Nigeria has finally gotten a law to overhaul its oil sector as President Buhari assented to the much-awaited Petroleum Industry Bill (PIB) on Monday.
The law comes about twenty years after much struggle to get an efficient legal backing to sanitise the oil sector which generates some 90 percent of the country’s foreign exchange earnings and 60 percent of total income.
President Buhari signed the PIB one month after federal law makers passed it in July.
“Working from home in five days quarantine as required by the Presidential Steering Committee on COVID-19 after returning from London on Friday August 13, the President assented to the bill on Monday August 16, in his determination to fulfil his constitutional duty,” Femi Adesina, media adviser to the president said in the statement.
According to him, the ceremonial part of the new legislation will be done on Wednesday, after the president who just returned from a London medical trip must have undergone the mandatory COVID-19 isolation.
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The Petroleum Industry Act provides legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry, the development of host communities, and related matters.
The key objective of the new law is to overhaul and transform the Nigerian oil gas industry and enable the country draw out the full potential of that sector.
Nigeria had tried at different times to reform its oil and gas sector for the past 20 years. Previous attempts at passing the PIB in 2009, 2012 and 2018, failed.
Factors, including lack of ownership, misalignment of interests between the legislature and the executive, perceived erosion of ministerial powers, stiff opposition by the petroleum host communities and push back by investors on the perceived uncompetitive provisions in those versions of the bill all contributed to frustrating efforts.
But there have been a few concerns around how much the new law could be the game changer for the industry at a time when major oil producers are seeking to transition to clean energy.
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The IMF, in its Article IV consultation with Nigeria in February, had welcomed the submission of the Petroleum Industry Bill (PIB) to the Parliament at the time.
The Fiscal Framework chapter of the bill, said particularly, appropriately rebalances the government take in onshore/offshore production, and advised that the fiscal regime should ensure a fair share of revenues to the government while remaining attractive to investors.
“For transparency and accountability purposes, adhering to the principle that all petroleum sector revenues, including royalty, taxes, government profit oil share and dividends, should flow through the Federation Account will be important and help reduce vulnerabilities to corruption,” it stressed.
The new petroleum industry law also holds huge prospects for the much needed investments and transparency in the sector, most times accused of corruption.
This is crucial considering that only 4 percent of the $70 billion investments made in Africa’s oil and gas industry between 2015 and 2019 came into Nigeria which accounts as the biggest producer and with the largest reserves on the continent.
Figures from the National Bureau of Statistics (NBS) indicate only $53.5 million or 0.55 percent of total investment of $9.680 billion in Nigeria in 2020 was made in the industry.
Interestingly, the new law also addresses the issue of separating the commercial and regulatory functions with proposals to replace the current state-owned NNPC with NNPC Limited, which would carry out only commercial activities, and set up two regulators with considerable independence.
“Going forward, striking the right balance between independence and accountability, while ensuring data and information sharing between regulators and relevant ministries and agencies, will be essential,” the IMF advised.
