Monday, July 12, 2021 / 2:45 PM / Ottoabasi Abasiekong for WebTV / Header
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Last month the Senate of the Federal Republic of Nigeria kept to its promise of passing the Petroleum Industry Bill two decades after it was initially proposed, the bill designed to transform the landscape of the Nigerian Oil and Gas sector has been similar to a fabled child of recurring births or 'Abiku' in local parlance.
However, the passing of the bill may signify a new chapter for improving the relationship between oil-producing communities and oil drillers in the industry.
In a recent discussion on the PIB 2020 bill, Mr. Taiwo Oyedele, the Fiscal Policy Partner and Africa Tax Leader, PriceWaterHouseCoopers (PwC) highlighted four key ways of attracting investments into Nigeria's Oil and Gas sector.
In the area of governance, the fiscal policy expert noted that in over 2 decades there has been no major reform in the nation's oil and gas sector, while the industry has evolved with petrochemicals, gas, and the shift to clean energy.
With the PIB 2020 bill, Nigeria has an opportunity to reposition itself with legislation that meets the realities of the 21st century global petroleum industry.
This he believed would reflect in the proposed ownership structure of the Nigerian National Petroleum Corporation, which is designed to achieve efficiency in the operations in the state oil company.
The new model would see the transformation of the NNPC into a limited liability company, with 2 regulators the Nigerian Upstream Regulatory Commission and the Nigerian Midstream and Downstream Regulatory Agency.
In the structure, he was hopeful that the NNPC limited under the Company and Allied Matters Act (CAMA) would take advantage of the capital market to enable Nigerians to own shares in the listed entity.
NNPC according to him should operate at a higher level than the Nigeria Liquified Natural Gas Company (NLNG), which has been a standout success story. He said stakeholders must take the critical decision to ensure competence is put above political interests.
Host Community Development Fund - A Possible Harmonization to 4%
Peace and stability are two important components for incentivizing oil and gas exploration, a principal consideration is the relationship of oil companies with their host communities.
Oyedele highlighted the fact that the failure of governments to address the urgent needs of depressed oil communities since the return to civil democratic rule in 1999, triggered hostilities that have sometimes affected investments and operations in the industry.
He cited the example of the Niger Delta Development Commission (NDDC), noting that despite the allocation of trillions of naira to the institution it has been engrossed in corruption, inefficiency, and waste.
The PwC tax expert acknowledged the fact that the proposed Host Community Development Fund (HCDF) could help to transform the circumstances of oil-producing host communities if the resources are utilized properly.
He called for the harmonization of the proposed contribution to the HCDF to 4%, considering the Senate's passage of 3% and the House of Representatives resolution in favour of 5%.
The Debate Over the 30% Frontier Exploration Fund
Speaking to the concerns of stakeholders and a cross-section of citizens over the 30% Frontier Exploration Fund, he said the issues stemmed from a lack of trust in government.
He said the Nigeria Upstream Regulatory Commission, would determine the basins for oil exploration across the nation. He added that investments would be made at the same time in all oil basins.
Oyedele decried the misinformation and misconception of issues surrounding the 3% to 5% contribution to the host communities. He observed that the fund would be of immense value to these communities as well as the remittance of 30% to a â€œFrontier Exploration Fundâ€ for the development of frontier acreages in addition to 10% of rents on petroleum prospecting licenses and mining leases.
He warned against the hijacking of the process by politicians, which could truncate the development of a viable Oil & Gas industry.
Fiscal Regime That Attracts Investments
The fiscal policy expert believed the Petroleum Industry Bill 2020 has the potential to attract more investments into Nigeria, but this hinges on a favorable fiscal regime.
He said Nigeria is not an island but in a global community where investments are fungible, which is why the country has to be a competitive market.
With the country's specific risk of insecurity, he called for a tax regime that is â€œinvestor-friendlyâ€, disagreeing with the position that the Nigerian Upstream Regulatory Commission under the PIB would determine the interest on a loan for operators, instead of the Federal Inland Revenue Service (FIRS) which would have played a key role through the transfer pricing model.