Olabode Sowunmi: Nigeria's Local Content Policy in Oil Sector Enhances Domestic Firms Without Excluding Foreign Players

Energy analyst Olabode Sowunmi has articulated that Nigeria's local content policy in the oil and gas sector is focused on enhancing local capabilities and is not intended to exclude foreign enterprises.

In a discussion with Arise News on Tuesday, Sowunmi addressed comments made by the Minister of State for Petroleum Resources, Senator Hannigan Lukwobiri, during the opening of the 2026 Niger International Energy Summit in Abuja.

Lukwobiri observed that while Nigerian companies presently lack the expertise to independently handle complex offshore Engineering, Procurement, and Construction (EPC) projects, the way forward lies in collaboration rather than exclusion.

He further pointed out that the Nigerian Content Act includes financial assistance for local companies to boost their competitiveness.

In response, Sowunmi expressed concern that the minister’s comments may have been interpreted incorrectly. “I sincerely believe that he must have been quoted out of context due to various factors,” he remarked. He clarified that the oil and gas sector operates through specialized subcontractors, particularly in offshore drilling and exploration.

"Oil exploration history stretches back over a century, initiating with Standard Oil and Rockefeller. In that era, companies managed entire value chains, but today, the situation has changed. Major international operators, such as Shell and Chevron, subcontract offshore exploration tasks to specialized firms like Schlumberger, Halliburton, and Baker Hughes,” stated Sowunmi. “It's akin to the construction of a skyscraper—there are firms that provide cranes and others that supply steel. We cannot expect a single company to manage all facets.”

Sowunmi elaborated that this operational structure reflects standard practices in the industry, not a Nigerian peculiarity. “The notion that local firms are incapable of executing such assignments needs to be contextualized. Whoever reported this might have had a limited grasp of how the industry operates,” he explained.

While acknowledging the existing shortcomings in Nigeria's local content implementation, he asserted that improvements are possible. “As the late MKO Abiola famously said, just because the midwife is a witch, doesn’t mean we should discard the baby along with the bathwater. We need to refine our processes, establish standards, and enhance delivery and productivity,” he noted.

Addressing assertions that local firms are subcontracting offshore contracts to foreign entities, Sowunmi emphasized that this practice is a strategic operational choice rather than a reflection of limited capacity. “Similar to telecom or other sectors, companies concentrate on their core strengths and delegate specialized tasks on the basis of efficiency and expertise, not inability,” he said.

Sowunmi also pointed out the significant role of industry bodies and financial institutions in fostering capacity development. “Organizations like the Nigerian Society of Engineers, the Society of Petroleum Engineers, PTAN, and IPPG offer guidance and oversight. While banks provide funding to bolster capacity, acquiring knowledge, technical skills, and adhering to international best practices is equally vital,” he remarked.

He recalled how Nigerian professionals secured offshore contracts on their own in 2015, showcasing the capabilities of local companies. “Nigeria has made notable strides in developing local content capacity. Compared to other African nations like South Africa or Egypt, we are at the forefront in oil and gas expertise,” Sowunmi asserted.

He concluded by stating, “The local content policy aims to enhance Nigerian capabilities while collaborating with foreign operators, not to exclude them. A successful implementation of this strategy would boost Nigeria’s competitiveness and fortify the sector.”