PIGB: Understanding the Politics Behind Buhari’s Refusal

Nseobong Okon-Ekong and Segun James interrogate all the sides to the recent refusal of the President Muhammadu Buhari to sign the Petroleum Industry Governance Bill

When the news came that President Muhammadu Buhari declined assent to the Petroleum Industry Governance Bill (PIGB), a framework of governance to determine and manage the Nigerian oil industry, it was an anti-climax of sorts.

This Bill had been in the works for over 10 years. There was intense lobbying for and against it, including the harmonization of the version passed by the House of Representations with that of the Senate.

The final version of the bill was finally approved by the National Assembly in March, 2018 and transmitted to President Buhari in July for acceptance.

But Buhari rejected the bill. He hinged his refusal on the fact that the bill would subtract from his power as the Minister of Petroleum Resources. The Petroleum Act of 1969, from which the president derives his powers, grants all rights in grant of oil licenses and leases to the Minister of Petroleum Resources. The Act has since been viewed by many as not providing enough room for transparency. It is also seen as not being strong on accountability and specifying inadequate penalties for offenses. Because of the apparent enormous powers inherent in this Act, Nigerian leaders reserved to themselves the Minister of Petroleum Resources portfolio or appointed cronies who answered directly to them to oversee that ministry. It is the powers conferred by the Act that Buhari is unwilling to relinquish.

The current administration has a Minister of State for Petroleum, Dr. Ibe Kachikwu. But he is constantly at war with the General Manager of the Nigeria National Petroleum Corporation (NNPC), Dr. Maikanti Baru.

In separate communications to the Senate President and the Speaker of the House of Representatives, Buhari took exception to the fact that the bill empowered technocrats in the petroleum industry.

The bill, which was initiated by late President Umaru Yar’Adua and sent to the 6th National Assembly headed by Senator David Mark in 2008 had been enmeshed in controversy due to some of its provisions.

The Senate had on March 28 passed the PIGB having adopted the report of the committee set up to harmonise the versions earlier passed by both Senate and House of Representatives.

The harmonised version of the bill seeks to, among others, unbundle the NNPC and merge its subsidiaries such as Department of Petroleum Resources (DPR) and Petroleum Products Pricing Regulatory Agency, PPPRA, into one entity.

Objectives of the PIGM

The objectives of the PIGB include transforming the administration of the upstream, midstream and downstream sectors of the Nigerian petroleum industry.

The bill creates a framework that will free up acreages that are not being developed by current license and lease holders, thereby creating opportunities for new investors. This will bring substantial new investment to the nation’s oil and gas industry; while also ensuring the effective management of the environment by petroleum operators and administrators.

It provides a framework to unleash midstream activities which will open up the market for the supply of gas and other downstream products, for economic growth and provides much needed legal backing for the deregulation of the downstream sector of the petroleum industry.

The refusal of the president to assent to the bill has generated adverse reactions, while the federal government has justified the president’s refusal to sign the bill.

The Presidency cited constitutional and legal breaches as reasons Buhari withheld his assent to the bill.

Senior Special Assistant to the President on National Assembly Matters, Senator Ita Enang, said  the National Assembly empowered the Petroleum Regulatory Commission, one of the bodies created by the bill to unduly retain 10 per cent of the funds it generates to the detriment of the three tiers of government and the Federal Capital Territory (FCT).

He also said the president vetoed the bill because it expanded the scope of the Petroleum Equalisation Fund (PEF) in a manner that is antithetical to the policy of his administration and consequently stipulating provisions that are in conflict with independent PEF.

Enang also disclosed that the President opted to return the bill to the National Assembly because it consisted some legislative drafting concerns, which he said, had the capacity to create ambiguity and conflicting interpretation.

“The provision of the bill permitting the Petroleum Regulatory Commission to retain as much as 10 per cent of the revenue generated unduly increases the funds accruing to the Petroleum Regulatory Commission to the detriment of the revenue available to the federal, states, Federal Capital Territory and local governments in the country.

“Expanding the scope of Petroleum Equalisation Fund and some provisions in divergence from this administration’s policy and indeed conflicting provisions on independent petroleum equalisation fund. Some legislative drafting concerns which, if assented to in the form presented, will create ambiguity and conflict in interpretation.”

Enang, who said it was inappropriate to make public statement on any executive communication that has not been read on the floor of legislative chambers, said he was compelled to make these clarifications because of some misrepresentations by the media on the president’s decision.

While appealing to the National Assembly for understanding of his action, the Presidential aide added that if such clarifications were not made, such misrepresentations could result in blackmail and pitch both the executive and the legislature against the public.

He added that none of the reasons reported by the media for the president’s decision to return the bill represents the true situation.

