…seeks adoption of development oil approach
Legal luminary, Olisa Agbakoba (SAN) has called for a new natural resources governance structure and the review of the oil and gas legal frameworks as the baseline for repositioning the sensitive sector.
He said Nigerians have been fooled by the Petroleum Industry Act (PIA), lamenting that its implementation has not yielded the desired results.
Agbakoba, former President of the Nigeria Bar Association (NBA), also said there is no difference between the Nigerian National Petroleum Corporation Limited (NNPCL), and Nigerian National Petroleum Company (NNPC), saying that they are the same.
He said it does not matter if the state controls oil and gas, adding that what is important is the impact of that management on the well-being of Nigerians.
Agbakoba vowed to challenge in court the scheme cheating the joint ventures, stressing that any joint ownership with the International Oil Companies (IOCs) contradicts the constitution.
The eminent lawyer spoke with reporters in Lagos on “Rethinking Nigeti’s oil and gas governance.”
He said Sections 16 and 4r of the Constitution, which vests the control on the government of the federation do not permit joint ownership.
He urged the federal government to emulate the Development Oil Approach adopted by Saudi Arabia, where the so-called partners limit their participation to providing service.
Agbakoba said the dismantling of the existing legal framework has become necessary because the contract sharing between the Federal Government and the IOCs has not benefitted Nigerians.
He said it was lamentable that the sector was being ceded to foreign companies.
Agbakoba queried: “The values of the IOCs should not overwhelm our own interests. Nigeria is the sixth largest producer of oil. Where is the benefit?
Noting that Nigerian oil is to the advantage of foreigners and not Nigerians, he said if the IOCs leave, there are capable Nigerians who can replace them.
Agbakoba said Nigerians should retrieve their inheritance from the firm grip of non-Nigerians.
He also urged President Bola Tinubu to appoint a minister of petroleum, saying that the work of the president is enormous.
He said Nigeria needs a minister of petroleum who can effectively supervise the sector.
Agbakoba added: “Oil is being paid for borrowing. What are the effects on the common man? What is the result? The service provider is elevated to the status of a co-owner. We are flaring gas. The incompetence in the management of the crisis in the oil sector is bigger than corruption.”
The rights activist said even though Nigeria has proven reserves of 37 billion barrels of oil and 188 trillion cubic feet of gas, this abundance of natural resources has not translated into broad-based economic development and improved living standards for the majority of Nigerians.
He lamented that the country has continued to grapple with what economists call the “resource curse” or the “paradox of plenty.”
He stressed:” This phenomenon is characterized by countries rich in natural resources, particularly non-renewable resources like minerals and fuels, experiencing less economic growth, less democracy, and worse development outcomes compared to countries with fewer natural resources. In Nigeria, this is manifested by high poverty rates, inadequate infrastructure, and uneven economic development.”
Agbakoba lauded recent initiatives by President Tinubu, including the Accelerated Stabilization and Advancement Plan aimed at injecting N2 trillion into the economy over six months.
Noting that the plan is to mitigate the impact of the removal of fuel subsidy and the liberalization of the foreign exchange market, he said more reforms are required.
Agbakoba called for a shift from the “Contract Oil Approach” to the “Development Oil Approach,” to end the government’s passive style and uncontrolled dominance by international oil companies. He said NNPCL cannot afford to remain a passive partner.
He drew attention to massive capital flight “as profit of oil does not stay in the country,” but transferred out of Nigeria by IOCs through payments to foreign contractors and service providers, use of foreign banks for transactions, and repatriation of profits to IOC home countries.
Describing the contract oil model as a violation of the Constitutional Mandate, he said: “The Contract Oil model stands in direct contradiction to Sections 16 and 44(3) of the Nigerian Constitution. These provisions explicitly mandate the government to manage Nigeria’s natural resources in a manner that secures the maximum welfare, freedom, and happiness of every citizen. The current arrangement, which primarily benefits International Oil Companies (IOCs), falls far short of this constitutional requirement.”
He added: “The outsourcing of oil and gas management to IOCs through Joint Ventures (JVs) and Production Sharing Contracts (PSCs) may constitute an unlawful delegation of governmental authority. It is a fundamental principle of administrative law that statutory bodies, including the government, cannot delegate their core functions without express legal authorization. In the absence of such express authority, the current arrangements may be ultra vires and potentially void.”
