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PIB: House Divided on Host Community Fund, Deregulation

15 Nov 2012

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 National Assembly



Onwuka Nzeshi 

The House of Representatives Wednesday  commenced the long awaited debate on the bill seeking to establish a new  Legal Fiscal and Regulatory Framework for Petroleum Industry in Nigeria with a barrage of criticisms on the proposed legislation.

The age-long ethnic and regional interests which had always polarised the parliament on sensitive national issues also reared its ugly head in the course of the discourse.

All the lawmakers who contributed to the debate were unanimous in their disapproval for provisions of the bill that tended to arrogate enormous powers to any sitting Minister of Petroleum Resources.
They were also not comfortable with the level of discretion a sitting President would have if the bill passes untouched.

As book- makers earlier predicted the  lawmakers were  divided on the provision in the bill which seeks to create a Petroleum Host Community Fund (PHCF) where  oil firms are expected  to pay  10 per cent of their net profits  for the benefit of the oil bearing communities. 


House Leader, Hon Mulikat Akande-Adeola, who set the ball rolling for the debate on the general principles of the bill described the Petroleum Industry Bill(PIB) as one of the most important bills the House  will ever consider  in the seventh National Assembly.
The PIB 2012, Akande -Adeola said, seeks  to harmonise and consolidate about 16 existing  laws governing the oil and gas industry  in order to better regulate, coordinate and manage the operations of the industry.

She said that some of these laws such as  the Petroleum Profits Tax Act, the Nigerian National Petroleum Corporation Act, the Deep Offshore and Inland Basin Production Sharing Act have been in the statute books for over four decades and needed to be reviewed to meet current challenges.

According to her, the PIB has been designed to promote a viable and sustainable petroleum industry in Nigeria as it seeks to  unbundle  the Nigeria National  Petroleum Corporation (NNPC) and in its place create  a National Oil Company that promotes indigenous operational capacity.

The bill, she explained, also recommends the  creation of an Asset Management Company and the  strengthening of regulatory institutions that  promote transparency, safety, consumer rights and safe environments. She stated that the proposed legislation will pave the way for the establishment of a  gas market and gas infrastructure development company;  the  establishment of a department in the Ministry of Petroleum Resources  charged with frontier exploration services as well as a  Petroleum Host Community Fund.

However, this lead debate provoked several harsh comments from subsequent contributors to the debate.

The first salvo was fired by Hon. Aishatu Modibo Ahmed, representing Yola North/Yola South/Guel Federal Constituency of Adamawa State. 
Ahmed said there was need for reform of the oil and gas industry to curb the corruption in the system  but expressed doubts whether the PIB as presented by the executive arm of government would do the magic.

Ahmed raised questions on the powers arrogated to the Minister of Petroleum Resources, unbundling of NNPC and the Host Community Fund.
She described the powers which the bill gives to the minister as too much and almost absolute and feared it could lead to arbitrariness and even more corruption.

On the Petroleum Host Community Fund, the lawmaker said it was a  most worrisome provision because the oil communities already have funds accruing to them from  the 13 per cent derivation, Niger Delta Development Commission and Ministry of Niger Delta.

The proposed Host Community Fund, she said, could also lead to more corruption because of the varying methods of calculating these benefits and the absence of a reliable metering system to measure oil production.
In a separate contribution, Hon. Abubakar Momoh (ACN/Edo) also criticised the powers of the minister under the bill and said it will not be good for the industry and the economy.

Momoh, however ,threw his weight behind the Host Community Fund, saying it will really enthrone ownership in the hands of the people and reduce  pipeline vandalism  and oil theft to the barest minimum.
Chairman, House Committee on Diaspora, Hon. Abike Dabiri-Erewa, endorsed the omnibus piece of legislation but criticised it for being weak on transparency.

Dabiri-Erewa said the bill has not provided transparency and full disclosure on oil sales and  signature bonuses,adding that the aim of the law will be defeated if such issues were still kept secret. She also expressed discomfort with the powers allocated to the Minister of Petroleum Resources and the ambiguity in the proposed unbundling of the NNPC.

However, it was Hon Friday Itulah(PDP/Edo) who stirred the hornets nest when he endorsed the Petroleum Host Community Fund and raised questions about the provision in the bill and in the Nigerian Constitution that vests oil minerals extracted in the country on the Federal Government rather than the host communities.

He argued that if in a democracy  sovereignty belongs to the people, and government exists at the pleasure of the people, it would be wrong to vest what rightly belongs to the people on the government.


This contribution  triggered an immediate reaction from Hon Simon Arabor from Kaduna State who attacked both the Host Community Fund and the position of Itulah on the ownership of oil mineral resources.

However, Chairman, House Committee on Environment, Hon Uche Ekwunife (APGA/Anambra) steered the debate back to the concerns for the development of oil bearing communities and the protection of their environment. Ekwunife took exception to aspects of the bill that tends to create roles for some participants in the oil and gas sector to superintend over the environmental problems associated with oil exploration, production and distribution. She said that there are already established agencies under the Ministry of Environment that have been assigned such roles, adding that participants in the oil sector cannot be judges in their own case as they are guilty of degrading the environment.

The debate on the PIB was adjourned and will resume for the second day today. The Petroleum Industry Bill (PI B) was  presented to the National  Assembly by President Goodluck Jonathan.
This bill was first introduced to the 6th National Assembly in 2010. Unfortunately, due to a number of factors, it was not passed into law.

The  sector has over time been plagued by secrecy, corruption and inefficiency, leading to poor economic and social returns from the industry for the Nigerian government and people.

Every Nigerian believes, and rightly so, that the abundance of oil and gas in Nigeria should be a blessing and the proceeds from the sale of this product should serve as a catalyst for rapid industrial growth. Fifty-six years after the discovery of oil and fifty-two years after independence, the country is yet to find  the right formula.

The non-passage of the bill has occasioned an atmosphere of confusion and uncertainty in the oil and gas sector, leading to loss of billions of dollars in potential revenue for the country. This situation will  continue to deteriorate if there are  further delays in the passage of the bill.

Tags: Deregulation, Featured, Host Community Fund, House Divided, News, Nigeria

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