LCCI urges review of PIB provisions to drive investments, economic growth
The Lagos Chamber of Commerce and Industry (LCCI) has called on the Federal Government to review some conditions of the Petroleum Industry Bill (PIB) in order to improve investment inflow into the country for economic development.
According to the LCCI, despite having the largest oil and gas reserve in Africa, Nigeria has a huge unexplored potential to achieve its economic development goals including the gas to power initiative with data showing that Nigeria received 4 percent ($3 billion) of $75 billion invested in the continent between 2015-2019, consequentially, the government’s move to reform the oil and gas sector through a new PIB is a welcome and strategic move however the chamber notes that some provisions of the bill could affect negatively growth of the industry, investment inflow and the economy.
In a statement signed the Muda Yusuf, Director General of the LCCI, highlighting some unfavourable provisions in the PIB, the chamber noted that the PIB did not provide a favourable environment for future investments and initiation of new projects especially in the Deepwater assets which are important contributors to Nigeria’s oil production, furthermore , The bill also prohibits the deductions of Capital Allowance pre-production for Hydrocarbon Tax (HT) purposes, which is not consistent under Companies Income Tax (CIT) provisions.
“The PIB requires that companies operating consolidated upstream and midstream assets separate and incorporate their midstream assets as distinct legal entities. The assets, however, were commercially and technically designed to function as one. This framework may be applicable for new projects, however the Bill has omitted the inclusion of a grandfathering framework to ensure that assets developed based on integrated economics complete their lifecycle.” it said.
Citing recommendations , the LCCI stated that , “the PIB should grant new Deepwater oil projects a full royalty relief during the first five years of production and should remove HT since companies will still be subject to CITA, The PIB should seek to harmonize tax practices and ensure capital allowance and allowable deductions are consistent with existing tax legislations, Companies Income Tax Act (CITA), the Bill should simplify the administrative burden of compliance, minimising ambiguity and the extent of overlapping regulation. This would lead to fewer disputes and avoid increasing the cost of doing business in Nigeria.” it read.
In addition, to avoid contract breach by sector players, the LCCI called for the need to exempt existing export gas supply contracts and obligations as the PIB prohibits export gas, without exemptions, until Domestic gas obligation is met
The chamber also appealed for a law which will promote a more effective and efficient governance, administration, host community development and fiscal framework for the petroleum industry as well as competitive Bill would help preserve the integrity of the existing projects, whilst also encourage future growth of production and make Nigeria an investment destination of choice.