… It’ll attract investments says Buhari
… Promote transparency in sector – NNPC
… May lead to revenue shortfall – FIRS
‘…Good start for host communities but …’
… Groups allege bias; say it’s provocative
After over a decade of wait, the Petroleum Industry Bill (PIB) was finally passed by the National Assembly and signed into law by President Muhammadu Buhari, Monday, thus bringing to an end the ‘jinx’. In this report, BENJAMIN UMUTEME asks: What next?
President Muhammadu Buhari’s assent to the Petroleum Industry Bill (PIB) brought to an end over a decade-long tussle that saw the Bill being passed by the National Assembly.
The PIB seeks to ensure reforms, promote transparency, and attract capital flows into the oil and gas sector. The upper chamber passed the bill following consideration of each clause in the report by the Joint Committee of the National Assembly on Petroleum (Downstream, Upstream and Gas).
The Bill comprises five major parts, including Governance and Institutions; Administration; Host Communities Development; Petroleum Industry Framework; and Miscellaneous Provisions comprising 319 clauses and 8 schedules.
One of the key recommendations of the Bill is the unbundling of the Nigerian National Petroleum Corporation (NNPC)) and a revision of the funding mechanism.
When it was introduced in 2008, industry watchers had expected that would be quickly passed, but that was not the case as disagreements between the Executive and Legislative arms of the government and other stakeholders kept it in limbo.
In the 8th Assembly, when it was passed as the Petroleum Industry Governance Bill (PIGB), it still could not get the assent of the President. However, the entire Bill was re-introduced to the National Assembly by the executive in September 2020.
Having set its mind to seeing the Bill passed, the leadership of the both chambers of NASS ensured that they worked very closely with the executive right from the conception of the Bill.
Also, oil and gas related committees of the National Assembly worked closely with relevant agencies of government to the point of presentation and passage of the Bill.
Industry experts estimate that in the over 20 years that the Bill was not passed Nigeria suffered a revenue loss of about $200 billion.
Sylva heads implementation team
To show its commitment to the implementation, President Buhari has directed the immediate implementation of the framework for PIA and urged all relevant stakeholders to comply and reposition for full activation within 12 months.
President Buhari, who said the Minister of State for Petroleum Resources, Mr Timipre Sylva, would head the implementation team, urged all Ministries, Departments and Agencies (MDA) to adjust to the transition, designed to reposition the economy.
“To consolidate the commitment of this administration to delivering the value proposition of this law, I have approved an implementation framework commencing immediately to ensure the industry envisaged in the new law begins to take shape.
“The implementation process to be headed by the Minister of State, Petroleum Resources is hereby tasked with the completion of the implementation of this act within 12 months. I am therefore directing all relevant MDAs of government to fully cooperate in ensuring the successful and timely implementation of this law,” he said.
Speaking on the passage of the Petroleum Industry Act (PIA) 2021, President Buhari said assent of the PIB on August 16, 2021, will put an end to decades of uncertainty and under-investment in the petroleum industry.
“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 $50bn worth of investments due to uncertainty created by the non-passage of the PIB. This administration believes that the timely passage of the PIB will help our country attract investments across the oil and gas value chain,” he said.
… Host communities win as well
For the President of the Senate, Ahmad Lawan, “This is one Bill that will benefit Nigeria as a country and benefit its people. We will have much more revenues coming into our country, into our coffers.
“So our states will have more revenues. Our local government will have more funds. And of course what they expect is that these revenues should translate into actionable projects that will make life better for Nigerians.
“Of course, there will be so much employment and jobs especially in the midstream of the value chain.
“The host communities are winners as well. It may not be necessarily exactly what some of them had hoped but you know from zero to over $500 million,” he added.
Expect more refineries, end to importation – Expert
Capital Market Professor Uche Uwaleke told Blueprint Weekend that the Petroleum Industry Act (PIA) would open up the sector for more investments and boost economic growth.
He said the Act would not only translate to the establishment of more refineries but also end continuous importation of fuel.
“The Act makes provision for speedy granting of licenses to investors, especially in the downstream sector. This is likely to translate to the establishment of more refineries in Nigeria which will go a long way to meet local consumption with prospects of ending fuel importation and the loss of FOREX associated with it.
