Tackling R&D Deficit in Nigeria’s Oil Industry

The world over, Research and Development (R&D) remains the bedrock of growth and innovation, not just in the oil and gas industry, but across all sectors. But in Nigeria, R&D has always taken the back burner, getting little attention and resources. Emmanuel Addeh takes a look at the challenges and efforts by Nigeria to tackle these problems, given the new drive to ensure local content in the oil and gas sector.

Despite the signing into law in 2010 of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, which mainly sought to close the gap left unfilled by Nigerian experts, there still exists a gap between the expertise required in the industry and associated service sectors and what is currently available. In the main, R&D literally keeps the world going, especially in the ever-changing oil industry, spurring competitiveness among leading nations and catalysing newer, faster as well as more efficient ways of doing things. In Nigeria, the lack of funding for research in the oil and gas industry as well as related sectors has hampered innovation and stunted development leaving investment in new technologies, new products, processes, and services suffer.

Although there have been improvements in the development of homemade, in-country technologies and expertise spurred by the local content law, which gives priority to Nigerian operators and prescribes minimum levels of Nigerian content, the missing link appears to be the R&D aspect.

As it is, Nigeria does not have adequate facilities and R&D infrastructure ecosystem to begin with, added to weak framework for protection of intellectual property, lack of funding, low technological development and inadequate educational infrastructure and curriculum to support and foster innovation in higher institutions.

Added to that is the inability to retain most of the best brains in-country and inability to employ or re-integrate those sponsored by government on scholarships to apply knowledge acquired. Even where it exists, there is some sort of discrimination against local researchers compared to expatriates, poor linkages between R&D departments and industry that are meant to promote the advancement of the frontiers of human knowledge. In developing and developed countries, the shift towards renewable sources of energy is being revved up, which underscores why Nigeria must not be left behind, being a major resource-dependent country. Countries are driving this with huge investment in R&D.

The nexus is unmistakable. The fact that Nigeria is yet to advance economically or have globally branded products or world acclaimed Intellectual Property Rights, from its indigenous knowledge and industrial efforts is a clear testimony that the country still has a long way to go in its research efforts.

Research Institutes

With over 300 institutions composed of research institutes, innovation agencies and policy implementation departments, multinational companies, large pool of skilled labour force, including a sizeable number of diaspora, the economy is still weak on innovation. The situation has partly contributed to the very high national poverty incidence, which implies that over 100 million Nigerians are living below the poverty line.

A major challenge to R&D in Nigeria is that the actors within the system, including private enterprises, universities and public research institutes have little or no linkage among them in form of joint research, personnel exchanges, and even joint purchase of equipment.

Despite the increasing number of research institutes and public and private universities, these distortions continue to exist. Nigeria as a country is the worst for it, with even academic researchers carrying out their work for the sake of it, rather than channeling it to solve a particular societal problem.

An analysis of global practices of R&D will quickly reveal that Nigeria has either not started or is still lagging behind. For instance, the combined R&D spend of just five countries makes up 63.5 per cent of the entire global R&D expenditure.

It is therefore not surprising that these five countries, namely USA, China, Japan, Germany, and India also account for over 50 per cent of the global Gross Domestic Product (GDP).

Conversely, Africa, accounts for less than 1 per cent of the global R&D spend while its GDP is only 3 per cent of the global GDP. In the oil industry, which depends largely on new technology, the contribution is even less, even when the continent remains a major oil-producing one.

Indeed, the oil industry has come a long way. From its early days of research efforts, to the breakthrough on crude oil exploration, improvement of geophysical methods of determining underground structures where oil may accumulate and even the investigation of the best methods of extracting oil from crude oil reservoirs.
In addition, there has been a certain amount of research carried out on improved drilling methods and along basic geological lines, seismic methods of determining underground structure, seismic surveying, which has come with great improvement in the accuracy and reliability of the instruments used and in the method itself. All these have been dependent on innovation.

Nigeria As CCUS Hub

In fact, although still far-fetched, Nigeria can be a major hub for Carbon Capture, Utilisation, and Storage (CCUS) system, a new technology being supported by the Organisation of Petroleum Exporting Countries (OPEC).

According to experts, this system encompasses methods and technologies to remove carbon from the oil and gas from spilling into the atmosphere, followed by recycling the carbon for utilisation and determining safe and permanent storage options.

With the growing adoption of alternative energy sources and energy efficient systems to reduce the rate of carbon emissions and limit rising atmospheric CO2 concentrations while meeting increasing global energy demand, this is one technology that industry players like OPEC Secretary General, Dr. Sanusi Barkindo, say is the future of the industry.

It was, therefore, heartening last Thursday that the federal government through the Nigerian Content Development Monitoring Board (NCDMB), floated a $50 million Nigerian Content Research and Development Fund (NCRDF) to boost innovation in the country in general and the oil and gas industry as well as associated sectors.

The government noted that the 0.2 per cent currently devoted to Research and Development (R&D) in the country remains very negligible, noting that developed nations like the United States, China, Japan, Germany, and South Korea spend between 2.5 to 4 per cent of their annual GDP on research.

