Our dear Nigeria discovered Oil in 1956. Was that a gift or curse? Well, to Royal Dutch Shell, it was a gift. They were the first firm to discover oil in Nigeria after about a decade of drilling. Speaking of Dutch, ever heard of the term “Dutch disease”?
“Dutch disease is the negative impact on an economy of anything that gives rise to a sharp inflow of foreign currency, such as the discovery of large oil reserves. The currency inflows lead to currency appreciation, making the country’s other products less price competitive on the export market” – Financial Times Lexicon
Expanding on this a wee bit further, other sectors of the economy end up suffering because of the intense focus on the natural resource that literally springs up out of the ground and becomes an instant source of wealth. Sound familiar? But let’s push on with the brief history recap.
An industry sprung up around oil after its discovery. In 1971, Nigeria joined the Organisation of Oil Exporting Countries (OPEC). In 1977 it created a state-owned oil company called the Nigerian National Petroleum Company (NNPC). Unfortunately, accusations of corruption and a lack of transparency have plagued the Company for years. Nigeria’s oil industry has also not been very favourable to indigenous oil companies who feel shortchanged in favour of the International Oil Companies.
The Olusegun Obasanjo regime decided to overhaul the Petroleum industry with a bill which would achieve a number of objectives including
This was back in 2000. 17 years of back-and-forth passed while different stakeholders argued that the bill did too much in one department of its scope, and too little in others.
Finally, on the 25th of May of last year, the Senate delivered the bill to the promised land. It was decided that the Petroleum Industry Bill be broken up into parts:
First up to bat is the PIGB which focused on establishing a regulatory commission called the Nigerian Petroleum Regulatory Commission, which would be responsible for licensing, monitoring, and supervising petroleum operations. Most notable is the ability to allocate oil blocks, something that was previously exclusive to the President of Nigeria.
The President’s powers in relation to the industry aren’t the only ones affected by this bill. The Minister of Petroleum is also affected as well. A nine-member board with a fixed tenure makes up the commission and transfers some regulatory functions of the Minister from the petroleum and act and oil pipelines act. The Minister still retains some discretionary powers.
What about the agencies?
Some agencies like the Department of Petroleum Resources (DPR), Petroleum Technology Development Fund (PTDF), and Petroleum Products Pricing Regulatory Agency (PPPRA) could possibly continue to exist, or be merged with others that share overlapping functions.
By moving certain powers from the President and Minister of Petroleum, the PIGB intends to tackle accusations of nepotism by making sure that oil blocks for instance, are awarded on the basis of merit and expertise. Investors looking to come into Nigeria would be encouraged by such a commission because of the appearance of neutrality.
The Elephant in the room: NNPC
The PIGB seeks to break the NNPC into two entities: the National Petroleum Company (“NPC”) and the Nigerian Petroleum Assets Management Company (“NPAMC”). Both will be incorporated as Limited Liability Companies under the Companies and Allied Matters Act. Many are looking forward to seeing both companies listed on the Nigerian Stock Exchange and another stock exchange overseas to ensure transparency via corporate governance requirements from both stock exchanges.
Indigenous oil and gas players are optimistic that the PIGB will streamline the process of obtaining permits, licenses, waivers, tax related processes, crude oil export certificates, filings and approvals, all within a reasonable time and at a lower cost.
Importantly, this should lead to the development of private refineries. Dr. Ibe Kachikwu, the Minister of State for Petroleum, has said that the Federal Government is committed to ending fuel importation by 2019. Considering the latest round of hardship caused by fuel scarcity during the Christmas holidays of 2017, this will be a most welcome relief to Nigerians everywhere.
Lost Revenue and Promise of tomorrow
In May of 2015, Dr. Ibe Kachikwu said that Nigeria had lost an estimated N3 trillion worth of investment for every year that the Petroleum Industry Bill had not been passed.
Breaking up the bill into chunks that will tackle different areas of the Petroleum sector is a prudent move that takes the country ¼ of the way towards the fully transparent, accountable, profitable, and investment-worthy sector it could potentially be. Many thanks to the Senate for kicking things off in May of last year. The nation awaits further developments with baited breath.
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