et al., 2013; Heum et al., 2003), however, this is without compromise with quality and timeliness. It is in this viewpoint that many new oil-prospecting countries, such as Ghana and Cameroon, are introducing LCP as a regulatory policy in their oil sector for enhancement of participation of their local oil firms and creation of more jobs.

Following the local content developed oil rich countries, Nigerian government introduced LCP in its oil and gas sector, in 2001 and passed it into law in 2010 by the administration of Good-luck Jonathan. …

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