The inability of the National Assembly to pass the Petroleum Industry Bill despite repeated promises to do so is beginning to look very suspicious indeed. The incapability is fuelling the belief among many that there are indeed dishonourable reasons other than legislative responsible for the lethargy of a section of the national legislature from passing PIB. Nosa James-Igbinadolor reports
The petroleum industry is itself a big predicament for the Nigerian people; a peculiar mess. An industry so thoroughly mismanaged and corrupted that it has in over 60 years been unable to support the development of the Nigerian economy.
The Nigeria petroleum industry is a paradox; while it drives economic growth, it has stunted economic development. Indeed, the most inflammatory policy of the Nigerian government has been the dependence on oil resources as the dominant source of foreign exchange earnings to the detriment of manufacturing and agriculture.
Nigeria sits on the largest oil and gas reserve in sub-Saharan Africa, with crude oil accounting for 90 per cent of its export earnings. Due to the NNPC’s enormous revenues, which can represent more than five times Nigeria’s health expenditure, around seven times its foreign aid receipts, and more than 15 times the value of the country’s sovereign wealth fund, the government’s major budgetary decisions tend towards the oil sector as opposed to the service, manufacturing and other associated public goods.
As noted in a recent Columbia University report, Nigeria’s reliance on oil and gas “therefore puts the country in a vulnerable and increasingly unsustainable position, particularly in the face of heightened economic challenges due to COVID-19.
“Given the downturn in oil and Nigeria’s uncompetitive production costs, above-average carbon intensity of oil production, and inefficient refineries, the country cannot rely on oil revenues to finance immediate stimulus packages, nor should it bank on them for the future.
“The fact that Nigeria’s public and private debt is indexed on oil prices further threatens Nigeria’s already downgraded sovereign debt rating and puts the country in a compromised position to borrow money to remediate pressing economic, environmental, and health crises.”
No doubt, Nigeria’s petroleum ordinances have been long due for reform, and the “much-vaunted” Petroleum Industry Bill has been widely seen as the critical instrument for the modernisation of the oil and gas industry.
The bill, which aims at a complete ‘refurbishment’ of the Nigerian oil and gas sector, seeks to, among others, ensure an amplified level of transparency and accountability in the sector by strengthening the governing institutions to attract investment capital through changes to the governance, administrative, regulatory and fiscal framework of the Nigerian oil and gas industry.
This includes, strengthening the commercial roles of the state-owned NNPC by transitioning it into a limited liability company, NNPC Limited. According to the bill, NNPC Limited would be constituted within six months of enactment, opening it up to private capital, and making for a more transparent system given the requirement to publish annual reports and audited accounts.
The bill also seeks to limit the power of the Minister of Petroleum Resources, a role currently held by Nigeria’s President, by revoking the Minister’s power to grant, amend, revoke or renew licenses, and removing the Minister’s seat on the board of NNPC Limited. Two proposed regulators, the Nigerian Upstream Regulatory Commission (The Commission) and the Midstream and Downstream Petroleum Regulatory Authority (The Authority) would replace the multitude of regulating bodies (the DPR, Petroleum Inspectorate, the Petroleum Products Pricing Regulatory Agency, the Petroleum Equalisation Fund, among others) and must consult each other on new regulations or amendments. Such structural reforms create a clear separation between NNPC Limited’s operations as a commercial entity and the regulatory roles to be exercised by the regulatory authorities, allowing for more transparent oversight.
Kenneth Ene, the Senior Programme Manager for the DFID funded Facility for Oil Sector Transformation, FOSTER noted in a February 2018 analysis, that, “Since 2008, Nigeria has been working to improve transparency and accountability in the oil sector. Despite being one of the largest suppliers of crude oil in Africa, the country has traditionally been unable to significantly translate its oil wealth into sufficient national development. There have been many reasons for this, including insufficient governance, weak sector regulation, and inefficiencies in oil operations. These have resulted in declining investment and returns in the industry, owing to the uncertain investment climate, incessant fuel shortage and insecurity. In response, the Petroleum Industry Bill (PIB) was developed.”
The bill, he further posited, has since undergone numerous revisions and debates, and met with a complex set of obstacles.
