The Nigerian Oil and Gas Industry Content Development Act and GATT Treaty Obligations: On a Path of Harmony or Discord?
| Autor | Uchenna Jerome Orji |
| Cargo | American University of Nigeria |
| Páginas | 56-80 |
Latin American Journal of Trade Policy 7 (2020) – ISSN 079-9668 – Universidad de Chile
56
The Nigerian Oil and Gas Industry Content Development Act and GATT
Treaty Obligations: On a Path of Harmony or Discord?
Uchenna Jerome Orji
Abstract
The Nigerian Oil and Gas Industry Content Development Act of 2010 prescribe local content
requirements to promote the patronage of Nigerian products and services by operators in the oil and gas
industry. Local content requirements however appear to violate obligations under the World Trade
Organization’s (WTO) General Agreement on Tariffs and Trade (GATT) (1994) of which Nigeria is a
member. This article examines provisions of the Act and Nigeria’s obligations under the GATT with a
view to determining whether the provisions of the Act are in violation of GATT obligations, and whether
those violations are covered by any of the exemptions under the GATT. The article finds that sections
10(1) (a), 11(1), 12 and 13 of the Act, which favor the use of local products and materials for projects in
the oil and gas industry, contravene the national treatment obligations under Article III of GATT. The
article also finds section 53 of the Act to be in violation of the obligation to ensure the general elimination
of quantitative restrictions under Article XI:1 of GATT. However, the article suggests that GATT
exemptions justify Nigeria’s application of local content measures in the industry. Nigeria can rely on
Article XVIII of GATT to apply local content measures for the purpose of promoting economic
development and improving living standards in the country. Besides, Nigeria can rely on Articles XII:
1/2 and XIX:1 of GATT to apply local content measures that restrict fabricated/welded metal products
imports in order to prevent a serious decline in monetary reserves and also safeguard domestic producers
of similar products from “serious injury” that may arise from the increased imports of such products.
Keywords: GATT; Local content requirements; Nigeria; WTO obligations; Oil and gas industry.
Resumen
El Acta de Nigeria para el desarrollo de contenido de la industria del petróleo y el gas de 2010 prescribe
requisitos de contenido local para promover el uso de productos y servicios nigerianos por parte de los
operadores de esta industria. Sin embargo, los requisitos de contenido local parecen violar las obligaciones
del Acuerdo General sobre Aranceles Aduaneros y Comercio (GATT) (1994) de la Organización Mundial
del Comercio (OMC), del que Nigeria es miembro. En este artículo se examinan las disposiciones del
Acta y las obligaciones de Nigeria en virtud del GATT para determinar si estas disposiciones infringen
las obligaciones del GATT, y si esas infracciones están cubiertas por alguna de las exenciones previstas
en el Acuerdo. El análisis determina que los artículos 10 (1) (a), 11 (1), 12 y 13 del Acta, que favorecen el
uso de productos y materiales locales para proyectos en la industria del petróleo y el gas, contravienen las
obligaciones de trato nacional en virtud del artículo III del GATT. El trabajo también determina que el
artículo 53 del Acta infringe la obligación de garantizar la eliminación general de las restricciones
cuantitativas en virtud del artículo XI:1 del GATT. Sin embargo, se estima que las exenciones del GATT
justifican la aplicación de medidas de contenido local en la industria. Nigeria puede basarse en el artículo
XVIII del GATT para aplicar medidas de contenido local con el fin de promover el desarrollo económico
y mejorar el nivel de vida en el país. Además, Nigeria puede basarse en los artículos XII: 1/2 y XIX:1 del
GATT para aplicar medidas de contenido local que restrinjan la importación de productos metálicos
fabricados/soldados a fin de evitar una disminución grave de las reservas monetarias y también proteger
a los productores nacionales de productos similares del "daño grave" que pueda derivarse del aumento
de la importación de esos productos.
Palabras claves: GATT; requisito de contenido local; Nigeria; obligaciones OMC; gas y petróleo.
PhD in Law from Nnamdi Azikiwe University, Nigeria. Assistant Professor, School of Law, American University
of Nigeria, Yola, Nigeria. Email: uchenna.orji@aun.edu.ng. Received: December, 5th 2019; accepted: May, 10th 2020.
