The rejection of the bill is a major setback for the country
Citing the provision that empowers the proposed Petroleum Regulatory Commission to retain as much as 10 per cent of the revenue generated amongst other reasons, President Muhammadu Buhari has refused assent to the Petroleum Industry Governance Bill (PIGB) recently passed by the National Assembly. Against the background that the sector—which provides most of the country’s foreign exchange and to a large extent drives other sectors of the economy—has for decades operated with an archaic legislation, this is no doubt a major setback for the country.
It is particularly noteworthy that the unsuccessful passage of the PIB at the National Assembly for many years led the current Eighth Assembly to separate it into various components including the PIGB which deals mostly with the governance issues in the industry; the Petroleum Industry Fiscal Bill, which deals with the fiscal issues; the Petroleum Industry Host Communities Bill, which deals with issues of oil assets host communities, and the Petroleum Industry Administration Bill, which would address other administrative challenges of the sector.
The PIGB, the first of the four bills, was passed in March 2018 to provide the legal framework for the creation of commercially oriented and profit-driven petroleum entities; to ensure value addition and elevate the petroleum industry to international standards through the creation of efficient and effective governing institutions with distinct roles. Basically, the PIGB envisaged that the Ministry of Petroleum shall be responsible only for setting the overall policy and strategy for the oil and gas sector. It also granted the minister pre-emptive rights over all petroleum products in the country in the event of a national emergency.
However, the powers to grant, renew, amend, extend or revoke licenses for oil and gas acreages were taken away from the minister unlike it was in the 1969 Act. It equally provided for the establishment of the National Petroleum Regulatory Commission (NPRC) to replace the DPR, Petroleum Inspectorate and PPPRA. Under the PIGB, the NPRC shall be completely independent, and shall among other functions, be responsible for regulating the oil and gas sector as well as the conduct of bid rounds and or processes for the award of any licenses or lease required for oil and gas exploration and production in the country. It was also going to get the Nigerian National Petroleum Corporation (NNPC) separated into functional companies that would be listed on the stock exchange, and ultimately end NNPC’s long years of operational failures, thereby turning its successors into profit making entities.
We are well aware that the PIGB was not the ‘silver bullet’ that would cure Nigeria’s oil industry of all its operational anomalies, but it was going to set off the process of an enduring reform, depending however on the implementation of its provisions. For sure, it provided hope to investors in the industry that there would eventually be some level of certainty in how they do business. Unfortunately, that hope has been dashed.
We will like to remind the president that in setting up his Economic Recovery and Growth Plan (ERGP), he had chosen the oil sector as one of the major pillars of that plan, and anticipated it would contribute immensely to its success. But the oil industry as presently run will hardly provide the kind of results he is expecting for many reasons among which is that new investments to improve its productivity will not come due to operational uncertainties. While we therefore do not want to be seen as being pessimistic, we are nonetheless constrained to warn that this decision is one that could set Nigeria on the road to Venezuela with all its dire consequences.