“By presidential communication of July 29, 2018 addressed to the Senate and House of Representatives, Mr. President did communicate decline of assent to the Petroleum Industry Governance Bill 2018 for constitutional and legal reasons stated therein.

“By convention, it is inappropriate to speak on the content of executive communication addressed to the legislature until same has been read on the floor in plenary.

“But I plead for the understanding of the legislature that due to the misrepresentations in the public domain and apparent deliberate blackmail which if not promptly addressed may set both the executive and the legislature against the public and even the international investment community, this be excused. None of the reasons for withholding assent by Mr. President adduced by the media is true.”

Impact on the Economy

According to KPMG, an international chartered accounting and auditing firm, what the PIGM will do is engender more professionalism in the management of the Nigerian oil industry. The bill will have no direct impact on the economy as the sale of oil is based on the vagaries of the market place.

While the action of the President has come under strident criticism from environmentalists and oil producing communities; the Organised Private Sector (OPS) may indeed be in support of the presidential decision.

The Major Oil Marketers Association of Nigeria (MOMAN) and the Organised Private Sector (OPS) wanted the President to create two regulators before appending his signature to the bill, but the PIGB created only one.

Femi Olawore, the Executive-Secretary of MOMAN said a single regulator was in place prior to the set-up of the Petroleum Product Pricing Regulatory Agency (PPPRA): “Our position is that one regulator is inadequate for the entire industry. From the beginning, we had one regulator, but we found out that the regulator was not able to police the industry very well. That was why PPPRA came up to deal with pricing.

“The upstream deserves one regulator because the activities are very massive. The downstream deserves one regulator because activities in the downstream are quite different from the activities in the upstream. Each of them requires different specialists as the regulator. The two have little or nothing in common.

“One regulator for both will lead to excessive bureaucracy. Having one regulator will be detrimental to the industry and the Nigerian economy.”

According to MOMAN, the new regulatory commission will take over the work of the Petroleum Inspectorate (PI), the Department of Petroleum Resources (DPR) and PPPRA. This position was not contained in the bill.

Reginald Odiah, Chairman of the Economic Policy Group of the Manufacturers Association of Nigeria (MAN), representing OPS, said the composition of the board of the regulatory commission, has no space for the private sector.

“As OPS, we are interested in having two regulators for the oil and gas industry. The board of PPPRA has critical stakeholders as members and this gives OPS voice and capacity to make a contribution.”

Political, Community and Environmental Stakeholders

But the action of president has continued to come under the hammer of politicians, environmentalists and the oil producing communities.

According to former Vice President Atiku Abubakar, the veto was “a monumental mistake,” adding that the reason given by the president for rejecting the bill also betrayed the fact that the current administration was out of tandem with global best practices.

The former vice president wondered why that the National Assembly in conjunction with the oil majors and host communities would be allowed to put in so much work and yet gain nothing.

“The PIGB will be a great catalyst for Nigeria’s oil and gas sector and has the capacity of stabilising our host communities, boosting our reserves and creating the enabling environment that attracts the type of investment that will make Nigeria a world leader in the petroleum industry.

“In recent months, Nigeria became the world headquarters for extreme poverty, having overtaken India as the nation with the most people living under $2 a day (81 million people). If we are to change the situation and bring our people out of poverty, we must support legislation such as the PIGB.”

Afenifere chieftain, Chief Ayo Adebanjo, reacting to the veto, said the Nigerian leader was not only undemocratic; he was also not a man of his words.

According to him, the development “is very unfortunate,” noting, “I am the last person you should be asking about Buhari. You know I told you I will be disappointed if he is democratic and that I am disappointed that he has not disappointed me. What is he doing now that I have not said before? He doesn’t want to rule, he wants to dominate.”

The people of Niger Delta region, who are mostly affected by the impact of oil and gas activities in the country, reacted angrily to the president’s action, accusing him of not only being selfish, but also against the development of the region.

Environmental rights activist, Mr. Nnimmo Bassey, an architect, who chairs Environmental Rights Action (ERA), a Niger Delta based advocacy group against environmental pollution; said the National Assembly should immediately override the presidential veto in the interest of the nation and the environment.

“Although, I’m not a fan of a fragmented PIGB, it would be okay if the National Assembly overrides the presidential dissent. The petroleum sector needs a workable structure. The PIGB would comprehensively handle the pressing problems of our devastated environment and communities.

“The fact that the president stepped up to speak about the PIGB challenging his powers as the Minister of Petroleum Resources is important because we are reminded of a vital point: that this represents a sad commentary of the petroleum resources industry in Nigeria.”

This position was also shared by a Bayelsa State-based environmental activist, Mr. Alagoa Morris, who wondered why the president had the belief that the bill would remove some of his powers as Minister of Petroleum Resources when the reverse was the case.

