Economy

Breaking the Jinx: Buhari’s Doggedness in Birthing the PIA

In a landmark move, President Muhammadu Buhari recently signed the Petroleum Industry Bill (PIB) into law after it was transmitted to him from the National Assembly for executive assent.

Some of the key objectives of the PIA (Petroleum Industry  Act) include safeguarding the long-term macroeconomic stability of the country, reforming the extractive industry institutional framework, providing better clarity for Nigeria and its partners (particularly international oil companies), entrenching a domestic gas to power market, increasing oil and gas production, whilst protecting the environment and supporting the economic diversification agenda of the country. Essentially, the PIB provides legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry, the development of host communities, and related matters.

The Upper and Lower Chambers passed the Bill following careful consideration of each clause in the report by the Joint Committee of the National Assembly on Petroleum (Downstream, Upstream and Gas) and forwarded it to the President for his assent. The Bill comprises five major parts, including Governance and Institutions; Administration; Host Communities Development; Petroleum Industry Framework; and Miscellaneous Provisions, comprising 319 clauses and 8 schedules.

The Petroleum Industry Bill (PIB) is not strange or new to the nation; it is one of the longest and perhaps, the most debated and difficult Bill to ever go through the National Assembly. It was first introduced to the National Assembly in December 2008 and ever since, it has been reputed as a knotty Bill breeding disagreement between the Executive and Legislative arms of the Government and other stakeholders.

A presidential committee set up in 2007 to look into the oil and gas sector came up with this Bill, which aims to increase transparency at the Nigerian National Petroleum Corporation (NNPC) and to increase Nigeria’s share of oil revenue. Drafts of the Bill, however, became very contentious due to objections from the International Oil Companies (IOCs) and the NNPC. Consequently, the Bill was never passed into law. Towards the end of 2015, and in a concerted move to ease its passage, the Bill was broken into four parts by the National Assembly. These parts were the Petroleum Industry Governance Bill (PIGB); Petroleum Host and Impacted Community Bill (PHICB); Petroleum Industry Administration Bill (PIAB); and Petroleum Industry Fiscal Bill (PIFB). However, the outcome of events deviated from plans because of the full dissolution of the 7th Assembly following the change of government in May 2015. Also, in 2017, despite the passage of the PIGB (a part of the PIB) by the Senate, it failed to become a law.

In all the versions of the Bill, key themes that have constantly featured include the ownership and management of petroleum resources, functions and powers of the Minister of Petroleum, the establishment of Nigerian Petroleum Regulatory Commission (NPRC) to act as a regulator for the industry, and the restructuring of the NNPC.  This signed version is a harmonisation of all the existing versions, with necessary adjustments to address the concerns raised by the industry players.

In September 2020, the Bill was presented by President Buhari to the National Assembly for consideration once again. Many observers were pessimistic about it at the time, describing it as another “doomed-to-fail” episode in the unending melodrama of the PIB saga. But it has proven to be the masterstroke; the step which has set in motion a renewed sense of urgency which finally culminated in the Bill becoming a reality.

With more than a decade of deliberations and revisions, it was supposed to be a great relief to all stakeholders that the Bill has finally been passed into law. Presently, Nigeria is said to have one of the least competitive deepwater fiscal terms in Africa and is increasingly losing significant amounts of potential investments to other African countries. Many stakeholders hold strongly that new investments in the oil sector is dependent on the passage of the PIB, which would take a more holistic approach in addressing issues around the fiscal terms, especially following the passage of the Deep Offshore and Inland Basin Production Sharing Contracts (amendment) Bill, 2019 (PSC Amendment Bill).

But despite the many years of delay, the Bill could not achieve a consensus among all stakeholders, as the Bill that was signed still has many contentious aspects, such as the approval of the remittance of only 3% of the operating expenditure incurred by oil firms to host communities as equity share. Stakeholders from the South-South protested the 3% approved for the host communities and called for 5%, which was in the original document sent to the Senate. The Bill also allows for 30% of profits accruing from oil and gas operations by the Nigerian National Petroleum Corporation (NNPC) to be set aside for exploration of oil in the frontier basins, which was also disputed in certain quarters. Also controversial is the segment of the Bill that expunges the payment of Fuel Subsidy by the Federal Government, a move that government has since declared that it will not embark upon arbitrarily but in strategic manners to lessen the economic effects in the interim.

Expectedly, mixed reactions have since trailed the signing. The South-South Governors Forum, through its Chairman, Governor Ifeanyi Okowa of Delta State, has blamed the National Assembly members from the region for the 3% Equity Fund approved for the oil-producing communities. Lampooning them for putting political interests ahead of regional interests, he decried the partisanship showed by the lawmakers in not vehemently rejecting that meagre quota.

Pan Niger-Delta Elders Forum (PANDEF), the apex socio-cultural group in the Niger Delta region, went a further step and criticised President Buhari for his assent to the Bill. They said it is quite unfortunate that Buhari went ahead to assent to the PIB, despite the overwhelming outcry and condemnation that greeted its passage by the National Assembly, especially with regards to the provision for the Host Communities Development Trust Fund and the appropriation of 30% of NNPC profit for Frontier Oil Exploration Fund. They further accused the President of disdain and contempt for the Niger Delta and a direct assault on them by signing the Bill. Many other people from the zone have made similar comments, with some declaring the signed PIB as a calamity, and some even saying Buhari should have vetoed the Bill.

