The Nigeria Content Development Monitoring Board, NCDMB, has craved the understanding and support of the insurance sector to strengthen the Board’s desire towards the implementation of the Nigerian Oil and Gas Industry Content Act, NOGICD, in the sector.
The Executive Secretary, ES, of the Board, Simbi Wabote, made the call at the 2023 Oriental News Nigeria conference in Lagos, with the theme, “Building Local Content Synergy between the Oil and Gas and the Insurance Sector in Nigeria” said over the years, the Board has taken deliberate steps to forge collaboration with various critical stakeholders to support the attainment of its strategic goals and mandate.
Wabote, who was represented by Mr. Daziba Patrick Obah. The Director, Corporate Services of NCDMB, said that stakeholders’ engagement and collaboration is one of the key enablers to the Board’s ten-year strategic road map designed to achieve 70 percent Nigerian content performance by the year 2027.
This he said is the reason for various engagements and collaboration between NCDMB and several MDAs, including the National Insurance Commission, NAICOM which crystalized in the joint issuance of the Insurance Guideline in 2022 to support the implementation of the insurance requirements contained in Sections 49 and 50 of the NOGICD Act 2010.
The main benefit of the guidelines according to Wabote, is the creation of a database of all insurance programs procured by the operators, project promoters, alliance partners, and Nigerian indigenous companies, to enable the Board to monitor utilization of in-country insurance capacity thereby enhancing in-country value retention.
“It is worthy to emphasize that collaboration between government agencies is crucial for effective public service delivery through alignments of areas of strength, better decision-making, sharing of resources, optimization of opportunities, and a better understanding of issues and challenges with policy implementation.
“This ultimately, creates huge benefits for both country and citizens, as it enables collaborating agencies to understand and respond to the needs and expectations of Nigerians. In NCDMB, we recognize the importance of collaboration and synergy amongst government organizations and other stakeholders to the fulfillment of our statutory mandate.
The Executive Secretary described the theme of the conference as apt and timely as it underscores the imperative of fostering the much-needed collaboration and synergy amongst MDAs and critical stakeholders; in this case between two critical regulators in the Oil and Gas Industry and the Insurance Industry.
“There is no doubt that Nigeria has not extracted sufficient value across the Nigerian oil and gas industry value chain since the commencement of hydrocarbon mining in Nigeria. It is this very low indigenous participation in the hydrocarbon value chain in Nigeria that necessitated the enactment of the NOGICD Act in 2010 with the sole aim of deepening local content in the nation’s economy.
“Similarly, the performance of the insurance sector, particularly in relation to oil and gas businesses, is also sub-optimal due to various reasons,” Wabote observed.
Speaking further he said that building synergy between these two critical sectors of our economy holds huge potential for growth and development of the Nigerian economy, adding, “The summit, therefore, presents a great opportunity for key stakeholders to brainstorm on the benefits and challenges impeding optimal performance in these two critical sectors. Furthermore, this summit offers us a strong veritable platform for the Insurance Industry, the Oil and Gas Industries, and other stakeholders to articulate processes, procedures, and practices to forge sustainable collaboration in optimizing opportunities and harnessing benefits for themselves as Nigerians.”
Dwelling more on the legislation, he said, “In addition to various provisions of the NOGIC Act and the Insurance Act, Sections 49 and 50 of the NOGICD Act specifically provide a concrete basis for NCDMB and NAICOM to work together to extract maximal value from both the Insurance and the Oil and Gas Industry for the Nigerian economy.
Section 49(1) states: “All operators, project promoters, alliance partners and Nigerian indigenous companies engaged in any form of business, operations or contract in the Nigerian oil and gas industry, shall insure all insurable risks related to its oil and gas business, operations or contracts with an insurance company, through an insurance broker registered in Nigeria under the provisions of the Insurance Act as amended”
Also, Section 49(2) states: Each operator in subsection (1) of this section shall submit to the Board, a list of all insurance companies and insurance brokers through which insurance covers were obtained in the past six months, the class of insurance cover obtained, and the expenditures made by the operator while Section 50 states, No insurance risk in the Nigerian oil and gas industry shall be placed offshore without the written approval of the National Insurance Commission which shall ensure that Nigerian local capacity has been fully exhausted.”
Wabote further noted that Section 49 makes it mandatory for operators, project promoters, and other entities in the oil and gas industry to obtain insurance coverage for all insurable risks with insurance companies and brokers that are registered in Nigeria in line with the Insurance Act (as amended).
“It is important to note that Section 50 forbids entities in the oil and gas industry from offshore placement of any insurable risks except with the written approval of NAICOM. The essence of these two provisions of the NOGIC Act is to ensure full utilization of available in-country capacity in the insurance sector by oil and gas industry players. The goal ultimately is to promote more capital retention in the country and to boost the capacity of Nigerian insurance companies and brokers to support the Nigerian oil and gas industry.
“To give life to these sections of the NOGIC Act, NCDMB and NAICOM set up a Technical Committee which developed the structures and strategies to promote and ease interface between both regulatory institutions. One of the tools to ease the interface between the two bodies involved the development of the NOGIC JQS Statutory Reporting Module which makes the submission of insurance performance reports by oil and gas companies to NCDMB automatically accessible to NAICOM for prompt review and feedback to NCDMB. The benefit of this virtual interface is to reduce the turnaround time and to promote the ease of doing business. NCDMB and NAICOM are still fine-tuning the Application Programming Interface to enhance its functionality and efficiency.” he said.
Speaking on seeming, challenges, the ES, said, “Despite the commitment of both agencies to optimize the benefit of the NOGICD Act and the Insurance Act, there are still some obstacles in the way of full implementation. One of the challenges of utilizing Nigerian loss adjusters or brokerage firms is the low capital base of the insurance industry. Closely related to it is the capacity of local insurance firms to underwrite the huge loss associated with a typical upstream petroleum project.”
He said, however, that in response, NAICOM has made remarkable efforts to mitigate some of these limitations, but a lot still needs to be done.
He added that in the spirit of collaboration, NCDMB is poised to work with NAICOM as a credible partner every inch of the way to get around some of these obstacles, particularly within the boundaries of our statutory mandate.
On the way forward he said the Board will not only look at the challenges of building sustainable synergies but will also come up with feasible proposals to encourage collaboration to surmount impediments.
“To address the issue of the low capital base of the industry, for example, we call on all stakeholders to support NAICOM to push for an increase in the minimum capital base of insurance companies.
“Secondly, NAICOM and other stakeholders need to also work assiduously to forge and promote mergers of insurance companies to enhance their efficiencies and improve their market share as part of their collective benefits.
I am aware that some steps have been taken in this direction, but these efforts need to crystallize into reality.” he added.
