The Petroleum Industry Governance Bill: Issues Arising

 In Energy & Environment, Thinking Aloud

Opaluwa Enebi

The first tranche of the Petroleum Industry bill (PIB) famously known as the Petroleum Industry governance bill (PIGB) scaled through the third reading at the Senate in May 2017. The bill, presently before the House of Representatives, will limit the powers of the Petroleum minister to policy and administration, transfer the powers to grant, modify, extend, renew and revoke petroleum licenses and permits to a regulatory body (the Nigeria Petroleum Regulatory Commission; NPRC) and restructure the Nigeria National Petroleum Corporation (NNPC) into three commercial entities expected to operate independently with limited government interference. While this development has been described by industry stakeholders as a step in the right direction, there is a consensus that the bill is nonetheless far from perfect with a number of issues that still need to be adequately addressed or clarified. Some of these issues are outlined below.

The Petroleum Inspectorate: The Bill mentioned the Petroleum Inspectorate as one of the agencies to be absorbed by the new regulatory commission. The Petroleum Inspectorate was created in 1977 as an integral part of the NNPC entrusted with regulating the industry. However in 1988, the Inspectorate was excised from the NNPC and transferred to the Ministry of Petroleum Resources as the technical arm where it was renamed the Department of Petroleum Resources. In effect, the Petroleum Inspectorate is the DPR and therefore should not be mentioned as a separate entity to be merged under the NPRC as this may lead to confusion.

Discretionary powers of the NPRC in determining remuneration: In as much as it is pertinent to ensure that the commission is allowed to operate independently, there may be issues concerning the extent of such powers available to the board to determine its own remuneration and salaries. The PIGB makes no mention of any mechanism to ensure that this particular privilege, or power depending on perspective, is not abused.

The Equalisation Fund: Some of the arguments for the dissolution of the Petroleum Equalisation Fund are that its purpose violates the principles of a market driven industry and also creates loopholes that are exploited by miscreants to loot the country’s scarce revenue. In addition, if the goal of the industry is a deregulated downstream sector, the purpose of the Fund increasingly becomes counterproductive. The 2015 version of the PIGB had previously removed the PEF however; the 2017 version passed by the senate returned the fund only with a different administrative structure and a slightly altered name. The government may have to provide better justification for continuing the fund than a uniform pricing mechanism to mitigate inequality in economic development across the country. This assertion falls apart on the fact that natural, human and intellectual resources vary across the country and therefore each region cannot develop at the same pace. More so, in the more than 40 years since the inception of the Fund, evidence of evenly spread economic development in Nigeria is yet to be seen which should count as a basis for the obvious dissolution of the fund.

Legislative Oversight: Apart from the confirmation of board members, the Bill does not state what other function, if any, the house committees on the oil and gas sector in both legislative houses would have in relation to the NPRC, NPC and NPAMC. This may require clarification.

Integrity of governing boards: The provisions for qualification or disqualification of board members who will serve on the respective boards of any of the new entities ensure that no individual with criminal records becomes a member. Nevertheless, such provisions may need to be extended beyond convictions. In order to preserve the integrity of the board, it may be necessary to include pending criminal matters before any law enforcement agency, as grounds for rendering any appointee unfit to be on the board, whether before or after appointment. If such issues come up after appointment has commenced, that board member should be required to excuse himself or herself, or be excused from continuing on the board pending when such matters are totally resolved with the respective agencies. If such matters are not resolved within three months (the maximum time allowed for suspension under the Bill) the board member should be replaced. Furthermore, the satisfaction of the President that conflicts of interest of a proposed member of the governing board of the NPRC would not hamper the impartial discharge of his or her duties should be expunged from the bill. Personal satisfaction is too vague a criterion to allow a candidate serve on the board of such a sensitive body. Such powers may be abused or allow room for bias towards a prospective appointee irrespective of qualification thereby compromising the integrity of the commission.

It is without doubt that petroleum currently represents Nigeria’s major source of revenue and foreign exchange as well as the backbone of the country’s economy. Consequently, there is no gainsaying that the reform of the industry, as mirrored by the PIGB and other related bills, is vital to Nigeria’s progress. Going forward, it is pertinent that the country gets it right, especially during this period of socio-economic reform if it must lay the proper cornerstones for a thriving future. These issues must be adequately addressed before the bill is signed into law by the President. The legislative and executive arms of government, as well as other stakeholder groups must ensure that no stones are left unturned or loopholes left unplugged. The country’s fate might as well depend on it.


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