“I don’t think the bill will reduce the powers of the president if signed into law; instead, it will retain it, if not increase it. The only thing that will change is that the technocrats will manage the system. Unfortunately, that is what the politicians don’t want. He should sign it in the interest of peace.”

But for retired Colonel Tony Nyiam, another political and environmental activist in the Niger Delta region, “It is most sad that the PIGB, which has been in the works for many years now, has been shut down. It shows that President Buhari is insensitive to things that are sensitive to the Niger Delta people.”

Petroleum Act of 1969

The Petroleum Act is an Act to provide for the exploration of petroleum for the territorial waters and continental shelf of Nigeria and to vest the ownership of/and all onshore and offshore revenue from petroleum resources derivable there from/in the federal government.

Strengths – Provides regulations for safe operations, protection of the environment, and conservation of natural resources.

Weaknesses – Grants all rights to decide to the Minister. No provisions for transparency in grant of oil licenses and leases. Not strong on accountability. Inadequate penalties for offenses.

An oil and gas lawyer, Mr. Uche Nwokedi (SAN), said since Buhari refused to assent to the bill, the country should continue to operate the Petroleum Act of 1969.

Nwokedi noted that as far as he was concerned, nothing was wrong with the Petroleum Act of 1969, as the law had everything to effectively administer the industry.

QUICK FACTS

President Muhammadu Buhari, according to industry stakeholders, can avert enormous economic losses, unlock billions of dollars’ worth of oil sector investment and ultimately make history should he sign the Petroleum Industry Governance Bill (PIGB) into law.

1. The PIGB is the culmination of almost two decades of work by various stakeholders in the Nigerian petroleum industry. It is the first of the Petroleum Industry Bill (PIB) split by the current National Assembly (NASS) into four.
2. It was passed by both chambers, a joint committee of the NASS harmonised the bill on March 31, 2018 and the harmonized copy was then transmitted to the president for assent on April 25, 2018
3. The bill when it becomes an Act will give clear demarcation of institutional roles in industry governance with respect to policy institutions – commercial and regulatory institutions.
4. Stakeholders agree that the battle to the transformation of oil and gas governance in Nigeria does not just end with presidential assent to the bill, in fact, that is when the story begins.

5. There is now widespread advocacy by civil society groups and well-meaning Nigerians for the president to immediately sign the bill because the long delay in passing it had cost the country enormous fortunes.
6. In 2013, then Country Chair of Shell Companies in Nigeria, Mutiu Sunmonu, said their upstream exploration and production arm, SPDC, put on hold investment decisions on two key offshore oil and gas projects that would have cost about $30 billion until the new petroleum law was approved.
7. Two years later, chairman of the Petroleum Technology Association of Nigeria (PETAN), Bank Anthony Okoroafor, estimated that Nigeria lost $10 billion (N1.7 trillion) fresh investments due to the non-passage of the PIB. The Nigeria Extractive Industries Transparency Initiative (NEITI) in a policy brief later that year put annual losses due to the non-passage of the bill at $200 billion. The brief also alerted that another $15 billion is lost yearly in fresh investments to regulatory uncertainties.
8. The Energy Information Administration, the statistical arm of the US Energy Department, in one of its report said, “The amount of money that Nigeria loses every year from not passing the PIB is estimated to be as high as $15 billion.”
9. GlobalData, a leading data and analytics company, said in a new report that the delay in the passage of the PIB was threatening an average capital expenditure of $8.4bn per year expected to be spent on 249 oil and gas fields in Nigeria between 2018 and 2020.
10. Buhari currently doubles as petroleum minister and experts said if the harmonised version of the bill sent to him is anything to go by, the intent of the PIGB is to whittle down the power of the petroleum minister thereby limiting him mostly to policy making while empowering the petroleum agencies.
11. The Energy and Natural Resource Partner, Streamsowers and Kohn, Chigozie Hilary-Nwokonko, said the bill if assented to, means that the president who doubles as minister of petroleum resources will no longer have powers to grant key authorisations like discretionary award of oil and gas licenses and permits. It means Buhari cannot arbitrarily fire any of the oil agency heads and most importantly
12. The President Nigeria Association for Energy Economics (NAEE), Prof Wumi Iledare, also said there were still some safeguards for the president. “The president has the right to review the PIGB before accenting to it for areas that may not be in tune with his policy objectives for the sector. But will Buhari consider national interest and the citizenry as bigger than individual benefit and therefore prove everyone wrong and sign the PIGB?
13. Buhari should sign the bill because his government has shown clear signs of commitment towards a private sector market-led economy.  “Secondly, it is also a bragging right; if the president signs. It fits into the campaign tool box of what he has achieved,” said Dr. Amadi, an oil industry expert