End the dithering on Petroleum Industry Bill

The lingering controversy on the Petroleum Industry Bill (PIB) deepened sharply along regional lines, recently, as Northern leaders took a firm stance against the bill that provides for a law for the regulation of the nation’s oil industry. Specifically, Northern political leaders kicked against Sections 116 – 118 of the bill.

The sections provide for the establishment of a Petroleum Host Communities Fund (PHCF) for the development of the economic and social infrastructure of the communities within the petroleum producing areas. Section 118(1) says “each upstream petroleum company shall remit, on a monthly basis, 10 per cent of the net profit… into the Fund for the benefit of the petroleum producing littoral states”.

The argument of the North is that the provision for this Fund will not benefit the Northern region of the country, which they say is already starved of funds on account of the 13 percent derivation allocated to oil producing states in the country under the extant revenue allocation formula, and the huge allocations to the amnesty programme and the Niger Delta Development Commission (NDDC). Some Northern leaders have reportedly vowed to use their majority strength in the National Assembly to stop the bill, which has, however, scaled its second reading.

Other controversial aspects of the PIB include its provision for payment of higher taxes, including company income tax, by the International Oil Companies (1OCs), and its perceived over-concentration of power in the hands of the Minister of Petroleum.

The continuing dithering on the PIB is unfortunate. It is sad that a bill that is expected to revolutionize the legal framework for the nation’s oil industry and put the sector on a firmer pedestal for the benefit of the country has been in such dire straits over the years. It will be recalled that the very first version of this bill was drafted by the National Council on Privatisation/Bureau of Public Enterprises (NCP/BPE) in 2005/2006, shortly after the approval of the National Policy on Gas in 2005, and the 2005/2006 draft formed the basis of different versions of the bill, including the latest 2012 draft that is now in stormy waters in the National Assembly.

There is no arguing the fact that the enactment of a petroleum industry law for Nigeria is long overdue. All oil-producing countries have a law regulating how the industry should be run. Nigeria should not be an exception.

The PIB now under consideration in the National Assembly addresses the many problems of the oil industry, including unfair practices by international oil companies, which are now believed to be sponsoring strong opposition to the bill.

Provisions of this bill will help to check fraud, improve revenue accruable to the government, provide a roadmap to run the industry professionally and address the problem of vandalisation of oil facilities, since the cost of repair of such facilities will be paid from PHCF entitlements of concerned communities.

Instead of reducing the portion of national revenue accruable to the states or regions, the PIB, when passed into law and properly enforced, should significantly increase revenue available for sharing to all parts of the country. The fear of Northern leaders that the PIB, if passed into law, would further impoverish the North, may be misplaced.

The region and, indeed, all parts of the country will likely get much more revenue than they are getting now, when the law becomes operational. Nigerians should, therefore, not throw away the PIB baby with the bath water.There are good aspects of the bill that will benefit all Nigerians and leaders in all parts of the country should begin to see Nigeria as one country, and not through regional eye glasses.There have been calls from some quarters in the North for the late President Umaru Yar’Adua’s version of the bill. That version provided for a minimum of 13 percent derivation to oil communities with a proviso that the figure should progressively increase.

Section 30 of Nigeria’s 1960 Constitution (Independence Constitution) provided for 100 percent of revenue accruing from a region going to that region. Section 40 of the 1963 Constitution (Republican) said only 50 percent of such revenue should go to the region.

Reports indicate that this held until 1966, but changed after the 1967–1970 Nigerian civil war to zero percent for the oil-producing region. At that time, all revenue went to the Federal Government, which distributed it back to its constituents. The regime of President Shehu Shagari later conceded 1 per cent of national revenue to oil producing states.

Subsequently, this moved to 11/2 percent, and ultimately 13 per cent. The proposed Petroleum Host Communities Fund should, therefore, not be the basis for agitation against the PIB. We support the bill because of its benefits to Nigerians and the oil industry.

Whatever shortcomings are identified in it should be resolved so that it can be passed, expeditiously. The 10 percent of the net profit of oil producing companies that the document says should be paid into the PHCF for development of oil host communities should not becloud its benefits.