Article Summary
- NCDMB has been mandated by the court to collect a 1% NCDF levy on all upstream oil and gas transactions.
- The decision follows a lawsuit filed last year, challenging the power of the board to demand such payments.
- The NCDMB has increased local content participation in Nigeria’s oil and gas industry in recent times.
The Nigerian Content Development and Monitoring Board (NCDMB) will collect a 1% levy on all upstream oil and gas transactions in the country. This was stated by the Federal High Court sitting in Yenagoa, Bayelsa State, on May 9, 2023.
According to a statement by the NCDMB, the court’s ruling confirmed the authority of the NCDMB to collect a 1% Nigerian Content Development Fund (NCDF) levy from every contract awarded in the Nigerian oil and gas upstream transaction. The ruling is in line with Section 104 of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act.
The cited section states:
- “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 Nigerian oil and gas industry shall be deducted at source and paid into the Fund.”
Reacting to the court judgment on May 10, the Executive Secretary, Engr. Simbi Wabote, said the court’s decision would strengthen the board’s resolve and commitment to Nigerian content implementation regardless of any headwind or distraction. He said:
- “The Board vigorously contested the issues in court and effectively countered the arguments of the plaintiffs. Hence, on May 9, 2023, the Federal High Court finally gave judgment in favor of the Board, dismissing the suit and prayers of the plaintiffs as wholly incompetent, and baseless and finding that the suit did not disclose any reasonable cause of action. The interim injunction earlier granted ex parte on July 19, 2022, was also vacated.”
Backstory
In 2022, the Incorporated Trustees of the International Association of Drilling Contractors (IADC) initiated a lawsuit against the NCDMB, seeking to stop the collection of the one percent NCDF levy. The IADC challenged the powers of NCDMB to demand the 1% NCDF levy from their members and contractors.
What you should know
The Nigerian Content Development Fund (NCDF) is NCDMB’s only source of funding following the Board’s exit from federal allocation in 2017/2018.
In April 2022, the NCDMB revealed that local content in the Nigerian oil and gas industry had risen to 42%. The Board said that the growth in content has seen the retention of over $8 billion of the $20 billion annual spending in the industry, as Nigerian-owned oil companies produced 15% of the country’s daily oil output and accounted for some 60% of domestic gas supply.
