Benefits Of Passed PIB To Nigeria Economy

0 43

Hon Abdullahi Mahmud Gaya

Nigeria’s oil and gas  industries are being governed by-laws enacted more than 50 years ago, which has extremely not conversant with current oil and gas reality.  For all these years the  sectors only have about the 28 Petroleum Acts and Regulations that overlapped in the functions and responsibilities without a comprehensive law for the administration of the oil and gas sector.

The most recent   regulations and act that governed Nation’s oil and gas are the National Data Repository Regulations 2020 Petroleum (Drilling & Production) (Amendments), Regulations 2020 Deep Offshore And Inland Basin Production Sharing Contracts,

Petroleum (Drilling And Production) (Amendment) Regulations, 2019 and Flare Gas (Prevention of Waste & Pollution) Regulations 2018.  President Muhammadu Buhari also signed into law, a Bill to amend the Deep Offshore (and Inland Basin Production Sharing Contract) Act [the PSC Act].

For 13 years, the  passed Petroleum Industry  Bill (PIB) went through three presidents and four legislative tenures without resulting in an overarching petroleum industry law. Even though In 2018,  the House of Representatives passed a harmonized version of the  PIGB  almost a year After the Senate passed the bill. However, the Petroleum Industry  Bill was rejected by President Muhammadu Buhari for “Legal and Constitutional reasons.

My piece will focus on the significance of the Petroleum Industry  Bill (PIB) passage to the country’s economy and its benefits to Nigeria. About two weeks ago both chambers of the National Assembly Passed long-awaited Petroleum Industry  Bill after 13 years in the House.

It is a fact that Nigeria hosts the African second  largest Petroleum reserve with  proven oil reserves  about 36.97 billion barrels of crude oil. As of 2020, Nigeria is the most  concentrated  the natural gas reserves in Africa. The country had more than 200.4 Trillion Standard Cubic Feet (TSCF).  But in spite of this abundance Oil and Gas  reserve,  but  country  only received 4 percent ($3 billion) of $75 billion invested in the continent in  2019 making Nigeria be overthrown by its smaller neighbor, Ghana, National Bureau of Statistics, NBS

Non passage of the  Bill remains a major drag on the petroleum industry, which is significantly limiting the country potential to attract both local and foreign capital at a time when many other countries in Africa’s are scrambling to exploit their oil and gas resource.

The global market is changing rapidly, exacerbating old threats and creating new ones. The world’s largest consumers have become top producers and top importers have begun to export. Future trends for the oil industry do not look too good because a number of developed countries have set ambitious targets for reduced greenhouse emissions.

According OPEC projection that by 2040 oil sector is going to be playing less and less a role in global energy usage.  If the projection come true  in the next 20 years from now the world’s dependence on oil would have reduced to 50 percent. Considering the future usefulness of petroleum resources in the near decades had increased level of uncertainty on oil demand call for great concern but the passing  PIB would overhaul the sector that has not been operated optimally in line with global standards.

Going by OPEC projection likely petroleum would have no much  value in the next 20 years due to  new technologies, fossil fuel may be less attractive as projected, but it is time for Nigeria to  maximum benefit of it fossil fuel reserves through this reform before it fades away with new technologies, fossil fuel. it is to act fast in the repositioning of the oil and gas industries with desirable legislation that   would strengthen transparency, accountability limiting  economic loss for the gas and petroleum industries and the country.

The Bill consists of Five Distinct chapters, with  Miscellaneous Provisions comprising 319 clauses and 8 schedules. Most importantly, the  PIB will create a sustainable investment climate, where businesses in the sector will flourish.  The NNPC operation will be commercially oriented, which would bring  much-needed dividends to Nigerians.  NNPC will metamorphose into a Limited Liability Company.   In the coming months, NNPC will play a more vital role in the petroleum marketplace, just like other marketers in the downstream space.  In meantime NNPC Limited initial shareholders will be open for the general public to invest. Then, with regard to the fiscal regime, the laws will bring it in tandem with international best practices, to make the oil and gas industry in Nigeria much more competitive and attract the much-needed investments into the country. The initial shareholders are going to be the Ministry of Finance Incorporated and Ministry of Petroleum Incorporated.

About 3 percent of the Host Community Development Fund, House of Representatives made efforts to return to the Senate to discuss the possibility of renegotiation to 5%.  But by the time the members of the conference committee reached the Red Chamber had already passed the report thereby foreclosing any chance of a review. Therefore, members of the conference committee of the House had to return and pass it. That is what House rules say. As we don’t want    PIB to suffer the same fate that it had suffered in the past. Therefore House of Representatives adopted the Conference Report on the Petroleum Industry Bill approving 3% as the financial provision for the Host Communities Fund is to align with the position of the Senate on the same matter.

The 3 percent should pay  annually  as a contribution to the Host Community Development Fund Operating Expenditure by Oil Companies (OPEX). Another good aspect for community component in the bill provides that each settler must set up a development trust fund and appoint a Board of Trustees, which must apply to the Corporate Affairs Commission (CAC) to register the trust as a Host Communities Development Trust.

Clause 236 of the bill gives the time frame for the registration of a trust fund for oil assets. For existing leases and existing designated facilities, the period for setting up the fund is within 12 months of the bill coming into effect. Existing prospective licenses must set up the Fund before application for the field development plan. And failure to comply with setting up of the trust fund in line with the Act, a holder risks revocation of the applicable license.

The 3% should be paid annually as a contribution to the host Community Development Fund Operating Expenditure by Oil Companies (OPEX). The bill provides that each settler must set up a development trust fund and appoint a Board of Trustee which must apply to the Corporate Affairs Commission (CAC) to register the trust as a Host Communities Development Trust.

The quest for oil explorations  in the North and other parts of the country have received a huge boost. Based on Section 9 of the PIB, at least 30% of the profit generated by the proposed Nigerian National Petroleum Company Limited will go to the exploration of oil in ‘frontier basins’. Although the proposed law doesn’t identify the frontier basins, a statement by the President in 2019 identified the frontier basins as Chad Basin, Gongola Basin, Anambra Basin, Sokoto Basin, Dahomey Basin, Bida Basin and Benue Trough.

The proposed law stipulates that the 30% profits from oil operations will be held in Escrow Account that process completing  the transaction. Money, securities, funds, and other assets can all be held in escrow. In a situation where it is not being used, it would be returned to the treasury.

The main objective of 30% of Frontier exploration activities is to promote the exploration of petroleum resources in Nigeria for the benefit of the Nigerian people and promote sustainable development of the industry, ensure safe, efficient transportation and distribution of infrastructure, and transparency and accountability in the administration of petroleum resources in Nigeria.

If  PIB assent by  PMB  will  clear the concerns raised by investors and have greater clarity on the direction of the industry, especially with respect to the new fiscal rules and Nigeria’s oil and gas industry and  Nigeria’s economy to witness an exponential growth soon. The bill also promotes the competitive and liberalized downstream sector of the petroleum industry as well as the development of fuel and chemical industries.

 Hon   Gaya, Writes From the House of Representatives Abuja

Leave a Reply