The Nigerian oil and gas local content regime and its (non) compliance with the trims agreement

Abstract

One major milestone for the Nigerian oil and gas industry was the enactment of the Nigerian Oil and Gas Industry Content Development Act in 2010. The Act establishes a comprehensive local content regime that enshrines legal measures which promote the patronage of Nigerian products and services by operators in the Nigerian oil and gas industry. This article examines the provisions of the Act and Nigeria’s obligations under the WTO’s Trade Related Investment Measures (TRIMS) Agreement with a view to determining whether the provisions of the Act are in violation of Nigeria’s obligations under the TRIMS Agreement. It also examines whether any exemptions can justify the derogation of Nigeria’s obligations under the TRIMS Agreement. The article finds that requirements under the Act constitute trade-related “investment measures” within the meaning of the TRIMS Agreement because such requirements are explicitly meant to apply to “all operations or transactions” connected with the oil and gas industry. This article also finds that some provisions of the Act are not in compliance with Nigeria’s obligations under the TRIMS Agreement. In particular, sections 10 (1), 11(1), and 12 of the Act which favour the use of local products and materials for projects in the oil and gas industry contravene Nigeria’s obligations under the TRIMS Agreement. The article further identifies exemptions which can justify Nigeria’s application of oil and gas industry local content measures that derogate obligations under the TRIMS Agreement. In this regard, the article suggests that the exemptions under Article 4 of the TRIMS Agreement, which permit a WTO member whose economy is in the early stages of development and can only support low standards of living to temporarily apply local content measures, can be applied by Nigeria to justify the oil and gas industry local content measures under the Act for the purpose of promoting economic development and improving living standards in the country.

Keywords: GATT, Local Content Requirements, Nigeria, TRIMS, WTO Obligations