Analyst Advocates Scrapping of NDDC, Discretionary Allocation of Oil Blocks

By Peter Uzoho

On the heels of the proposed establishment of Petroleum Host Community Fund in the Petroleum Industry Bill (PIB) currently at the National Assembly, the Partner, Tax, Regulatory and People’s Services, KPMG, Mr. Wale Ajayi, has called for the scrapping of the Niger Delta Development Commission (NDDC).

Ajayi also canvassed for an end to the discretionary allocation of oil blocks by the President of the country as empowered by the extant petroleum law of the country, saying the PIB has made provision for a competitive bidding process for the allocation of oil blocks.

The KPMG partner made the interventions recently when he featured on Global Business Report, a programme of Arise News Channel, THISDAY’s sister broadcast station.

He, however, advised the lawmakers and the federal government against producing a new petroleum law in form of the PIB that will further stifle investments in the nation’s oil and gas industry.

He said since the PIB has made provision for the establishment of host community fund, the relevance and continued stay of the NDDC had been generating questions among the stakeholders.

Ajayi said: “That’s the question everybody has been asking -what’s the continued relevance of the NDDC? Every operator in the sector contributes three per cent of their budget to NDDC and unfortunately for NDDC, they have been in the news in recent time for the wrong reasons.

“And then, we then have the Petroleum Host Community Fund in the PIB where oil companies are meant to contribute 2.5 per cent of their OPEX to the Petroleum Host Community.

“The question is: why do we still have to keep NDDC? And that’s the question that people are going to be asking at the public hearing.

“Because as far as I am concerned, it is better to leave the Petroleum Host Community Fund to actually cater for the interest of people in those communities and transform them to what they should be.”

On the need for the abolition of discretionary allocation of oil blocks by the president, he said the competitive bidding provision proposed in the PIB was supposed to end that.

He argued that one of the problems that stopped the implementation or delayed implementation of PIB had always been powers of the minister and the powers of the president.

“And one of the issues has always been the power of the president to give discretionary blocks to people, like we did in the early 90s. So we have a provision in the PIB that says no, it has to be competitive.

“But you know, at the end of the day, it’s not so much about what the law says, it’s what we do that really matters. There are provisions that are supposed to govern how things are supposed to be done and the process that you need to go through.

“So, I wish I could say that we see an end to this discretionary allocation of oil blocks,” Ajayi explained.

Also on the proposition in the PIB for the Petroleum Mining Lease to be converted and for the underdeveloped acreages to be developed through competitive bidding, Ajayi argued that there was nothing new in that provision.

He observed that that provision was a mere repetition of what is already in the Petroleum Act, adding that the problem with Nigeria is not the law itself but about the wool power to implement it.

He said: “It is the will power to implement the laws to the letter. Because currently, there is a provision in the Petroleum Act that requires that when companies are converting their petroleum prospecting lease to oil mining lease, that 50 per cent of it must be relinquished.

“What did we do? Even if there is supposed to be mandatory relinquishment for that, what we simply did is to say to them, you know what, you can actually apply to retain that 50 per cent.

“All you need to do is to pay $500,000 and then pay your signature bonus that you paid when you initially got the lease. So really, the provision doesn’t really mean anything to me.

“The question is: are we going to be able to implement it this time around? And if we can’t, then, we will just be where we are and nothing will really change.”

On the proposed transformation of the Nigerian National Petroleum Corporation (NNPC) into Nigerian National Petroleum Company (NNPC) Limited, which will make it a commercial entity, Ajayi stated that the provision was a step in the right direction.

According to him, the NNPC has always been one of the biggest challenges being faced in the Nigeria oil and gas industry.

He, however, raised concerns on the profitability and funding of the NNPC Limited since it is still going to be a government-owned company for a while until the shares are transferred.

Ajayi further said: “So I really don’t see whether it is going to be profitable in the short term until we are able to really transform it to really being a company that is owned not by government but by other investors.

“And I think that one of the things that we can do to do that (transform it) is to accelerate the process. As soon as the PIB is passed, the requirement is that within six months, NNPC Limited has to be incorporated.”

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