It becomes worrisome indeed when a group of elderly statesmen of PANDEF decides to be as uncharitable as this; allowing unwholesome and primordial sentiments to becloud rational objectivity by heaping all the blame on the President for signing the Bill. Were they expecting the President to perpetuate the endless PIB rigmarole by sending back a Bill duly passed by both chambers of the National Assembly (which includes Senators and Reps from the Niger Delta region)?

PANDEF should have a better knowledge of the situation, that the Bill may never be able to achieve a consensus position due to many divergent stakeholder interests. But it will definitely be subject to negotiations, amendments and fine-tuning, as dynamics emerge. It should, therefore, rid itself of the overbearing sentimentality and applaud the signing as the first of many steps towards getting it right in the Petroleum Industry, while also working with other stakeholders to get more value from the Bill.

The main opposition, the People’s Democratic Party, has also used the opportunity to attempt to score some political points. The party berated President Buhari for “ignoring the outcry by Nigerians” across board not to sign the offensive, repugnant, and anti-people PIB, as passed by the National Assembly into law. Hammering on the contentious 3% host community fund section, the party threw caution to the winds in an embarrassing manner that smacks of puerile and desperate attention-seeking. The party forgot that when it was in power, at both at the Executive and Legislative arms of Government, the Bill was a major complication it was unable to resolve. More exasperating also is the fact that with all its members in both chambers of the National Assembly, the party could not unite to mount a formidable resistance to the passage of the Bill through constitutional means. It, therefore, has no moral rectitude to lambast the President on this.

In response to the passage of PIB, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) declared it a welcome development. It said that the signing of the PIB has brought to an end the level of uncertainty in the oil and gas sector. This is because there is no investor that will want to put his or her money into an economy where there is no assurance on what the rule will be in the next six months or one year.  But signing this particular Bill has put an end to those uncertainties. It, however, expressed concern for the dual regulators (Upstream & Downstream Regulatory Commissions) created for the industry, hoping that section will be reviewed to create one single regulator for it to enhance operational efficiency.

The Secretary-General of the Organisation of the Petroleum Exporting Countries (OPEC), Mohammad Barkindo, commended the signing, stating that the law will enhance the Nigerian petroleum industry’s reputation, open the door to new investments, and ultimately strengthen its position to meet the world’s growing demand for energy.

The Nigerian Senate also described the assent by President Buhari to the PIB as a major victory that had the potential of bailing Nigeria out of its economic predicament. They also lauded the 9th National Assembly for working dispassionately by putting the interest of the nation first over petty squabbles and other self-interests, thereby laying finally to rest previous failed attempts. Similarly, the Speaker of the House of Representatives, Femi Gbajabiamila, enthused that the coming into being of the law was a victory for Nigerians and a landmark achievement that ended the long journey of the PIB. Gbajabiamila said when massive investments come in as a result of the PIB, many Nigerians would gain employment. He said he was optimistic that with the coming on board of the PIB, Nigerians will also benefit from reduced fuel prices, as there would be competition among the industry players.

President Buhari should be commended for acting decisively by signing the Bill into law. It might never be able to achieve uniformity of acceptance, and returning it to the National Assembly would only subject it to another round of ad-infinitum debates and controversies that will follow the pattern it has assumed since 2007. Granted that the signed Bill is not totally perfect, the political will to finally make it a reality, regardless of the different angles of politicking, exemplifies resolute action.

The passage of the PIB after so many years is a step in the right direction needed to attract investments across the industry’s entire value chain. The country has already lost so much from the delay in its passage, which may now be impossible to recoup. It will help to maximise the benefits of the nation’s gas potentials, improve the state of power supply, and boost revenue receipts.

The enactment of this legislation is especially timely, as the investment outlook becomes clouded by efforts aimed at accelerating a lower-carbon future. Furthermore, the new law will help harness Nigeria’s potential to achieve its programme of raising oil production to 4mb/d and oil reserves to 40 billion barrels, while also drawing on the country’s vast natural gas reserves to provide clean and efficient energy. In addition, these resources will be vital to supplying world markets with a broad portfolio of energy options, and support global efforts to alleviate energy poverty, as outlined in the United Nations’ Sustainable Development Goals.

There will now be a defined rule of engagement for all stakeholders, particularly the IOCs and marketers. The Bill will give some level of autonomy and it would help to define rules, as it sets policy guidelines for all stakeholders. It would strengthen accountability and transparency of NNPC as a full-fledged company under statutory/regulatory oversight, with better returns to its shareholders and the Nigerian people.

Going forward, the grey areas in the Bill, such as the 3% equity fund for host communities, should be worked upon as host communities indeed deserve more than this, especially since 30% of profits is being devoted to exploring new basins and oil frontiers nationwide. More important is the monitoring of how the funds are to be used and if they will really be used for the host communities. 3% equity fund is estimated to be in the region of $500 million, which is a lot of money. Bearing in mind that the 13% derivation funds meant to be channeled to oil-producing communities for developmental projects and environmental clean-ups are often diverted for other purposes by the state governors, there is urgent need to enforce strict utilisation of this fund for the intended purposes.

Even though it might not appear so at the moment, history will likely be favourable to the President for mustering the courage by signing the Bill and ending the circus show once and for all. As such, stakeholders such as PANDEF and its bedfellows should stop wasting time lamenting on the deed done. They should work round the clock to seek amendments to the portions of the Bill they are not comfortable with. At least, the process of lawmaking and continuous engagement guarantees that privilege.  Therefore, they should brace up to the challenge and cooperate with the government to continue to identify and address all the issues as they emerge.