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Nigeria's leading finance and market intelligence news report.

Politics trumps economics as Buhari seeks amendment of PIA

… five weeks after assent

Unlike other state-owned national oil companies such as Saudi Aramco, Abu Dhabi National Oil Company (ADNOC) which appoint board members on the basis of merit and competence, President Muhammadu Buhari is allowing political consideration to decide the administration of Nigeria’s oil industry.

36 days after signing the most debatable bill in the history of Nigeria’s oil industry into law, President Buhari asked the Senate to increase the number of non-executive members on the Board of the Upstream Regulatory Commission (Commission) and Downstream Petroleum Regulatory Authority (Authority) from two to six.

Buhari wants each of the geographical regions to have a representation on the board.

“The PIA provided for the appointment of two non-executive members for the board of the two institutions. I am of the view that this membership initiates limitation and does not address the principle of balanced geopolitical representation of the country,” Buhari said.

“I, therefore, pray for the intervention of the ninth assembly to correct this oversight in the interest of national unity. Needless to add that this amendment will provide a sense of participation and inclusion for almost every section of the country in the decision making of strategic institutions such as the oil industry,” he added.

Business experts say choosing appointments based on political consideration and not merit or efficiency is not among a million and one respectable ways a government can allow its active oil and gas sector to draw investments.

“Running an energy business based on political consideration will ruin a business,” a business leader close to Nigeria’s petroleum industry said while reacting to the latest development.

He added, “Most of the most efficient state owned Oil Corporations like Saudi Aramco are not run based on federal character but not competence and technical know-how.”

Read Also: Buhari approves steering committee on Petroleum Industry Act

In order to become more efficient, Saudi Aramco values diversity of expertise on its leadership teams or boards. In particular, 5 of the current 11-member board of Saudi Aramco are independent directors. Two of the five are; Sir Mark Moody, a former CEO of Shell, and Mr Mark Weinberger, former chairman and CEO of EY the global accounting firm.

For Joe Nwakwue, former chairman of Society of Petroleum Engineers (SPE), he is more concerned about the cost implications of the president’s current amendments.

“If he has anything that he is uncomfortable with, he has the right to amend however he must also understand the implication on the cost of governance,” Nwakwue told BusinessDay.

Daniel Adebayo, a Lagos-based energy lawyer said the president is trying to be more nationalistic in his appointments due to recent criticism of nepotism.

“NNPC should be recognised as a business first before federalism,” Adebayo said.

Also, President Buhari also asked the Upper Chamber of the National Assembly to expunge provisions in the PIA that include the Ministers of Petroleum and Finance in the administrative structure of the Act.

Buhari further prayed the Senate to consider exempting the Executive Directors to be appointed for the government regulators for the petroleum sector who are serving public servants from the established confirmation process for political appointments.

“This will ensure effective management of the revenue-generating institutions through uniform implementation of public service roles for employees in the authority,” Buhari said.

Last weekend, the president directed the incorporation of Nigerian National Petroleum Company (NNPC) Limited and appointed board and management of the new company.

 

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