With the passing of the Petroleum Industry Bill (PIB) into law barely a year ago, stakeholders have restated the need for speed, transparency and accountability in the implementation process of the new law in Nigeria’s extractive sector. CHINAKA OKORO reports
Among many prized natural resources abundantly available in Nigeria is oil. But the hope that proceeds crude oil would help to enhance the well-being of Nigerians has not been fully realised, no thanks to management topsy-turvy in the sector. One of the solutions proffered to solve the myriad of glitches confronting the sector is the Petroleum Industry Bill (PIB), a piece of legislation which has introduced far-reaching reforms in the industry that is the largest contributor to the country’s economy.
The bill, introduced in December 2008, has been signed into law as the Petroleum Industry Act (PIA) by President Muhammadu Buhari on August 16, 2021. His assent to the bill provided legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry, the development of host communities, and related matters. Further to this, the Presidency approved a nine-member steering committee to ensure the implementation of the Petroleum Industry Act (PIA) with an implementation structure comprising a steering committee and an implementation working group and a coordinating secretariat.
Specifically, the steering committee ensures effective and timely implementation of the law and that the new institutions created have the full capability to deliver on their mandate. The tasks of the implementation working group and the coordinating secretariat are to develop the briefs (including model contracts and regulations) that would be presented to the steering committee for consideration and approval within a 12-month period. The Act is expected to promote transparency and accountability in extractive sector governance, eliminate regulatory/legal hurdles, attract critical investments, unlock financial resources, accelerate local content development, and enhance employment, among other opportunities.
However, to unlock and maximise the potential of the Petroleum Industry Act (PIA), the stakeholders maintain that there is a need for the political will to implement the provisions of the law and continuous engagement with all stakeholders for the support necessary for its success. Some steps taken towards fulfilling the statutory prescription in the implementation of the PIA in the upstream sector of the oil and gas industry are commendable. The consultative forum for regulations held in April this year is regarded as a critical milestone in the implementation of the Act.
Anxious that there is a lull in the implementation process, the Civil Society Legislative Advocacy Centre (CISLAC), the national chapter of Transparency International, on behalf of the Accountability in Extractive Sector (AES) Cluster within the framework of the Strengthening Civic Advocacy and Local Engagement (SCALE) project being implemented by Palladium with funding from the United States Agency for International Development (USAID), recently converged on Lagos to ascertain the level of progress made in the PIA implementation process; identify possible factors, actions and inactions that have contributed to delays; and to contribute to the advancement of the effective implementation in the extractive sector.
The forum, which harnessed necessary inputs from various stakeholders, provided a review and further clarification for six draft regulations, including the Nigerian Upstream Fee and Rent Regulations, the Petroleum Licensing Round Regulations, the Domestic Gas Delivery Obligations Regulations, the Nigeria Conversion Regulations, and the Nigeria Royalty Regulations and the Nigeria Host Community Regulations.
Beyond this milestone achieved, the stakeholders expressed the hope that deliberate efforts should be made to fast-track the implementation of the law in a manner that best achieves the PIA objectives in line with the yearnings and aspirations of Nigerians. Participants at the forum were Nigeria Upstream Petroleum Regulatory Commission (NUPRC), Federal Inland Revenue Service (FIRS), and some members from host communities, among others. The Executive Director of CISLAC, Auwal Ibrahim Rafsanjani, said the stakeholders considered the consultative forum important as a way of reminding the government of its obligation to make the PIA work for the benefit of the Nigerian people and to also ensure that the objectives of the Act were realised.
He said: “The other objective is to see that those who are supposed to benefit from the Act are taken care of and their entitlements implemented. That would go a long way in reducing tension, violence, and gross injustice that communities have continued to suffer as a result of extractive activities. Many of the communities have been devastated and their means of livelihood destroyed. Therefore, this Act is an attempt to right the wrongs.
“If the process of implementation is slow, it would create the impression that some people do not want the status quo to change. Also, there is the need for reform in order to stamp out corruption in the sector.”
Rafsanjani noted that with the new Act, the stakeholders believe that a lot of lapses and opportunities for corruption and looting in the sector, including oil theft, would be addressed. He said it will also improve and increase productivity and efficiency in the oil sector.
