The Nigerian National Petroleum Corporation (NNPC), the Petroleum Equalisation Fund (Management) Board (PEF) and the Petroleum Products Pricing Regulatory Agency (PPPRA) are the three agencies to be scrapped as President Muhammadu Buhari signed the Petroleum Industry Bill (PIB) 2021 into law, Monday.
According to a statement by the Special Adviser to the President, Media and Publicity, Femi Adesina, the president signed the bill while working from home on quarantine.
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It said the ceremonial part of the new legislation will be done on Wednesday, after the days of mandatory isolation would have been fulfilled.
The Petroleum Industry Act (PIA) provides legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry, the development of host communities and related matters.
The Senate and the House of Representatives had passed the bill in July, ending a long journey, which commenced in the early 2000s, for the creation of a proper corporate governance of the oil sector.
Some stakeholders had however expressed worry over some clauses in the passed bill, which Buhari signed to law. One of such is the scrapping of PEF and PPPRA and the commercialisation of the NNPC, fearing there could be job losses.
To begin the unbundling of the NNPC, the petroleum minister is mandated by the new Law to incorporate a limited liability company, to be known as NNPC Limited, within six months after the commencement of the Act.
It also stipulates that 30 per cent of NNPC Limited’s profit in the production sharing, profit sharing and risk service contracts shall be used to fund the oil exploration in frontier basins.
There is also the part that allocates 3% of operating expenditure (OPEX) of oil companies, estimated at $500 million annually, be paid as contribution to the Host Community Development Fund.
Get right persons to implement Act – Experts
Various stakeholders and experts reacted to the signing of the bill into law yesterday.
Among the experts who spoke on this was Prof. Omowumi Iledare, a professor of Energy Economics and former President, Nigeria Association of Energy Economics (NAEE) who described the action as laudable.
“Congratulations to the Presidency and the 9th National Assembly for bringing the wobbling PIB journey since 2000 to an end. I see in the Act, an investment-friendly fiscal framework with well-designed regulatory and governance institutions.
“The next phase is implementation without regulatory and institutional captures. One can hope for the appointment of competent professionals with diverse work experiences as members of the implementation committee,” Prof. Iledare noted.
Speaking on the PIB, a Professor of Economics at the Kaduna State University, Professor Aminu Usman, said the signing of the Bill was a step forward in advancing the oil industry in Nigeria beyond the usual talks.
However, Professor Usman said now that the Bill is a law, the federal government has to establish specific timelines for the unbundling of the NNPC, the removal of subsidy and implementation of other provisions of the Petroleum Industry Act (PIA).
The CEO of International Energy Ltd., Dr Diran Fawibe, said: “The most important issue in the Host Community Fund is that the monies must be judiciously utilised for the benefit of the communities.
Fawibe said: “When you consider the amount that has gone to the Niger Delta region through several avenues including OMPADEC, NDDC, 13% Derivation and Ecological Fund (2%), by now the landscape of the region should have changed significantly.”
President of Capital Market Academics, Professor Uche Uwalake said: “The law makes provision for speedy granting of licenses to investors especially in the downstream sector. This is likely to translate to the establishment of more refineries in Nigeria, which will go a long way to meet local consumption with prospects of ending fuel importation and the loss of forex associated with it.
“This could strengthen the value of the naira in the long run as well as create job opportunities in the petroleum value chain.”
He explained that the law also provided for the application of cost-reflective tariffs by operators and the commercialisation of NNPC Limited, adding that the one implication of this is that fuel subsidy will completely be removed.
An Abuja-based economic analyst, Simon Samson Galadima said the PIB, if implemented thoroughly, should turn around the country’s fortune for good.
Galadima said for instance that commercialising the NNPC is the right thing to do economically.
“It would make the firm more productive and efficient. It would reduce government interference and increase the bottom line”, the analyst said.
On subsidy removal, he said it might seem like a bitter pill to swallow, but it is a necessary evil.
“True! It would be tough for the masses in the short run. However, it will yield bountifully down the road for the masses in particular and the economy generally. As the resources being lavished on subsidised fuel are better used for health, education and infrastructure.”
Commenting on the disputed 3% host communities fund, he said the host communities deserve more than 3%. On 30% basin exploration, Galadima said it isn’t entirely bad. He said the government wants to increase the country’s options by having many more sources of oil which may not be entirely bad.