Agbakoba frowned at the inconsistent application of ownership principles, saying: “While the Federal Government is reluctant to consider shared or joint ownership with state governments, who represent Nigerians more directly), it sees no issue in delegating, outsourcing, and sharing joint ownership with IOCs.”
In his view, “the dominance of IOCs in the sector has historically limited opportunities for developing local content and building domestic capacity in the oil and gas industry.”
Agbakoba said a paradigm shift to the “Development Oil” option would foster active state participation unlike the contract system and boost value addition, including the development of local refining capacity, establishment of petrochemical industries and creation of downstream industries that use oil and gas as raw materials.”
Emphasising the import of “Local Content Development,” he said: “Development Oil prioritizes the development of local content, aiming to build domestic capacity in all aspects of the oil and gas value chain. This includes training the local workforce, developing local technology, and promoting Nigerian-owned businesses in the sector.”
He added: “While not excluding foreign partnerships, Development Oil seeks to redefine these relationships. Instead of passive JVs or PSCs, it aims for partnerships that prioritize technology transfer, skills development, and mutual benefits aligned with Nigeria’s national interests.
“There is a need to review and potentially revise existing Joint Venture agreements and Production Sharing Contracts with International Oil Companies (IOCs). Current agreements have effectively delegated the inherent rights of Nigerians to IOCs, allowing them to extract significant portions of Nigeria’s resources while leaving Nigerian citizens with comparatively little benefit. This practice raises serious concerns about the protection of national interests and the fulfillment of constitutional obligations.”
Agbakoba said the government should develop new models for engagement with IOCs that prioritize technology transfer, local content development, and value addition within Nigeria, rather than mere resource extraction.
He called for a new governance framework centred on development along the pattern of Saudi Arabia and novel legislative and structural changes, particularly the repeal or amendment of the Petroleum Industry Act (PIA) as “Section 64 (c) of PIA conflicts with Section 162 (1) of the Nigerian Constitution.”
The legal luminary also advised the government to “explore innovative funding mechanisms, such as a Sovereign Oil Fund guaranteed by oil reserves, to finance strategic investments in the sector and related industries.”
He said: “This approach would allow Nigeria to leverage its proven reserves as collateral for borrowing, similar to how IOCs currently operate.
“This will enable Nigeria to fund its own oil and gas operations without relying on foreign companies. Through this process, retain the entire value chain (exploration, production, refining, distribution, shipping, and marketing) in oil and gas, as Saudi Arabia has done successfully.”
He said the government should invest in capacity building for Nigerian oil and gas companies to enable them to take on larger roles in the sector, reducing dependence on IOCs, adding that a significant portion of oil and gas revenue should be reinvested in diversifying the economy and developing non-oil sectors.
Agbakoba said the government should establish special economic zones focused on oil and gas-related industries to attract investment and create jobs.
Highlighting the benefits of the Development Approach, he said it will lead to economic diversification and growth, job creation, increased Gross Domestic Product (GDP), improved infrastructure energy security, improved transportation networks, industrial development, educational development, and environmental sustainability.
Noting that a reformed governance structure will minimize opportunities for corruption and mismanagement, he added that a well-managed oil and gas sector will enhance Nigeria’s reputation in the international community.
Agbakoba stressed: “Rethinking Nigeria’s oil and gas governance is not just crucial; it is a constitutional imperative.
“The current system of JVs and PSCs, originally justified by a lack of funds, now appears to violate the inherent rights of Nigerians over their natural resources. By adopting a “Development Oil” approach, Nigeria can reclaim control over its vital oil and gas sector and transform it into a powerful engine for national development.
“This paradigm shift requires bold policy changes, including the securitization of oil reserves through a Sovereign Oil Fund, which would allow Nigeria to finance its own oil and gas operations. It also calls for a re-evaluation of existing agreements with IOCs that have effectively outsourced decision-making and control over Nigerian resources.
“The current exit of IOCs presents both a challenge and an opportunity for new Nigerian actors in the oil and gas sector. In collaboration with the federal government, these actors must rise to the occasion and build a new strategy for oil and gas exploration based on development oil principles.
“By aligning the oil and gas sector with broader national interests and constitutional obligations, Nigeria can create a more diversified, resilient, and prosperous economy that truly benefits the generality of Nigerians.”
