*70% allocation should go to 36 states – Consultant
Nigeria’s petroleum sector is currently trailing on a new phase, following the Petroleum Industry Bill (PIB) signed into law by President Muhammadu Buhari last Tuesday.
This development thus opens a new chapter for operators, International Oil Companies, IOCs, investors and the country at large.
Available reports showed that the sector contributes about nine per cent of the country’s Gross Domestic Products, GDP, and 90 per cent of the foreign exchange earnings.
Consequently, any adverse change in the industry will seriously impact government finances, which is why successive governments remained focused on the sector despite various discussions on diversifying the economy.
Energy Vanguard gathered that in the past 20 years, there have been various attempts at reforming the industry. Although, none of these efforts has yielded any concrete result until the introduction of the PIB 2020.
According to a report by KPMG, several attempts at passing the bill in 2009, 2012 and 2018 failed because of factors such as lack of ownership, misalignment of interests between the National Assembly and the Executive, perceived erosion of ministerial powers, stiff opposition by the petroleum host communities and push back by investors on the perceived uncompetitive provisions in those versions of the bill.
The report also noted that the PIB 2021 is set to address all the issues to the extent possible, although, the biggest question in the lips of Nigeria is if it will savage the investment lost overtime following the non endorsement of the bill by the most populous black nation.
$50 billion worth of investments fizzle out in 10 years
Meanwhile, President Buhari revealed that the non-passage of the PIB, lack of progress and stagnation in the petroleum industry forced Nigeria to lose an estimated $50 billion worth of investments in ten years.
He stated that the past Administrations have identified the need to further align the industry for global competitiveness, but there was a lack of political will to actualize this needed transformation.
“This lack of progress has stagnated the growth of the industry and the prosperity of our economy. In the past ten years, Nigeria has lost an estimated $50billion worth of investments due to uncertainty created by the non-passage of the PIB.
“This administration believes that the timely passage of the Petroleum Industry Bill will help our country attract investments across the oil and gas value chain.”
Oil firms deny funding to communities’ trust fund
There seem to be some unclarified issues in the bill, as some sections of the bill empower oil firms, as parts of cost-cutting measures, to reduce the number of members of the Board of Trustees and refuse to fund the host communities development trust fund to be set up mandatorily by the companies.
Energy Vanguard gathered that in the aspect of host community development trust fund, a new clause was inserted in the bill which mandates The Commission and The Authority to include while making regulations on host communities’ development, a grievance mechanism to resolve disputes between oil firms and their host communities.
The mechanism for dispute resolution, according to the bill, empowers oil companies to make series of adjustments regarding host communities development trust funds, to enable them to reduce expenditures where the available financial resources for the administration of the trust fund is insufficient to fund the ongoing operations.
PIA Framework and Business Plan
According to a Managing Consultant of Syntechsys International Dr. Kingsley Abhulimen, there should be a framework between the government sharing formula which must allocate 70 per cent to 36 states and 30 per cent to Federal Government.
“The Ministry of Petroleum Incorporated and Ministry of Finance must be owned by the 36 states at 2 per cent each making 70 per cent and Federal Government through the Federal Territory Abuja should retain 30 per cent.
“The Host communities should be under Nigeria Content. Without Technology from IOC and companies like Shell Global, Chevron Global and IOCs global, the PIA cannot stand on policy or Law Alone, it must stand on Technology and Innovation and human capital to support its longevity and profitability.”
Mixed feelings as experts react to PIA
Meanwhile, Energy Vanguard gathered that several controversies and criticisms have trailed the passage of the Bill into Law.
In a message by the Organisation of Petroleum Exporting Countries (OPEC), Secretary-General, Dr Mohammed Barkindo, the enactment of the legislation was timely as the investment outlook had become clouded by efforts aimed at accelerating a lower-carbon future.
“I wish to extend my congratulations to you on signing into law the PIB, which marks a significant milestone for Nigeria’s oil industry and a historic achievement for your Presidency.
“With the stroke of a pen, you have inaugurated a new era for the industry following years of legislative efforts to strengthen the legal, regulatory, fiscal and governance framework of the petroleum sector,” he said.
On his part, Nigeria Extractive Industries Transparency Initiative (NEITI), Executive Secretary, Dr Orji Ogbonnaya Orji, described the bill as a historic development.
“The new Petroleum Industry Law had ended decades of uncertainty concerning the future of Nigeria’s oil and gas sector. The new law has opened a new phase of wider opportunities in the oil and gas industry.
“Buhari has created a new business horizon built on healthy legal frameworks with realistic optimism for inflow of investments, revenue growth and job opportunities,” he said.
Former Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, noted that it is a step in the right direction, even though it is not perfect legislation because not all the concerns of major stakeholders have been addressed by the legislation.
In his words, “I am aware that the oil companies were concerned about the adequacy of the fiscal terms in the PIB. The host communities also had reservations about the percentage contribution to host communities funds. But we can always improve on those provisions with time. Issues of this nature are typically work in progress.
“The Act is a major instrument of reform in the oil and gas sector. It has several significant implications for the oil and gas sector and the economy as a whole. It has a profound investment effect as investment sentiments in the petroleum sector are enhanced by the new policy regime,” he added.
On the flip side, Edwin Clark-led Pan Niger Delta Forum (PANDEF) condemned the signing into law of the PIB.
According to the National Publicity Secretary of PANDEF, Ken Robinson, “It is unfortunate that President Buhari went ahead to assent to the PIB despite overwhelming outcry and condemnation that greeted its passage by the National Assembly, especially with regards to the paltry three per cent provision for the Host Communities Development Trust Fund and the brazen appropriation of an outrageous 30 per cent of NNPC Ltd profit for a dubious, nebulous Frontier Oil Exploration Fund.
“This PIB falls way short of the expectations of the Oil and Gas Producing Communities, that bear the brunt of unconscionable industry operations. This assent, by President Buhari, simply speaks to the repugnant attitude of disregard, propelled by arrogance, disdain and contempt with which issues concerning the Niger Delta region are treated, particularly, by the present administration,” he added.
PIA is not yet a force
Although the PIA is not yet in force. While the signing by the president means it has become a law, it does not mean it became effective on the day it was signed. A gazetted version will be issued that says the date of commencement.
A couple of provisions there will also not start immediately. For example; the Minister of Finance will incorporate Nigerian National Petroleum Corporation, NNPC Limited under Companies and Allied Matters Act, CAMA within six months after the effective date.
The date of signing is not necessarily the effective date. And the effective date is not yet public.