“This could strengthen the value of the naira in the long run as well as create job opportunities in the petroleum value chain.
“The Bill also provided for the application of cost reflective tariffs by operators and the commercialisation of NNPC Limited. One implication of this is that fuel subsidy will completely be removed,” the capital market expert said.
It’ll promote transparency says Kyari
The Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, has said PIA would transform the nation’s petroleum industry into a hub of business opportunities.
According to Kyari, the Act would also attract huge capital globally into the country’s oil sector, strengthen cost recovery and ensure decent returns on investment.
Speaking as Guest of Honour at a Fireside Chat organised by a Nigerian online media in Houston, Texas, Persecondnews, Thursday, at the Offshore Technology Conference, OTC, said the new petroleum law, was expected to promote good governance in the oil and gas sector in tandem with the international best practices.
“The passage of the PIB will also attract capital, strengthen cost recovery and ensure decent returns on investment.
“It will help us to have a very transparent, clearly competitive physical framework, where you get to see opportunities on where you can put your money and also get back your money with some benefits.
“It will also refocus on gas development in our country such that as we know gas is the new oil… We have been very stagnant for over 24 years without any physical change.
“What happened in the last few days is simply a transformation of activities and transformation of the environment for doing business making our country very competitive.”
According to the NNPC boss, getting the petroleum legislation passed was the right thing to do because investors would not invest their money if they are not sure of how they are going to get their investment back, and what benefits they can get from their investment, as well as how stable the investment climate is.
The technocrat explained: “We are aware that the whole world is becoming a petroleum territory and no country will survive except you have a very competitive physical environment.
“What is logic to us is to bring us abound with the best of physical environment that is available in the world, bringing us to a place where also structure of regulation that is also in line with best practices in the world clearly separating the upstream from the midstream and downstream so that our focus can come back to the part of the industry that will surely be the hub.
“For our investors what this means is that there is clarity of our physical environment, there is also a very robust commercial framework, there is also a competitive physical framework.
“So the combination of these three to new investors and existing investors is that they can now take opportunity of the industry. Friendly business environment will guarantee cost recovery and a decent return on investment for investors.
“The combination of these is that NNPC will be the house of opportunities, expand our partnerships, and it will be a very big opportunity for new investors and the country. I think this is a very exciting moment for us as a country.”
Speaking on changes in the corporation’s assets after the PIA with regards to the incorporation of NNPC as a company under the Company Allied Matters Act (CAMA), Kyari reiterated that all assets and liabilities of the NNPC would be transferred to the new company.
“The bill clearly states that the corporation will be transformed into a CAMA company. The bill also made it clear that the assets and liabilities of NNPC will be transferred to the new company, while some toxic ones may be left for NNPC.
“What this means is that, this company will start paying taxes and royalties as any other companies, and also declare the debt with shareholders at the end of every year,” Kyari said.
It’ll help eliminate corruption – Researcher
On his part, a political economist and development researcher, Mr Adefolarin A. Olamilekan, told our correspondents that: “The signing of the PIB is a paradigm shift in national priorities that will emphasise transparency, prompt management and engagement in the oil and gas sector in Nigeria.
“It is our hope that things would be done differently and the economy is prosperous. PIA, perhaps, provides opportunity for the economy to perform well coming from the oil and gas sector that is to primarily drive competitiveness among all stakeholders.
“Again, it is our belief that PIA would reassure and help build the confidence of stakeholders, investors and better host communities -oil companies’ relations. Besides, we hope it will help eliminate all forms of corruption in the oil and gas sector translating into positive macro and micro economics goodies for all Nigerians,” he said.
We’ll canvass for amendment – HOSCON
Similarly, the Chairman, Host Communities of Nigeria, Producing Oil and Gas (HOSCON), Dr. Mike Emuh, Tuesday, said the PIA was a good start for host communities who have bore the brunt of oil exploration.
According to him, the direct payment of derivation to states denied the host communities of funds totalling N44 trillion in the past 22 years noting that it accounted for the underdevelopment of the region.
He said: “It is a good start for the oil communities. I have been asking the communities to accept the new Act even though we intend to canvass for the amendment of some provisions, including the section, which gives a landlord status to the oil companies.”
