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PIGB: How Buhari’s assent can save over $15bn oil sector losses

President Muhammadu Buhari, according to industry stakeholders, can avert enormous economic losses, unlock billions of dollars’ worth of oil sector investment and ultimately make history…

President Muhammadu Buhari, according to industry stakeholders, can avert enormous economic losses, unlock billions of dollars’ worth of oil sector investment and ultimately make history should he sign the Petroleum Industry Governance Bill (PIGB) into law, our reporter writes.

The PIGB currently awaiting Mr President’s assent is the culmination of almost two decades of work by various stakeholders in the Nigerian petroleum industry. It is the first of the Petroleum Industry Bill (PIB) split by the current National Assembly (NASS) into four.

 After it was passed by both chambers, a joint committee of the NASS harmonized the bill on March 31, 2018 and the harmonized copy was then transmitted to the president for assent on April 25, 2018.

 The bill when it becomes an Act will give clear demarcation of institutional roles in industry governance with respect to policy institutions – commercial and regulatory institutions.

 Stakeholders agree that the battle to the transformation of oil and gas governance in Nigeria does not just end with presidential assent to the bill, in fact, that is when the story begins.

 The cost of delays

 There is now widespread advocacy by civil society groups and well-meaning Nigerians for the president to immediately sign the bill because the long delay in passing it had cost the country enormous fortunes.

 In 2013, then Country Chair of Shell Companies in Nigeria, Mutiu Sunmonu, said their upstream exploration and production arm, SPDC, put on hold investment decisions on two key offshore oil and gas projects that would have cost about $30 billion until the new petroleum law was approved.

 Two years later, chairman of the Petroleum Technology Association of Nigeria (PETAN), Bank Anthony Okoroafor, estimated that Nigeria lost $10 billion (N1.7 trillion) fresh investments due to the non-passage of the PIB. The Nigeria Extractive Industries Transparency Initiative (NEITI) in a policy brief later that year, put annual losses due to the non-passage of the bill at $200 billion. The brief also alerted that another $15 billion is lost yearly in fresh investments to regulatory uncertainties.

 The Energy Information Administration, the statistical arm of the US Energy Department, in one of its report said, “The amount of money that Nigeria loses every year from not passing the PIB is estimated to be as high as $15 billion."

GlobalData, a leading data and analytics company, said in a new report that the delay in the passage of the PIB was threatening an average capital expenditure of $8.4bn per year expected to be spent on 249 oil and gas fields in Nigeria between 2018 and 2020. 

Why Buhari may withhold assent

The transmission of the harmonized PIGB to President Buhari for assent on April 25, 2018 has raised a lot of questions about how to get the president to assent to the bill.

Buhari currently doubles as petroleum minister and experts said if the harmonised version of the bill sent to him is anything to go by, the intent of the PIGB is to whittle down the power of the petroleum minister thereby limiting him mostly to policy making while empowering the petroleum agencies. So the reverse of what currently obtains is what is in the Petroleum Act.

 At a roundtable on the need for presidential assent to the PIGB organized by the Civil Society Legislative Advocacy Centre (CISLAC), the Senior Programme Officer of the centre, Mr. Kolawole Banwo, said Buhari signing the bill could be “giving away power that is potentially enriching, that gives leverage for influence peddling and perhaps in terms of electoral gains can also be used as a bargaining chip.”  

 Also speaking, the Energy and Natural Resource Partner, Streamsowers and Kohn, Chigozie Hilary-Nwokonko, said the bill if assented to, means that the president who doubles as minister of petroleum resources will no longer have powers to grant key authorizations like discretionary award of oil and gas licenses and permits.

 "It means Buhari cannot arbitrarily fire any of the oil agency heads and most importantly will have less influence on the oil and gas business in Nigeria," Hilary-Nwokonko said.

 But a former chairman of the Nigeria Electricity Regulatory Commission (NERC), Dr. Sam Amadi, said Buhari needs not worry as he would still exert substantial powers after assenting to the bill.

“I don’t think PIGB diminishes presidential powers at all because in Section 5 the power of the president is power over the economy,” he said.

“The president can exercise that power by himself or his minister or by anybody. If the president appoints a regulator he is actually donating that presidential power to that person,” he added.

Amadi is however worried that the president might eventually withhold assent to the bill.

 “This presidency has kind of walked back from too many things that we thought they would sign like the declaration of asset and procurement council. Things we thought harmless they have walked back on. I will not lose sleep if they walk back on this," Amadi said. 

The President Nigeria Association for Energy Economics (NAEE), Prof Wumi Iledare, also said there were still some safeguards for the president.

 He said: "The president has the right to review the PIGB before accenting to it for areas that may not be in tune with his policy objectives for the sector."

 “But will Buhari consider national interest and the citizenry as bigger than individual benefit and therefore prove everyone wrong and sign the PIGB?

 “My response to that is that it is a litmus test for an individual who has integrity supposedly and who happens at this time to occupy the same position as minister,” said Banwo the CISLAC programme manager.

 Why should Buhari sign?

Dr. Amadi said Buhari should sign the bill because his government has shown clear signs of commitment towards a private sector market-led economy. 

 “Secondly, it is also a bragging right; if the president signs, a major legislative milestone is attained. It fits into the campaign tool box of what he has achieved," he said.

Energy expert Dauda Garuba says it is in the best interest of the president to sign the bill.

 Mr. Nwokonko, Energy and Natural Resource Partner at Streamsowers and Kohn, said “I think it is absolutely in the president’s best interest to sign this bill because one would have thought that what is his best interest is what would preserve his legacy. He has everything to gain by signing it. This is not about personality, we are talking about the future of Nigeria.”

Prof Iledare said there are far more good reasons for President Buhari to sign than not to.

“Politically speaking, he has a lot to gain. All the presidents before him never get to see any PIB to even sign. He has the opportunity," Iledare said.

"The industry is bleeding with significant cloud of uncertainty over the industry.  NASS passing the bill has lifted some cloud. Signing the bill to an Act will lift the cloud completely," he added. 

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