The nation, particularly, the oil and gas industry, was thrown into a rude shock last week following the refusal by President Muhammadu Buhari to sign into law the Petroleum Industry Governance Bill (PIGB), a segment of the Petroleum Industry Bill (PIB).
The expectation had been high because there is the general belief among investors and many players in the industry that if the bill is signed into law, the oil and gas industry would have access to a new life line which would increase the tempo of activities in the upstream of the industry,
The action of the president is a big setback to the industry, the nation and the economy generally, especially for a country that operates a monolithic economy.
In the past 11 years, there have not been any major exploratory and seismic activities in the sector. All the investments into the sector so far have been for production and not exploration. The country has been claiming that it has 37 billion oil reserves for several years. But it has not been able to make new discoveries thereby depleting even the so-called 37 billion barrels on daily basis. This is because of the uncertainty that has surrounded the passage of the PIB
With all the efforts put into making the document by the National Assembly members and the general public, this coupled with the interest it has generated both locally and internationally, operators were very optimistic that the President would this time around assent to the bill, no matter the anomalies associated with it. Such gray areas (the shortcomings) could be fine-tuned later as it becomes operational.
The global extractive industry watchdog, Publish What You Pay (PWYP), had stated that Nigeria is losing N3 trillion annually for failing to put in place a proper legislation for the oil and gas industry. The concerns of Nigerians and stakeholders alike stem from the fact that past legislatures had promised to pass the PIB, only to renege at the end of their respective tenures.
The prospect that the other segments of the bill, which are fiscal, host community, would be signed into law when work on them is completed, is very slim given what has happened to the PIGB.
Obviously, the much expected investment inflow
President Buhari refused to sign into law the Petroleum Industry Governance Bill on account that the bill is permitting the Petroleum Regulatory Commission to retain as much as 10percent of the revenue generated in oil and gas industry.
He said the bill unduly increases the funds accruing to the commission to the detriment of the revenue available to the Federal, States, Federal Capital Territory and Local Governments in the country.
Ita Enang, senior special assistant to the President on National Assembly Matters, disclosed this while briefing State House Correspondents.
Other reasons include, expanding the scope of Petroleum Equalisation Fund and some provisions in divergence from this administration’s policy and indeed conflicting provisions on independent petroleum equalisation fund.
He also stated that some legislative drafting concerns which, if assented to in the form presented, will create ambiguity and conflict in interpretation.
“By convention, it is inappropriate to speak on the content of executive communication addressed to the Legislature until same has been read on the floor in plenary”, he said.
But the question is, how much would the Petroleum Regulatory Commission generate that retaining 10percent of the revenue would become an issue? From statistics, the Department of Petroleum Resources (DPR), which would be replaced by the commission, does not make more than N500billion annually. This is from licenses, permits, signature bonuses and fees and not from the crude oil sold.
The Department of Petroleum Resources is so incapacitated currently because it is poorly financed to the extent that it finds it difficult to perform its functions without compromising its regulatory role.
Does the government want to cripple the commission by starving it of the necessary funds?
Certainly, the issue of 10 percent revenue to PRC is not a good reason for the bill not to be assented to.
Enang said he had pleaded for the understanding of the legislature that due to the misrepresentations in the public domain and apparent deliberate blackmail which if not promptly addressed may set both the executive and the legislature against the public and even the international investment community.
This action by President Buhari has consequently elicited barrage of reactions from oil and gas industry stakeholders who expressed disappointment over the issue.
This is a big drawback for the country and oil and gas industry in terms of investments as expected investors would now be considering taking their money to other parts of the world, said one of the stakeholders.
Godswill Iheatu, immediate past president of Petroleum Club, said he expected the action of the President, given the fact that if the bill was to be signed into law in its current status, it gives a lot of power to the director-general of the Nigeria Petroleum Regulatory Commission which will take over the functions of the Department of Petroleum Resources (DPR) and the Petroleum Products Pricing Regulatory Agency (PPPRA).
He however, said it was better to have a financially strong institution.
Dada Thomas, managing director of Frontier Petroleum and current president of the Nigeria Gas Association, told BusinessDay that he was disappointed over the development.
“We thought if the bill is assented to, it would give the industry the lee way to operate transparently and also promote accountability in the oil and gas industry which is what this government has been championing. The 8th Assembly has lost the PIB again,” he said.
“Would it now take between 20 to 25 years to pass a single bill into law?” he asked.
According to him, “For a country that is asking for foreign investment, this is not the way we should go.”
Abiodun Adesanya, managing director of Degeconek, said the action has stalled creation of jobs and increased unemployment. He added that valuable times and money spent on putting together the document have been wasted.
“We have suffered enough as a people over this matter”, he said.
Already, a significant decline was recorded in foreign investment inflow into the Nigeria’s oil and gas industry in the second quarter of 2018, as total capital imported into the industry between April and June 2018, dipped by 70.98 percent, compared with the amount imported in the first three months of the year.
According to data obtained from the National Bureau of Statistics, NBS’ Nigerian Capital Importation report for the second quarter of 2018, foreign capital inflow into the oil and gas industry declined by $60.77 million to $24.85 million in the second quarter of 2018, compared to $85.62 million recorded in the first quarter.
However, no reason was given for the sharp drop in foreign capital inflow into the oil and gas industry, but analysts have consistently blamed the decline in investment on uncertainty in the industry, following the delay in the assent of the Petroleum Industry Governance Bill (PIGB), and the non-passage of the remaining variants of the Petroleum Industry Bill (PIB).
The report further stated that the oil and gas industry accounted for 0.45 percent of the $5.514 billion total capital imported into the economy in the second quarter, compared to its contribution of 1.36 percent to the $6.3 billion total capital imported in the industry in the first quarter.
Olusola Bello
