Following the privatization of the Nigerian Electricity Supply Industry (NESI), there has been in increase in foreign direct investment in the power sector. The NESI is now heavily dependent on imported human resources, material, equipment and services. It is based on the above that Nigerian Electricity Regulatory Commission (NERC) issued the ‘Regulation on National Content Development for the Power Sector’ in 2014 to ensure that indigenous companies are utilized for goods, works and services in the NESI. The Regulation was issued to regulate the deployment of foreign equipment, workforce, and other services in Nigeria without allowing them to dominate operations in Nigeria’s electricity market However, implementation of the regulation did not commence in 2014.
In January 2019, NERC announced the commencement of the implementation of the regulation. This article reviews the regulation and its impact on the NESI.
Objectives of the Regulation
The objectives of the Regulation are provided in clause 3. The objective is to promote the following:
- Deliberate utilization of Nigerian human material resources, goods and services in the industry;
- Opening NESI at all levels of its complexity to involve Nigerian people and expertise;
- Building capabilities in Nigeria to support increased investment in the sector; and
- Leveraging existing and future investment in the NESI to stimulate the growth of the Nigerian and the Nigeria-located enterprise.
Development of Nigerian Content in the power sector
All licensees in the NESI are mandated to have the development of Nigerian content as a key component of their philosophy in their general operation, including execution of their projects. Similarly, in award of contracts all licensees shall ensure that first consideration is given to all qualified Nigerian companies for the supply of goods and works and provision of services and shall give first consideration to goods made in Nigeria and services provided by Nigerian firms.
The Regulations requires NERC to establish, maintain and administer a Joint Qualification System (JQS) in consultation with the Nigerian Content Consultative Forum (NNCCF) in accordance with provisions of the content law. The JQS is to constitute an industry databank of available capabilities and shall be the sole system for Nigerian content registration and pre-qualification of contractors in the industry, a source for the verification of contractors’ capacity and capabilities, a source for information in the review of applications of Nigerian content, and the data bank for national skills development pool and also used for ranking and categorization of all service companies.
To ensure continuous growth and monitor compliance of Nigerian content, the licensees are required to submit an annual report to NERC. The Regulations require all licensees to develop a framework for the development of Nigerian content in line with guidelines issued by the NERC. The licensees are also required to submit to NERC an annual performance report on Nigerian Content covering all their projects. NERC will assess and verify the report of the licensees and give the relevant directive.
Further to the above, before the commencement of any project whose total budget exceeds N15 million, the licensee must submit a Nigerian content plan for the project to NERC for authorization. Similarly, every six months the licensees shall submit a list of contracts and purchase orders exceeding N15 Million. The list shall contain the value of the contract, name of the successful contractor, location of the project, estimates of Nigerian content, commencement and completion date and any other information required by NERC. All contracts whose total budget exceeds the stated threshold shall contain a “Labour Clause” which mandates the use of minimum percentage of Nigerian labour in specific cadres as may be specified by NERC. Notwithstanding the above, NERC recognizes that the expertise to execute some contracts may not be available locally. Therefore, where such local capacity is unavailable, the Regulation provides that NERC may grant a waiver and authorize the licensee to import the relevant item but such approval shall be valid for only 3 years.
Employment and Training
With regards to the consideration for employment and training in the NESI, licensees shall give first consideration to qualified Nigerians. The licensees may retain a maximum of 5% of management positions to foreigners and 95% to Nigerians. The 5% position to foreigners is subject to the approval of NERC and the Licensee must also show justification to NERC that the licensee has not been able to find a suitable Nigerian for the position.
For junior and intermediate positions, licensees are obligated to employ Nigerians. The Regulations provides that the licensee shall provide trainings to Nigerians, where they cannot be employed by the licensee because of lack of training. The procedure for execution of such training shall be contained in the operators’ employment and training plan. All licensees are required to submit its operators’ employment and training plan to NERC at the end of each financial year. The said plan must contain a succession plan where Nigerians take over positions that are occupied by foreigners.
Transfer of Technology
Regulation 12 provides that every licensee shall submit to NERC a Technology Transfer Plan which contains details of transferring the technologies being deployed by such operator to Nigerians. The licensee is liable to fines or other sanctions from NERC where it fails to submit an acceptable technology transfer report as at when due. Licensees working through Nigerian subsidiaries shall demonstrate a minimum of 51% of the equipment deployed for execution of the work is owned by the Nigerian subsidiary.
Licensees shall give support to technology transfer by facilitating the formation of joint ventures, partnerships, and the execution of licensing agreements between Nigerian and foreign contractors. Agreements for such joint ventures or alliances are required to meet Nigerian content development specifications and must be to the satisfaction of NERC
The Regulation provides for professional services such as engineering services; insurance and re-insurance services; legal services; and financial and capital market services in the NESI shall be rendered by duly registered firms of Nigerian professionals in the specific fields mentioned. Foreign professionals may only be engaged when the required service is rendered in collaboration with Nigerian firms. For insurance and reinsurance business, where there is need to engage a foreign firm the consent of NERC must be obtained and the National Insurance Commission must also give clearance for the engagement of a foreign firm.
NESI Nigerian Content Consultative Forum (NNCCF)
The Regulation provides for the establishment of the NESI Nigerian Content Consultative Forum (“NNCCF”). The role of the NNCCF is to carry out periodical survey to determine the level of indigenous participation in the NESI and to advise NERC on the benchmark to set as the threshold of required local content. NNCCF also serves as an advisory body to NERC on other policy proposals such as the availability of local capabilities and any other policies that may be relevant to the development of Nigerian content in NESI. The NNCCF consists of representatives from the fabrication, engineering, financial services, legal and insurance, information and communication technology, education and training, and any other professional services (as may be determined by the Commission from time to time).
Undoubtedly, the sector is heavily dependent on imported human resources, material, equipment and services. There is need to develop Nigerian capacity and content in the NESI for long term growth and stability. Therefore, the commencement of the implementation of the regulation is commendable. It is our hope that the implementation will create opportunities for Nigerians to develop capacity, create jobs for unemployed Nigerian youths and build indigenous technical expertise so that Nigerians can participate and benefit from the privatisation of the power sector.
 Clause 4a
 Clause 18
The opinions in the articles are for general information purposes only and do not form a legal relationship or be taken as legal advice. To explore legal advice, please consult your solicitor or feel free to get in touch with us directly.