The Federal Government said it will represent the Petroleum Industry Bill, PIB, to the National Assembly in the first quarter of next year, as its delay deters investment in Africa’s largest crude producer.
Vice President Yemi Osinbajo, who disclosed this also said that government plans to split the oil-industry bill, which has been stuck with the legislators since 2008, obviously succumbing to industry pressure that the scope of the current bill is too wide.
The disclosure comes as a recent UK report criticised the slow pace of decision making and policy formulation by the President Muhammadu Buhari’s administration, saying it was frustrating fresh investments into Nigeria.
Breaking up the PIB, into smaller laws focused on fiscal and regulatory measures in Nigeria’s energy industry would make it easier to pass through parliament.
“Separating the PIB, breaking it up, obviously is the way I would think that we’ll proceed,” Osinbajo, 58, said in an interview on Tuesday in the Aso Rock Villa Presidential Residence in the capital, Abuja.
The proposed law has been held up largely by political wrangling and objections by international oil companies, which say the government is demanding too big an increase in its share of revenue.
The delays have caused uncertainty and are costing $15 billion a year in lost investments, the Group Managing Director, Nigerian National Petroleum Corporation, NNPC, Dr Emmanuel Kachikwu, told the nation’s senate last week.
The Vice Chairman/Chief Executive Officer, Emerald Energy Resources, Dr. Jude Amaefule, had in June, said rather than delaying any further in view of the dire consequences on the economy, the PIB should be broken and passed into segments.
He suggested that since the contentious proposals make up only about 20 per cent of the entire bill, the bill can be segmented along the lines of fiscal management, host community benefits and general industry operations.
He said: “Let them pass the bill in segments since 80 per cent of the provisions are favourable. Even the remaining 20 per cent were opposed because the people did not understand the provisions.”
He had also warned:t “The industry is high capital expenditure and we are losing money daily because no new investment is coming in and it will get worse if we don’t act fast.”
Delay in policy stalling investments
Similarly, a recent report by Global Risk Insight on the Business Insider UK, noted that the non-passage of the PIB and delay in policies by the Federal Government are major setbacks to attracting investments into the country.
It added that while President Muhammadu Buhari is implementing encouraging reforms in the oil sector at a time when the non-oil sectors are gaining ground, investor confidence may plummet further if the government continued to drag its feet.
The report said: “Pending the unveiling of a policy strategy by Buhari’s economic team, Nigeria’s ability to attract investment will continue to fall short of its potential.
“Tackling the prevalence of oil theft and insecurity in the Niger Delta, as well as the approval of the Petroleum Industry Bill, PIB, that has been stuck in parliament since 2009, will be crucial for the recovery of a sector that is proving to be a strain on the Nigerian economy.
“In the absence of an economic policy team, investors are becoming increasingly weary of Abuja’s ability to address downside risks.
“More than four months after his inauguration in late May 2015, President Muhammadu Buhari finally submitted his list of ministerial nominees on 30 September. Currently undergoing a vetting process by the Senate, candidates are yet to be assigned their cabinet portfolios, but Buhari has already appointed himself minister of the most lucrative, opaque, and corrupt ministry of all: petroleum resources.
“Granted Buhari’s good intentions to ‘clean up’ the administration before forming his own, the delays that this process has incurred have come at the cost of generating unsettling uncertainty for investors.
“For multinational oil corporations, MOCs, the precarious security environment and falling value of the Naira has caused many of them to halt future investments.
The report further said: “With prospects that the PIB will be revised and re-drafted, this will no doubt delay the implementation of a piece of legislation that seeks to establish a new legal framework and regulation mechanism for an industry that has been scarred by commercial-scale theft, sabotage and corruption.
“In the absence of the PIB, MOCs will be reticent to bolster their investments while they continue to scale down their operations in an unsafe and uncertain environment.
“The recent NNPC announcement to renegotiate production-sharing contracts with MOCs is a reassuring initiative, but oil majors remain sceptical given the Nigerian government’s poor track record to commit to reforms in this sector.”
The report also noted that with the formation of the Nigerian government still underway, uncertainty over reforms in the oil industry and macroeconomic mismanagement are making investors increasingly weary amid significant capital outflows and falling levels of foreign direct investments, FDI.
Nigeria depends on crude exports for about two-thirds of state revenue and more than 90 per cent of export earnings. A drop in crude prices in the past year has put pressure on public finances, while the naira has declined seven per cent against the dollar this year.
Retaining the refineries
While the government isn’t planning to sell its four refineries, which are running at a fraction of their capacity because of poor maintenance and aging equipment, Osinbajo said government wants to encourage private plants to cut Nigeria’s dependence on imports.
More than 30 licenses for refineries have been granted and private refineries will be allowed to build near the state-run units so they can “benefit from the available infrastructure,” he said.
Nigeria, which boasts of about 180 million people subsidizes fuel and relies on imports for more than 70 per cent of its supply. Of the four state-owned oil refineries, two units in the southern oil hub of Port Harcourt with a combined capacity of 210,000 barrels a day are currently producing at 67 per cent of capacity, while others in Warri and Kaduna have been shut.
“In the medium term we will be able to get cheaper pump-price oil because we will be importing far less refined petroleum,” Osinbajo said.
The NNPC has started publishing monthly accounts and is reviewing contracts with joint venture partners to improve transparency in the Corporation, which had the worst disclosure record of 44 energy companies analysed in a 2011 report by anti-corruption nonprofit organisations, Transparency International, and the Revenue Watch Institute.
The NNPC’s divisions will be “unbundled” to make them more efficient and the corporation will become a more regulatory body “as the private sector takes most of the downstream,” Osinbajo said. However, the government isn’t considering selling its stakes in ventures with oil companies.
Set up to look after Nigeria’s interests with foreign oil companies, the NNPC controls an aggregate 55 percent share in joint ventures with companies including Royal Dutch Shell Plc, Exxon Mobil Corp. and Chevron Corp.
“We think that we are able to resolve some of the cash-call difficulties that we have experienced,” Osinbajo said. The partners may be allowed to “borrow even on behalf of the federal government and will be able to introduce their own capital.”