On September 28, 2020, President Muhammadu Buhari introduced the reworked Petroleum Industry Bill (PIB) to the National Assembly for consideration and passage, after over a decade of delays within the legislative evaluate course of.
The Bill, which is meant as an entire overhaul of the Nigerian oil and fuel sector, seeks to introduce pertinent modifications to governance, administrative, regulatory and monetary framework of the Nigerian oil and fuel business, in an effort to guarantee an elevated degree of transparency and accountability, strengthen the governing establishments, and appeal to funding capital, amongst different aims.
It additionally seeks to safeguard the long-term macroeconomic stability of the nation, reform the extractive business’ institutional framework, and supply higher readability for Nigeria and its companions, thereby entrenching a home fuel to energy market, in addition to rising oil and fuel manufacturing, while defending the atmosphere.
Evolution of Nigeria’s Oil and Gas regulatory framework
The Nigerian oil and fuel business, which is the mainstay of the nation’s economic system, continues to be largely ruled by the Petroleum Act, and the Petroleum Profit Tax (PPT) Act, enacted in 1969 and 1959 respectively.
Since these legal guidelines have been ratified, the worldwide oil and fuel business has undergone vital modifications, from funding, governance and monetary views. Although sure out of date facets of the Acts have been amended, their inadequacies have led to neighborhood unrests, elevated uncertainty which impacts the circulate of desired investments into the sector, inefficiencies plaguing the sector, the state-owned oil large’s (NNPC) price range shortfalls, and so forth.
The emergence of the invoice is a fallout of the actions of the Oil and Gas Reform Implementation Committee which was inaugurated on April 24, 2000 underneath the Chairmanship of the then Presidential Adviser on Petroleum and Energy, Rilwan Lukman. The physique was charged with the accountability of creating suggestions for an in depth and holistic restructuring of Nigeria’s oil and fuel business.
The eventual report that got here from the committee shaped the premise of the primary PIB that was submitted in 2008 as an Executive Bill underneath the administration of Late President Umaru Musa Yar’Adua.
Since then, the Bill has confronted quite a few crises and hit a number of roadblocks as completely different vested pursuits attempt to push their completely different agendas.
Having gone by means of a number of revisions, a brand new model of the invoice was introduced to the seventh session of the National Assembly underneath President Goodluck Jonathan’s administration and subsequently, the legislature underneath the present administration of President Muhammadu Buhari.
In order to make it extra manageable to legislate on, the Bill is structured into 4 main elements particularly: the Petroleum Industry Governance Bill (PIOB), Petroleum Industry Administration Bill (PIAB), Petroleum Industry Fiscal Bill (PIFB), and Petroleum Host Community Bill (PHCB).
Today, the PIB primarily focuses on the taxation of oil firms, the commercialization of the NNPC, and the creation of neighborhood funds for oil producing communities.
The PIGB, which was handed by the eighth session of the National Assembly, couldn’t get presidential assent and was thereafter returned to the legislature for additional revision.
The newest model of the Bill, which is now earlier than the ninth session of the National Assembly for consideration and passage, seeks to interchange the Nigeria National Petroleum Commission (NNPC) with NNPC Limited, create separate regulatory companies for upstream, midstream and downstream operations, in addition to scale back the royalty from 10% to 7.5% for offshore fields producing no more than 15,000 barrels per day.
It additionally will increase the benchmark threshold of crude oil worth for charging royalty from $35 per barrel to $50 per barrel, and make fuel flaring penalties non-tax deductible in an effort to discourage the follow.
The PIB has been rocked by politics and stiff opposition from some stakeholders for over a decade, and even with a revised doc, it nonetheless faces resistance from numerous events.
Opposition from the leaders of host communities, who’ve kicked in opposition to sure provisions of the invoice is simply as sturdy as that of International Oil Companies (IOCs), who’ve additionally expressed dissatisfaction with some clauses within the proposed laws.
At a nationwide meeting listening to organised by the Joint Committee on Petroleum Upstream, Downstream and Gas, the Oil Producing Trade Section (OPTS) expressed discontent over some provisions of the proposed regulation.
During a public listening to organized by the National Assembly, the Chairman of the Oil Producers Trade Section (OPTS), Mike Sangster, representing Total, Chevron, Exxon Mobil and Shell firms, complained that the PIB created an unfavourable atmosphere for future deep-water investments and launching of latest tasks.
He proposed that to make sure traders have been inspired to finance deep-water tasks, the PIB ought to grant deep-water oil tasks a full royalty aid throughout the first 5 years of manufacturing, and take away Hydrocarbon Tax contemplating that firms would nonetheless be topic to Company Income Tax (CIT), and so forth.