Similarly, another expert, Suraj Oyewale, said commercialising the NNPC is a good development.
“It’s a good move, but it’s still a government company where decisions could still be subject to political, rather than purely commercial, considerations”, he said.
On subsidy removal, he said it is long overdue. “I cannot say how easy it will be for the government to achieve this but there is never really an easy time.”
Commenting on host communities’ fund, he said 3% is a fair rate as it is better than the earlier proposed 5%.
“It is also commendable that it applies to only upstream activities.”
On 30% for exploration, Oyewale said additional investment in oil exploration is in order.
“I do not subscribe to the popular view that no further exploratory activities should be carried out. However, the financing of the exploratory with 30% of NNPC’s profit oil/profit gas is a little problematic. Given the government’s much-publicised dire financial condition, it is difficult to justify the apportionment of 30% of a major source of government revenue into such activities, especially given the chance of success.”
No job loss, NUPENG allays fears
Meanwhile, the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) has allayed fears of job losses following the new PIA. Speaking on telephone, NUPENG President, Comrade Williams Akporeha, said, considering scrapping some agencies like Petroleum Equalisation Fund (PEF), PPPRA and others, the personnel involved will be posted to other places where their services would be useful.
“We are sure that there will be no job losses in oil and gas. Those persons involved will be moved from that place to another. We will move around the system, there will be no job loss. That is the assurance we can give to our members.’’
He charged the federal government to begin immediate implementation of the law.
‘‘Our position here is a commendable step forward and we hope the implementation will be taken off as stated in the law,’’ he said.
OPEC, NEITI, lawmakers hail action as PDP, PANDEF kick
The Organisation of Petroleum Exporting Countries (OPEC) has written to President Muhammadu Buhari, commending him for signing the bill into law.
OPEC in a letter signed by its Secretary-General, Mohammed Lamido Barkindo Monday night said, “With the stroke of a pen, you have inaugurated a new era for the industry following years of legislative efforts to strengthen the legal, regulatory, fiscal and governance framework of the petroleum sector.
The OPEC boss said the new law will help harness Nigeria’s potential to achieve its programme of raising oil production to 4 million barrels per day and oil reserves to 40 billion barrels. The Nigeria Extractive Industries Transparency Initiative (NEITI) also described it as a historic development.
The Executive Secretary of NEITI, Dr. Orji Ogbonnaya Orji in a statement in Abuja Monday said the new law has ended decades of uncertainty concerning the future of Nigeria’s oil and gas sector.
According to Dr. Orji “The new law has opened a new phase of wider opportunities in the oil and gas industry.”
The Senate described the assent as a major victory for the country. In a statement by its spokesperson, Senator Ajibola Basiru, the Senate said the Act has the potential of bailing Nigeria out of its economic predicament and would enable the country to make the most of the economic gains of the oil industry.
Speaker of the House of Representatives, Femi Gbajabiamila, said Nigeria’s oil and gas industry will now witness more investments and transparency in the sector.
In a statement by his Special Adviser on Media and Publicity, Mr Lanre Lasisi, the Speaker noted that when massive investments come in as a result of the Act, a lot of Nigerians will gain employment.
However, the Peoples Democratic Party (PDP) has berated President Buhari for ignoring the outcry by Nigerians across board and signing the PIB.
The party, in a statement by its spokesman, Kola Ologbondiyan noted that the signing of the bill, despite widespread public rejection amounts to an endorsement of imposition.
Equally, the Pan Niger Delta Forum (PANDEF) said it’s quite unfortunate that President Buhari went ahead to assent to the Petroleum Industry Bill, despite what it described as the overwhelming outcry and the condemnation that greeted its passage by the National Assembly.
PANDEF National Publicity Secretary, Ken Robinson in a press statement issued in Port Harcourt on Monday said that the group is particularly worried about the paltry 3% provision for the Host Communities Development Trust Fund and “The brazen appropriation of an outrageous 30% of NNPC Ltd profit for exploration.
“The Niger Delta people will speak, shortly, after full consultations, on this callous act, on the best legal and political response,” Ken stated in the press statement.
By Zakariyya Adaramola, Simon E. Sunday, Francis A. Iloani, Idowu Isamotu, Abdullateef Salau, Itodo D. Sule, Abdullateef Salau, Hamisu K. Matazu (Abuja), Sunday M. Ogwu (Lagos) & Victor Edozie (Port Harcourt)
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