Uchenna Jerome Orji
The Nigerian Oil and Gas Industry Content Development Act and G ATT Treaty Obligations: On a Path of
Harmony or Discord?
57
Introduction
The oil and gas industry is the most strategic sector of the Nigerian economy and accounts for the largest
source of the government’s revenue and national export earnings (IMF, 2017, 2019; World Bank 2017).1
Despite the strategic importance of the industry to Nigeria, it appears however, that it has not been
effectively integrated into the mainstream of the national economy. The government’s heavy dependence
on the industry as the major source of revenue has mired the country in an economic state of affairs that
reflects the ‘Dutch disease’ or ‘resource curse’ phenomena.2 This has persistently manifested in form of
economic distortions and the neglect of other critical sectors such as the agricultural and manufacturing
sectors (Binuomote and Odeniyi, 2013). Accordingly, it has been aptly observed that:
“Petroleum has transformed Nigeria from the diversified, agro-based economy that it
was up until the sixties to the mono-resource, petroleum based economy that it has
become since the 1970s. While Nigeria has earned billions of dollars exporting oil and
natural gas, the industry has not generated the type of multiplier effects necessary to
facilitate sustainable national development and economic growth. The ‘Dutch Disease’
phenomenon, which traditionally afflicts natural resource dominated economies, has
ravaged the Nigerian political economy”. (Iledare and Suberu, 2010, p.11)
Also, Nigeria’s huge revenue-receipts from the oil and gas industry have not significantly improved living
standards on the average as the country still has one of the highest rates of poverty3 and one of the lowest
human index levels in the world (UNDP, 2016). In addition, Nigeria’s huge revenue-receipts from the
industry have not resulted in huge contributions to the national Gross Domestic Product (GDP). For
example, Nigeria’s National Bureau of Statistics estimates that the oil and gas industry contributes about
14.40% to the national GDP, while agriculture, which has very low revenue-receipts, makes a higher
GDP contribution of about 21.97% (National Bureau of Statistics, 2013). It has also been observed that
out of the estimated $12 billion annually spent on servicing the upstream sector of the oil and gas industry,
“over 80% by value of work is carried out abroad, resulting therefore in an insignificant contribution to
1 The oil and gas sector accounts for over 57% of total government revenues and 94% of exports. See International
Monetary Fund (IMF), Nigeria -Selected Issues, IMF Country Report No. 19/93 (IMF: Washington, D.C, April,
2019), p.5; World Bank Macroeconomic and Fiscal Management Global Practice (Nigeria Team) Nigeria Bi-Annual
Economic Update: Fragile Recovery, No. 1 (World Bank: Washington, D .C, - April 2017), p.15; IMF, Nigeria -
Selected Issues, IMF Country Report No. 17/81 (IMF: Washington, D.C, A pril, 2017), p.6.
2 “Dutch disease” or “Resource curse” are terms commonly used to refer to “a phenomenon in which the discovery
of substantial natural resource wealth negatively affec ts a nation’s economy. The discovery often causes sudden
appreciation in the value of the nation’s currency, which in turn, decreases the nation’s competitiveness in the
international commodity markets. This reduces the country’s exports of manufactured and agricultural commodities
and increases its imports. At the same time, the natural resource sector draws a substantial share of domestic
resources such as labor and materials, increasing their cost to other sectors. Moreover, when the initially boomin g
resource sector eventually declines, the non-resource-based sectors may find it difficult to recover”. See Mähler, A.,
Nigeria: A Prime Example of the Resource Curse? Revisiting the Oil Violence Link in the Niger Delta (German
Institute of Global and Area Studies Working Papers: Germany, 2010) p. 120. See also Foundation for
Environmental Security and Sustainability, Oil and Gas and Conflict Development Challenges and Policy
Approaches (Foundation for Environmental Security and Sustainability and United States Agency for International
Development: United States, January 2006) pp.7-8.
3 The UNDP Human Development Report (2015) classifies Nigeria as one of the five countries with the largest
population of people in multidimensional poverty. See U NDP, Human Development Report 2015 (UNDP: New
York, USA, 2015) pp.61 &219.
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