It noted that even developing nations like India, Malaysia and Brazil spend between 0.7 per cent to 1.2 per cent, whereas Nigeria continues to lag well behind by deploying only about 0.2 per cent of its GDP, a far cry from the minimum threshold needed

Speaking at the 2nd NCDMB Research and Development Fair and Conference in Yenagoa, Bayelsa state, Minister of State, Petroleum Resources, Chief Timipre Sylva, explained that the underfunding of R&D reflects on Nigeria’s overdependence on foreign goods and services.

The event also witnessed the formal launch of the NCDMB 10-year R&D roadmap, anchored on eight success pillars, namely: funding, infrastructure, capability, commercial framework, collaboration, governance, legal framework and enforcement.

Represented by the Permanent Secretary at the ministry, Dr. Nasir Gwarzo, Sylva argued that the situation remains unsustainable if the country is serious about building a national technological capability that will drive economic growth.

“To put certain realities into context, there is a need to do a comparative analysis. Currently, developed nations such as the USA, China, Japan, Germany, and South Korea spend between 2.5 to 4 per cent of their annual Gross Domestic Production (GDP) on R&D.

“Also, developing nations like India, Malaysia, Brazil spend between 0.7 per cent to 1.2 per cent. Nigeria lags well behind by spending only about 0.2 per cent of its GDP on Research & Development,” he stated.

Funding Responsibility

Sylva added that it was important to clear the misconception that funding of research is the sole responsibility of national governments, arguing that rather, big spenders on research and development globally come from the private sector.

“In 2019, private sector practitioners in the ICT hardware and electronic equipment sector, pharmaceutical & biotechnology sector, automobiles and components sector cumulatively spent $528bn on R&D, representing 22 per cent of the $2.3 trillion global R&D spend. In India, the private sector contributed 38.1 per cent of the country’s R&D spend.

“Still on funding and in line with our commitment to provide leadership, I am pleased to officially announce the creation of the Nigerian Content Research and Development Fund with an initial seed capital of $50 million,” he announced.

He explained that the fund was designed for application in the establishment of research centres of excellence, funding support for research commercialisation, funding support for basic and applied research as well as the endowment of professorial chair.
The minister noted that though clearly insufficient, it signified the premium the present administration places on growing the nation’s research and development capabilities.

He encouraged the private sector to replicate the global practice by complementing the NCRDF and actively support the government’s drive in upscaling its national research architecture

According to him, with the Petroleum Industry Act (PIA), a governance framework for the industry with clear delineation of roles between regulation and profit-centric business units has now been established.

Members of the newly-constituted NCRDC include Dr. John Erinne, Mr. Ijuwe Albert ,Mr. Rosario Osobase , Dr. Noel Biodun Saliu, Alhaji Aliyu Adamu and Dr. Tandama Abu and will be headed by the Executive Secretary, NCDMB, Mr Simbi Wabote.

Sylva also commissioned the NCDMB Technology Incubation and Innovation Centre, which will provide the platform for idea generation, incubation and acceleration of innovative ideas to the marketplace.

Wabote in his comments, also stressed that an analysis of global practices of R&D revealed that the combined spend of just five countries makes up 63.5 or cent of the entire global spend and also account for over 50 per cent of the global GDP.

“Africa, on the other hand, accounted for less than 1 percent of the global R&D spend while its GDP is only 3 per cent of the global GDP. You will agree with me that there is a nexus between the spend on research and development and economic prosperity,” he argued.

He stressed that the authors of the Nigerian Oil and Gas Industry Content Development Act (NOGICD) of 2010 recognised the importance of research and development and included key provisions in the Act.

He stated that the board commenced the implementation of the 10-year strategic roadmap in 2018, which seeks to increase the level of Nigerian content in the oil and gas industry to 70 per cent by the year 2027.
Industrial Revolutions

The ES described R&D as the core of the industrial revolutions the world has witnessed over the ages, saying that it was important that countries deploy means of nurturing home-grown solutions as a way to wealth creation and growth.

Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, who also spoke on the importance of R&D, disclosed that the corporation was happy to incorporate it into its processes, adding that as a technology-based industry, the NNPC has revved up research efforts to make it suitable for the future.

Director, Department of Petroleum Resources (DPR), Mr Sarki Auwalu, in his comments, noted that the oil and gas industry must begin to see the world with new eyes, which also presents an array of opportunities for learning and knowledge sharing.

He added that it was critical for the global oil and gas industry to remain efficient and innovative in responding to the emergence of cheaper renewables to sustain the relevance of hydrocarbon resources to the global energy mix.

“Therefore, research and collaboration from all stakeholders is crucial to remain competitive and to meet safe, clean and sustainable energy demands of the future,” he said.

As the world moves away from fossil fuels to cleaner sources of energy, Nigeria must not be left behind if it must make tangible progress on the global stage.

It must devote more attention and resources to research and development, especially in relation to the country’s economic cash cow, the oil and gas industry, for the advancement of all.