“The powers vested on the Petroleum Minister under the Petroleum Industry Bill (PIB) are not excessive”, says Nigeria’s Petroleum Minister, Diezani Allisson Madueke. She made this statement at the Senate Joint Committee public hearing on the PIB held last Thursday at the National Assembly Complex in Abuja, Nigeria. Consistent with its mandate to promote oil sector transparency in Nigeria, Spaces for Change attended the public hearing where it submitted two separate memoranda on the bill, and addressed the Nigerian parliament, flagging and proffering a set of recommendations for strengthening specific provisions in the Bill requiring further legislative scrutiny and amendment.
In her opening address, Mrs Madueke traced the history of the PIB to the recommendations of the Oil and Gas Sector Reform Implementation Committee (OGIC), which was mandated to review the operations of the oil and gas sector; harmonize the 16 legislations that governed the industry into a single more comprehensive legislation that would overhaul and better regulate industry operations; and make such recommendations for a far reaching restructuring of Nigeria’s oil and gas industry. Among several objectives, the Bill seeks to revolutionize the Nigerian oil and gas industry, for the benefit of all Nigerian people, and all other stakeholders.
Recognizing that it is practically impossible to have a ‘perfect’ bill, yet the new oil regime draws on international best practices from various oil-rich jurisdictions across the world, with the objective of increasing government take and undertaking institutional reorganizations necessary to making the sector more transparent and accountable. Some of the key concerns about the new oil reform bill expressed by major stakeholders could be summed into four broad categories: 1.) the fiscal regime; 2.) the establishment of several regulatory institutions; 3.) the Petroleum Host Community Trust Fund; and 4.) and the powers of the minister.
Beginning with the last issue, Diezani stated that contrary to the widespread concern regarding the excessive powers conferred on the Petroleum Minister, such powers were necessary for the effective administration of the industry, and in particular, key to achieving the stated reform objectives. In fact, the Minister’s powers under the PIB are a lot less when compared to other advanced oil-rich nations such as the United Kingdom, Malaysia, Norway where best practice is taken from. Moreover, section 6(2) of the Bill gives the Minister power to delegate some of her functions to any other person or institution any power or function except the power to make orders and regulations. That means that other persons or agencies would assume some of the functions ascribed to the Minister.
Regarding the concern about multifaceted regulatory bodies, the Minister argued that they were necessary taking into the consideration the complex nature and magnitude of the oil industry operations in Nigeria. An unwieldy, mammoth entity that hosts two complete separately run organizations is not a mode of efficiency but the disaggregated regulatory system would enable speedy response to variety of issues that may arise from time to time. The need to ensure that the different sub-sectors are effectively covered and better regulated makes the establishment of several agencies imperative.
Furthermore, the Petroleum Host Community Fund was established to mitigate the human and environmental conditions in the region. It represents an effort to engender direct positive impact on communities hosting oil industry activities, which will in turn, also bolster healthier relationships between operators and the communities where they operate.
On the fiscal regime, the fiscal terms in the new bill are flexible, with the primary objective of increasing government take and encouraging investment in the sector. In addition, it provides for a two-tier taxation system and production-based incentive system that will be fair to both the big and small players. The proposed transition period will take at least 3 years while at least, 80 regulations will have to be made to give full effect to the PIB provisions. When passed into law, the new regime will represent a win-win situation for all stakeholders, revolutionize the industry as well as contribute to the country’s domestic gross product (GDP).