October 4, 2020//-In the last few weeks, Nigeria has stepped closer to major reform of its crucial but chaotic oil industry. What exactly is at stake, and will change finally be achieved?
What is Nigeria’s Petroleum Industry Bill and why is it significant?
Crude oil dominates Nigeria’s economy, accounting for around 90% of export earnings. The country has the largest oil and gas reserves in sub-Saharan Africa with an estimated 37bn barrels of oil and 188 trillion cubic feet of gas.
Yet for decades, the virtually ungovernable industry has been plagued by poor leadership, eye-watering corruption and environmental degradation.
Value has leached away through opaque licensing deals, unaccountable middlemen, a lack of refining capacity and graft in the government and state-owned Nigerian National Petroleum Corporation (NNPC).
Sabotage and pipeline theft in the oil-rich Niger Delta have ensured that the taxpayer loses out on billions of dollars in annual revenues.
Nigerian administrations since the 1960s have – with varying degrees of effort – failed at reform. In the last 20 years, multiple governments have attempted to pass an all-encompassing Petroleum Industry Bill (PIB), the scope and complexity of which has ensured repeated failure.
Now, President Muhammadu Buhari has sent a new PIB to the bicameral National Assembly, where the Senate, along with the House of Representatives, must sign off on it before it can become law. The bill passed its first reading in the Senate on October 1.
What changes under the new bill?
The new bill could offer a radical departure from past norms. The bill plans for the selling of shares in a reformed NNPC, the replacement of regulatory bodies, and the reduction and streamlining of royalties.
The legislation suggests the NNPC should become “a commercially oriented and profit-driven national petroleum company” independent of government and audited annually, although no dates are yet given for a share sale.
The PIB could also boost the amount of money companies pay to local communities and for environmental cleanups, introduce new dispute-resolution mechanisms between government and oil companies, and set up a midstream government infrastructure fund.
“It would play a vital role in addressing the inefficiencies plaguing the NNPC, from slow approval for oil projects to budget shortfalls that hinder its ability to pursue public-private partnerships.
What’s more, the bill would create a supportive environment for both IOCs and indigenous petroleum companies, help protect the environment and the interests of host communities, support economic diversification in Nigeria, and critically important, promote transparency in Nigeria’s administration of petroleum resources,” writes NJ Ayuk, executive chairman of the African Energy Chamber.
Why is Buhari acting now and what are the chances that his bill will be passed?
The National Assembly is controlled by Buhari’s All Progressives Congress party, boosting hopes that passage can be secured quickly following his comprehensive 2019 election win.
Given the PIB’s tangled history, passage of the bill would represent a significant political victory for the president and send a message to international investors.
Furthermore, the plunge in global oil prices brought about by the Covid-19 pandemic, which has seen crude trading at less than $40 a barrel and triggered a 60% slump in Nigerian government revenues, may give renewed impetus to reform efforts.
Yet the complexity of the legislation remains a problem. The latest PIB comprises one version separated into four chapters, unlike previous failed versions in which the bill itself was separated.
The Senate house speaker has resolved to pass the bill as quickly as possible but emphasised that it would not “sacrifice thoroughness at the altar of speed” – comments which may raise eyebrows among long-term industry observers.
https://africanbusinessmagazine.com/sectors/energy/what-you-need-to-know-about-nigerias-petroleum-industry-bill/