The representatives of the host communities on the public listening to, additionally objected to some sections of the Bill, claiming that the proposed piece of laws was designed to additional enslave them, and create extra confusion of their communities and area as a complete.
They particularly objected to the two.5% fairness holding from oil firms, and insisted on 10% which was a part of the preliminary Bill that was proposed underneath the administration of late President Umaru Yar’Adua. This is to allow the folks to completely take part by means of safety of infrastructure and oil installations.
They additionally rejected the governance construction proposed for the host communities’ funds, denying any significant degree of neighborhood participation, whereas covertly selling oil firms’ management and prominence.
They have been in opposition to the empowering of oil firms to arrange the Board of Trustees of the Trust fund, conduct wants evaluation, and give you improvement plans on behalf of the host communities.
Experts push for immediate passage of the invoice
In his evaluation of the event, the Director, Centre for Petroleum, Energy Economic and Law on the University of Ibadan, Professor Adeola Adenikinju, stated that Nigeria had no justifiable cause to not move the PIB this 12 months, because it had lingered for too lengthy.
While declaring that the completely different stakeholders and teams had the correct to pursue their self-interests, he stated the pursuit of such shouldn’t be allowed to destroy the intentions of the invoice.
The Professor stated, “The public hearings in both houses are designed to allow stakeholders to present their views on the bill. These views should be carefully considered and those that will improve on the bill should be taken on board. However, the reality is that a law cannot please everyone or all stakeholders, however, it must promote the greater good. It should also improve on the present conditions of the host communities.
“We should not allow the pursuit of what is perceived to be the ‘best’ for us, to destroy the good intentions of the bill.
“The IOCs, while having the right to pursue their self-interests, should all be aware that the passage of the bill is in their long term interests, in that it will provide a stable environment for them to plan their investments. Moreover, the efficiency and greater effectiveness that the reforms embodied in the bill brings to the operations of the energy sector should be of interests to the IOCs also.”
While offering his personal perception on the problem, an oil and fuel skilled, Damola Adegun, stated that communities’ issues about neighborhood funds have been legitimate, including that even the mechanisms for distribution of the funds was not effectively thought out.
He identified that although the Bill may not be excellent, it mustn’t cease the passage of the invoice.
Mr Adegun stated, “Progress matters; if you do not take any step, there is nothing to learn from, so while it might not be perfect, it should not stop the passage of the Bill because you always have the opportunity to adjust it. I think whatever the downsides, whatever the challenges are it may be better to pass it first, then we can keep updating and adjusting the terms
“Another thing is laws are very difficult to change, so it’s always better for Bills to provide frameworks, while agencies provide guidelines. The agencies and ministries are closer to the industry and can always provide better guidelines that encoding such into law. So that’s one downside I see with the community issue, just provide a framework, set up that 2.5% and then let there be guidelines issued later. Maybe that can help.
“One truth is this, the communities will never agree, they will never say this is the best option, so there will always be doubts for whatever you ask in the community bill.”
On the reservations by the IOCs on some sections of the Bill, Adegun disagreed with their view and stated that the piece of laws made Nigeria extra aggressive on the fiscal aspect and even lowered taxes.
He stated, “If you tell IOCs to come and take our oil for free and Nigeria will be paying, they will still say that deal is not good and not competitive. The bill makes Nigeria more competitive on the fiscal side; in fact, we are likely to lose more money to the IOCs, they have dropped the taxation. A lot of other things, royalties have been dropped. For the offshore there is no change, in fact there are even bonuses for offshore.
“When I saw a ranking of our competitiveness with this new bill, compared to other countries, we have even improved by 10 to 12 places in ranking when it comes to competitiveness. So don’t be worried, IOCs will complain, even if you give them the oil for free and pay them, they will tell you it’s still not good.
“They are optimized not to agree that it is good. The deep-water act was already enacted early this year before the PIB, the PIB only maintains and improves and even increases the incentives, it doesn’t make it harder on the IOCs, its better. The reason why it’s better is because they want to attract more people into Nigeria because we are losing our position as the foremost destination for investment.”
The delay and disaster of the PIB is primarily because of the pursuit of non-public pursuits of varied people and teams inside and outdoors the nation, far above nationwide curiosity. The Senate President, Ahmed Lawan, stated that PIB is sort of a demon with folks each inside and outdoors the nation able to work in opposition to it as that they had been doing for the previous 14 years.
He, nevertheless, declared that the ninth Senate and by extension, the ninth National Assembly, would “defeat the demon” with the present invoice earlier than each chambers.