“We want to see Nigeria utilising the natural resources that God has given it. We cannot continue to have oil and our communities being destroyed, with poverty on the increase in the land, and yet, we keep subsidising corruption,” he said.
Rafsanjani said subsidy was a manifestation of corruption which needs to be stopped. “This is why CISLAC is working with relevant government agencies, especially the committee saddled with the responsibility of ensuring that the PIA framework is implemented. We also urge them to engage communities and other stakeholders, and the media in their activities so that Nigerians can appreciate what they are doing and understand their obvious challenges.
“If there is no public engagement, Nigerians would still believe that it is the same old way of doing things. Hence, the need to intensify the process and also engage all relevant stakeholders in the industry, especially the host communities so that Nigerians can see how much progress is being made with this law. It’s not just enough to have the law. Yes, we struggled for it for 20 years, but we cannot afford to have a dormant law,” he said.
He, therefore, commended the Nigeria Extractive Industries Transparency Initiative (NEITI) for doing a good job. According to him, it was through NEITI that CSOs were able to know how many companies are paying taxes. He said it was also through NEITI’s records that many companies that have been avoiding tax payments were revealed.
“We now know that so much was going on in the extractive sector and more transparency has been created through NEITI records. The natural resources are supposed to enhance the well-being of Nigerians. But due to corruption, natural resources have become a ‘curse’ to our country.
“It has not helped in improving or creating more industries or infrastructure as seen in other countries where oil has brought development. The natural resource has brought more misery; it has exposed more people to corruption and has institutionalised laziness,” he said.
On the expectations of the host communities from the implementation of the PIA, the representative of the Oduosa of the Utagba-Ogbe Kingdom in Delta State, High Chief Dennis Ejechi, expressed his concern over the impact of the activities of oil companies in neighbouring communities on the host communities, which, according to him, were not given recognition in the PIA.
He also expressed his concern about the environmental effects of gas flaring, transparency and competence of auditors in charge of the oil company’s account, and how to rightfully determine the three per cent ascribed to be paid to host communities by the oil companies as recommended by the PIA, and the company’s level of compliance with the dictates of the PIA.
Assuring the host communities and other stakeholders of the effectiveness of the implementation, while also providing stakeholders with an update on the PIA implementation process, the Executive Commissioner of Economic Regulation and Strategic Planning, Dr Kelechi Ofoegbu, on behalf of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), said draft model licences, licensing conditions and model contracts for the PIA implementation have been finalised and presented to the industry for input.
He also said the Petroleum Prospecting Licenses (PPLs) were scheduled to be presented to the successful individuals by the Marginal Fields Bid Round 2020 this year, even as Host Community Development Trust Regulations were billed to be unveiled on that date to give guidance to operators. On delineation of acreage, he said discussions were ongoing with the industry operators, and sizing was being done to comply with the PIA 2021 requirement of a grid system based on the Universal Traverse Mercator.
“Delineation is a necessary precursor to the issuance of PPLs and PMLs as prescribed by the PIA 2021,” he said.
On the role of the Federal Inland Revenue Service (FIRS) in the implementation of the PIA, Technical Assistant to the Executive Chairman FIRS, Femi Olarinde, said FIRS was responsible for the enforcement of the provisions of chapter four of the Act with regard to taxes. He said the FIRS was also saddled with the task of assessing and collecting hydrocarbon taxes, companies’ income taxes, and education taxes from the oil and gas industry.
“The commission is also to determine and collect royalties, signature bonus and related payments of production shares, profit oil from the upstream petroleum sector. We are also authorised to determine and collect all related payments from downstream and midstream sectors of the industry, including gas flare penalty. All monies collected (taxes, royalties, profit oil, signature bonuses, and others) from the petroleum industry due to the government shall be timely transferred to the Federation Account,” he said.
The Director of Finance and Administration, SCALE, Domini Madugu, said the consultation engagement was to help in the area of capacity building by CSOs in Nigeria. According to her, SCALE has the mandate to build the capacity of the CSOs in Nigeria so that they can push policy reforms in all sectors in the country. She said SCALE had been working with 17 CSOs across the country.