OPS Warns against ‘Powerful, Single’ Regulator for Petroleum Industry  

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By Obinna Chima

The Organised Private Sector (OPS) has advised members of the National Assembly to create two regulatory bodies each focusing on the downstream and upstream sectors of the industry while reviewing the Petroleum Industry Governance Bill (PIGB).

The OPS expressed their dissatisfaction with the idea of creating a Petroleum Regulatory Commission (PRC), a commission that would be empowered to regulate the entire petroleum sector, as contained in the PIGB.

They stated this in a communique at the end of a meeting in Lagos recently.

The OPS is made up of the Manufacturers Association of Nigeria (MAN), Nigeria Employers Consultative Association (NECA), Nigerian Association of Chambers of Commerce, Industry, Mines & Agriculture (NACCIMA), National Association of Small and Medium Scale Enterprises (NASME) and the National Association of Small Scale Industries (NASSI).

They argued that “an all-powerful single regulator will not be able to technically examine and appreciate the regulatory, commercial and other operating environment issues from the deserved different dimensions and from the different viewpoints of the stakeholders.”

The OPS stressed the need for the lawmakers to be mindful in merging and streamlining the number of existing regulatory agencies in the face of dwindling revenue of government.

They maintained that there was no need creating another regulatory agency that would further swell the list of existing agencies with similar functions and duplicated mandates.

“Specifically, we canvass a simplified arrangement where the Petroleum Products Pricing Regulatory Agency (PPPRA) which has been saddled with the responsibility of commercial regulation since 2003 and has the relevant experience, structure and personnel, should be strengthened to continue to superintend the downstream sector of the Petroleum Industry while the Department of Petroleum Resources (DPR) oversees the upstream sector,” they stated.

According to them, a single unified regulator would effectively be a regulatory monopoly which “in the long run will promote the usual monopoly related inefficiency.”

“A particular concern about a monopoly regulator is that its functions by default would be more rigid and extremely bureaucratic than of specialized agencies regulating the downstream and upstream separately.
“A single regulator will not spur competitiveness nor enhance the contribution of upstream and downstream sectors to the national economy.
“The creation of a single regulator implies placing enormous responsibilities on a single entity of government especially with regards to the complexities of the upstream and downstream sectors which require astute efficiency and monitoring to achieve the required productivity.

“A single regulator would not be able to effectively handle the enormous challenges and complexities of the Petroleum Industry as well as the vast sub sectors within its value chain,” they added.

In addition, members of the OPS pointed out that in 2003, the federal government had taken into cognisance the decay and inefficiency that characterised and had established the PPPRA as a separate and distinct regulatory body to oversee the downstream sector.

“This singular act has to a large extent restored the commercial viability of the sector through private sector investment. “Therefore, history and economic reasoning is on the side of two regulator- model for the petroleum sector because in the recent past, the single regulator-model has been tried and found to be inefficient and unsuccessful,” they added.

Furthermore, they stated that it was necessary to increase the ratio of non-executive to executive directors and provide specific criteria to guarantee the independence of the non-executive directors.

Also, the statement pointed out that the composition on the Board should be reviewed to include stakeholders to represent the interests of the OPS and the organised labour.

They stated that they had observed over the past 10 years the inability of Nigeria to drive reform in the oil and gas industry that will position our country as the preferred destination for investment in that sector of the economy.

One of the reasons for this development, according to the OPS, was the failure of successive governments to articulate the appropriate legal framework that would underpin such reform.

“It, therefore, comes as a refreshing relief when this dispensation of the National Assembly came up with the PIGB, which, to the best of our knowledge, is the only bill before the National Assembly to jump start the long-needed reform in the Oil and Gas Sector.

“We commend the National Assembly for bringing sanity to an otherwise confused and conflictual dispensation of reform initiative that characterised the past.

“It is presumed that the intent of the bill is to ensure that there is a high level of transparency in the Nigerian Petroleum Industry whilst at the same time ensuring that the industry is commercially driven and attractive to potential investors.”