Assent unfortunate, unjust
Stakeholders in southern Nigeria including the Pan-Niger Delta Forum and other groups in the South-south, South-west and South-east have described some provisions as “unjust, satanic and provocative.
Many have questioned the sincerity of the president in rushing to sign the bill into law without taking into consideration the concerns of host communities.
They have wondered why the president would refuse to question the approval of three instead of five per cent for host communities while not raising an eye brow on the 30 per cent set aside for exploration of oil in the frontiers basins.
The frontier basins include: Chad Basin, Gongola Basin, Sokoto Basin, Dahomey Basin, Bida Basin, Benue Trough, amongst others.
For Managing Director, Financial Derivatives Company (FDC) Limited, Bismarck Rewane says three per cent allocation for oil-producing communities in the PIA is “unfair and rape” to the host communities.
“It is rape, and that is what is happening. Is the three per cent the ideal, optimal compensation for the host communities? I will say, no, but I come from there.
In an interview with Channels TV, Rivers state Governor, Nyesom Wike, insisted that the three per cent assigned to host communities in the Act was not enough to deal with the environmental degradation that has been caused by years of oil exploration.
According to him, “Three per cent is not enough when you consider the kind of pollution and environmental crisis we have had as a cause of oil exploration.”
In the same vein, Pan Niger Delta Forum (PANDEF) has condemned the Act, describing it as unfortunate.
“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,” PANDEF said in a press statement.
…Resource management vital
The Senate President, Ahmed Lawan, has remained adamant that it was not about the percentage allocated to the host communities but how they are able to prudently manage it.
Speaking on the outcry Lawan argued, “I want to also caution that it is not the $500 million that is more but how we are able to prudently and transparently deploy this $500 million in the host communities.
“This time around, there should be no excuses for anybody to tamper with this money. The host communities have suffered enough even when NDDC was established… This time, the host communities have been specifically mentioned and these funds should go there. We want to see people who will be appointed taking this as trust and do what is right.”
Reconciliation may affect projections
While many have hailed the signing of the PIA, authorities at the Federal Inland Revenue Service (FIRS) have expressed fear that it may lead to revenue shortfall for the federal government.
According to FIRS Chairman, Mohammed Nami, revenue that would accrue to the federation account in 2022 from Petroleum profit tax would drop.
Nami said: “We expect that with the new PIA there are some reconciliation that will be carried out that might affect the projections for 2022. We expect that there are new expenditures that will be rolled over to the new regime. So, what we are trying to do is to ensure that we adjust those expenses for the year 2022. We know that if we do that, it is going to affect our ability to collect more revenue in that area.
Uwaleke noted that there are still some grey areas that need to be addressed noting: “For instance, the PIB made an attempt to curb pipeline vandalism and restiveness in the Niger Delta region through various provisions that entitled the Host Communities to a percentage of oil revenue. Unfortunately, this area has not been properly tidied up as the percentage of oil revenue initially proposed for host communities was reduced.
“The PIB did not also make provision for eventual partial privatisation of NNPC Limited which guarantees a more efficiently run company,” the former Imo state finance commissioner added.
For the Capital Market Professor, the Act will finally put to rest the fuel subsidy ‘wahala’. According to him, fuel subsidies are causing incalculable damage to the economy.
He said: “A situation where the government spends close to N1 trillion subsidising fuel consumption is counterproductive.
“First and foremost, the fiscal situation of the government can no longer support it given the rising fiscal deficit.
“Again, it has been one scheme that is fraught with corruption given the fact that there is no accurate figure of volume of domestic fuel consumption.
“More importantly, fuel subsidy is regressive in the sense that it benefits the rich more than the poor. It also crowds out developmental funds which benefit the poor.
“There is no doubt that the removal of fuel subsidies will result in some hardship by way of rising inflation in the near term.
“But in the medium to long term, it is in the overall interest of the economy as it will free up more resources to fund critical sectors of the economy.
“In order to cushion the impact of fuel subsidy removal on the ordinary Nigerian, the government should quickly roll out compensation schemes in the area of Health, such as by expanding the National Health Insurance Scheme (NHIS), education and mass transportation,” he further said.