The idea of a new law for the petroleum sector began precisely on the 20th April, 2000, more than sixteen years ago when the Obasanjo administration inaugurated the Oil and Gas Reform Committee. The committee of experts was charged with the responsibility of reviewing the existing laws in the sector and to develop a dynamic legal and regulatory framework required to re-position the Petroleum industry to fully embrace competition, openness, accountability, professionalism, as well as better profit returns on investments. The work of the committee of experts produced the National Oil and Gas Policy in 2004. Following this development, the Oil and Gas Implementation Committee was set up by the Federal Government in June 2005. The second committee was among other things expected to draft a new legislation that will drive the proposed comprehensive reforms of the oil and gas industry for consideration and passage into law by the National Assembly. Unfortunately, the work of the Committee did not see the light of day before that administration ended its tenure in 2007. Later, the Yar’adua Administration took the challenge and presented the Petroleum Industry Bill to the National Assembly. The PIB provided for a new legal frame work for the sector, a new fiscal regime, governance and regulatory frame work for the Petroleum Industry. It also defined who gets what and how between government and investors on various business arrangements common in the sector. Unfortunately, the debate on the Bill at the National Assembly during the period was characterised by controversies. At the centre of arguments were such issues as the powers appropriated to the Minister, the fiscal terms, the benefits for host communities, definition of ownership and their wider implications for share and allocation of revenues. The raging controversy on the deliberations resulted in what industry experts viewed as ‘‘one -year -one – block slow pace in the consideration of the Bill”. Not even the interventions of the Jonathan administration could fast track the process. The unfortunate result was that the PIB failed to become law by the time the last National Assembly ended its tenure.
The Public outcry that greeted the failure by the last National Assembly to pass this important law informed the current Senate to revive legislative interest on the Bill. As part of efforts to avoid the controversies that killed the last PIB, the current Senate, carefully assembled another group of experts to consider the possibility of breaking the Bill into various segments beginning with governance aspect of the proposed law. In this direction, the Senate drafted a new Bill known as the Petroleum Industry Governance Bill (PIGB). While the PIGB scaled through the first reading in the Senate in April this year, debate on the new draft legislation was surprisingly suspended since June 13th. The sad development once again fueled growing concerns in the oil and gas industry that except and until a new legislation is enacted for the sector, the hope for new investors in the sector capable of expanding economic activities and diverse business opportunities in the industry will continue to remain a mere dream.
It was in response to the current stagnation of investment opportunities in the Petroleum Industry, the negative consequences to the economy as a result of the absence of the new law that informed the Policy Brief released recently by the Nigeria Extractive Industries Transparency Initiative (NEITI). The brief underlined the Urgency of a new Law for the Petroleum Sector. In the Policy Brief, widely circulated to both the executive and legislative arms of government, NEITI alerted the nation that Nigeria has so far lost over $200 billion as a result of avoidable delays to enact the law for the Petroleum Sector. For instance, in the last eight years, experts estimate that over $120 billion (at over $15 billion yearly) has been lost to investment withheld or diverted by investors to other (more predictable) jurisdictions.
The concern expressed in the Policy Brief remain that “the hedging by investors stems from the expectation that the old rules would no longer apply, but not knowing when the new ones would materialize. So they wait. Or walk, if they are investors looking at the time value of money”. The document made the point that considering the limited pool of investment funds, the amounts of funds previously allocated by IOCs for investment in Nigeria is almost certainly shrinking due to the emergence of several other viable oil and gas projects across Africa including Ghana, Senegal, Mozambique, Kenya, Uganda and Tanzania etc. The Policy Brief quoted Dr. Ibe Kachikwu, the Minister of State for Petroleum Resources, as putting the cost of uncertainty as far greater than the cost of simply not having the law itself. Further estimates projected (lost) earnings due to factors including loss of investment that should have happened at $100 billion. This figure represented only five years period between 2007 and 2012.
On jobs, the Policy Brief estimates employment impact at hundreds of thousands with the attendant negative consequences on security of lives and property. Although these numbers are largely projections, there can be no arguments about the narrative or logic that produced them. The Brief also argued that for five years up to 2014, Nigeria imported $26.4 billion worth of refined petroleum products. The resulting impact of this haemorrhage on the country’s balance of payments position, foreign reserves and, most recently, the value of the Naira have been colossal.
Other empirical examples include the NEITI’s 2013 audit of the oil and gas sector which revealed that a cumulative $10.4bn and N378.7bn were lost, under-remitted or outstanding due to inefficiencies, theft or absence of clear fiscal regime in the sector. All these came to N1.74 trillion at 2013 value. At the current exchange rate, total losses, under-remitted and under-payments for 2013 alone sum up to N3.2 trillion. Proper governance framework and clearer fiscal regime for the sector which a new legislation was in a position to address could have resolved most of the underlying causes and relieve the nation of this avoidable economic burden. It is of common knowledge that the bleeding may even be worse at this period of economic challenges facing our country.
The NEITI Policy Brief strongly recommended that a new law for the Petroleum Industry should be a robust executive bill driven by legislative – executive consensus, comprehensive in content and capable of re-positioning Nigeria’s oil and gas industry to compete favourably in the global market. It further underlined the urgent need for such a Bill to be driven by strong political will built on special Presidential backing. “The executive arm of government, with the President in the lead, needs to take full charge of the process of passing a new law for the petroleum sector. Enacting a new petroleum law should be prioritized as one of the planks of economic recovery; an inclusive task team should be urgently empaneled, charged with building consensus among stakeholders, drawing up a clear and well-communicated roadmap and fast-tracking the law’s passage”. It drew example from Ghana’s recent experience with the passage of its petroleum sector law within a record time of two years.
Against this background, the time for the National Assembly, oil and gas business community, the civil society and the media to appreciate the urgency of this law as one clear strategy that will help rescue Nigeria from economic recession is now. It is also important to note that local and international investors, who have waited patiently for this new law for the petroleum sector, do not see any rational economic reasons for any further delay. If for anything, there is underlining argument that such a law at this time in Nigeria with be consistent with President Muhammadu Buhari’s anti-corruption and economic recovery agenda announced to the international community at a recent summit in London.