It is these obstacles that have more than any other defined the failure of the National Assembly to execute its mandate of gifting the citizenry with an oil and gas industry that works and is fit for purpose.
It has been one tortured journey. The history of the attempts to legalise the PIB is replete with one failure after another, as the bill has struggled to see the light of day despite its introduction to the National Assembly over 16 years ago. The utmost the country came to concretising the PIB was in 2018 when the Petroleum Industry Governance Bill (PIGB), one of the four anthologies of the PIB, was harmonised and passed by both chambers for the president’s assent.
THISDAY noted in January 2020 that, “ The PIB has faced persistent backlash and herculean assault from vested interests, including from the federal government’s fear of potential protests against any removal of the fuel subsidy arising from deregulation of the industry. In addition, concerns about regional imbalances in the distribution of oil revenues and, mounting pressure from foreign oil companies that are unwilling to pay more oil taxes, as well as from the leviathan NNPC afraid of the whittling of its hegemony have all coalesced to stifle the debut of the PIB.”
Meanwhile, as the bill remains dormant and devoid of value, it has been estimated that the country might have lost as much as $235billion.
Senator Ovie Omo-Agege, the Deputy President of the Senate, speaking recently in Abuja, posited that an estimated $15 billion is lost annually as a result of the delay in passing the PIB.
Quoting from a recent report by Nigeria Natural Resource Charter (NNRC), the Deputy Senate President stressed that the delays, through different administrations, in enacting the PIB have cost the country an estimated $235 billion.
He said, “All these underscore the urgent need to do what we should have done in 2008 to give Nigeria the great oil industry it deserves, when President Umaru Musa Yar’Adua saw the need to overhaul the existing petroleum laws. These include the Petroleum Act of 1969, the Petroleum Profit Tax Act of 1959, and the Nigerian National Petroleum Corporation (NNPC) Act 1977, among other legislations”.
Omo-Agege further added, “The good news today is that help is on the way, as the 9th Assembly and the government of President Muhammadu Buhari, have boldly taken up the gauntlet and will soon enact the Petroleum Industry Bill 2020 into an Act. On the 29th of September last year, the government of President Muhammadu Buhari took a giant step forward in reforming the industry when he returned the Petroleum Industry Bill as an executive Bill to the National Assembly.
“Subsequently, the Bill was read for the first time on the 30th of September, 2020, second reading on 20th of October, 2020 and public hearing was held on 27th January this year. Now, we await the report on the public hearing from the Senate’s committees namely: Petroleum Downstream, Petroleum Upstream and Gas Committee, to be put forward for consideration by the Senate.
Not many discerning Nigerians will cheer the promise of Omo-Agege. Many promises had been made in the past by high officials of state with respect to passing the PIB into law.
On January 1, 2020, Minister of State for Petroleum Resources Timipre Sylva declared that the Petroleum Industry Bill (PIB), would soon be passed by the National Assembly. According to Sylva, a review of the Petroleum Industry Bill was at an advanced stage and full passage of the bill was expected mid-2020.
That same year, Senate President Ahmad Lawan vowed that the Senate would ensure the transmission of the approved version of the PIB to President Buhari for his assent before the end of 2020.
“Our petroleum industry is almost stagnant and for long needing profound reform. Our oil and gas-related committees are, therefore, expected to work hard to take the lead in our determination to reform this vital sector. It is the desire, indeed the design of this Senate that the Petroleum Industry Bill is passed before the end of 2020”, Lawan had said.
The failure of the National Assembly to pass the PIB is further aggravating the already debilitating state of the oil and gas industry. Final Investment Decisions (FID) are still pending on several offshore projects that are expected to create an additional production capacity of 875,000 b/d and hopefully attract about US$100 billion in new investments.
Final Investment Decisions on Shell’s Bonga and Southwest Aparo which are expected to add 225,000 b/d and Bonga North (100,000 b/d), Eni’s Zabazaba-Etan (120,000 b/d), Chevron’s Nsiko (100,000b/d), ExxonMobil’s Bosi (140,000 b/d); Satellite Field Development Phase Two (80,000 b/d); and Ude (110,000b/d) have been delayed because of the chronic lethargy of the National Assembly to pass the PIB.