Sunday, January 17, 2021 /07:40 AM / by FDC Ltd/ Header Image Credit: petroleumindustrybill
Since
the introduction of the PIB, there have been various amendments of it and
deliberations about it. In 2017, four new pieces of legislation were created,
namely: the Petroleum Industry Governance Bill (PIGB), the Petroleum Industry
Administration Bill (PIAB), the Petroleum Industry Fiscal Bill (PIFB) and the
Petroleum Host Society Bill (PHCB).
In
Nigeria, the oil and gas industry is highly regulated by the government, with
the National Petroleum Commission (NNPC) acting as the sole regulator. This is
similar to what was practiced in the United States and Britain during the 1970s
and 1980s. Regulators were seen to be working in the public interest under this
legislative system.1 With a government agency as the sole regulator, private
sector investment is discouraged - a negative impact on the development of the
upstream and downstream sector. Despite being one of the largest crude oil
producers in Africa, Nigeria has been unable to convert its abundant oil into
financial wealth to drive growth. To address the limited private investment in the
Nigerian oil industry, the Petroleum Industry Bill (PIB) was created and first
introduced in the National Assembly in 2008.
The
PIB has now been submitted to the legislature and seeks to:
Implications
for the oil sector and the Nigerian economy
Make
oil sector more competitive
When
passed, the revised PIB will make the oil sector more competitive and help
attract more domestic and foreign investors. The bill proposes that the NNPC
become a separate limited liability company to encourage the inflow of both
foreign and domestic investors. With an increase in the number of investors,
the oil industry will become more competitive and effective.
Supports
the deregulation of the oil sector
PIB
will also aid the deregulation of the oil sector to help attract more investors
to the downstream sub-sector. This allows potential private investors the
opportunity to participate in oil production in the downstream sector thereby
raising aggregate oil output.
Development
of oil infrastructure
PIB
will help with the development of oil infrastructure, which will boost
Nigeria's oil production and export revenue. Private investors will help in the
rehabilitation and development of the new oil refineries increasing aggregate
oil output. Their investment will also reduce Nigeria's reliance on imported
refined oil.
Attract
FDI inflows
The
deregulation of the oil sector will help attract foreign direct investment into
Nigeria thereby expanding the contribution of this sector to the country's
economy. In addition, more FDI inflows will help in external reserves accretion
thereby supporting the exchange rate.
Beneficial
to the host communities
PIB
proposes that the host communities receive a 2.5% fund based on the actual
operating expenditure of the oil companies for the preceding year. The bill also
seeks to end the flaring of gas, a major source of waste and environmental
pollution, particularly at oil exploration areas. The fund will be used to
support the development of healthcare facilities in the host communities, and
enhance environmental protection and local initiatives, which are favorable for
the overall socio-economic development of the host communities.
What's
next for the PIB?
The
National Assembly has postponed its deliberations on the PIB to Q1'21, in order
to focus on the 2021 budget discussion, which it intends to pass before January
2021. About $20 billion is lost annually owing to the delay in the passage of
the bill.3 The further delay in the implementation of the PIB and the oil
sector reforms will continue to cost Nigeria capital flight and the lack of new
investment. It is now very important to develop the domestic oil sector to
reduce the country's fuel import bill, increase oil output and improve refining
capacity.
The
quick passage of PIB will also facilitate the government's objective to stop
the exchange of crude for fuel by 2023. To achieve the desired outcome of the
PIB, there is need for strong political will and commitment of the government.
The question remains - does it have the resolve to move forward?
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