PIA: Buhari Blames Past Leaders for Lacking Political Will to Transform Sector
•Says Nigeria lost $50bn investments in 10 years over non-passage of PIB
•Sylva: NNPC will no longer handle federation crude sales
•Govs pick holes in new law
•Legislation can be brought back to NASS for amendment, says Lawan
•FIRS: Act will affect Nigeria’s 2022 revenues
•New law not perfect, but step in right direction, says NEITI boss
•Ozekhome: It’s Robbing Peter to Pay Paul
•Statute reflects APC’s commitment to restructure Nigeria’s Economy, Say APC Governors
Deji Elumoye, Alex Enumah, Emmanuel Addeh, Adedayo Akinwale, Udora Orizu, in Abuja; Dike Onwuamaeze, Emma Okonji and Nosa Alekhuogie in Lagos
President Muhammadu Buhari yesterday accused his predecessors of not having the political will to transform the petroleum industry in the last two decades.
He also disclosed that Nigeria lost an estimated $50 billion worth of investments in 10 years, due to uncertainty over the non-passage and signing of the Petroleum Industry Bill (PIB) into law, lack of progress and stagnation in the petroleum sector.
Also, the Minister of State for Petroleum Resources, Chief Timipre Sylva, has explained that with the PIA set to take off in earnest, the Nigerian National Petroleum Corporation (NNPC) will no longer handle the sale of crude oil that goes into the federation account.
But in spite of praises the federal government has been receiving over the history that was made with the birth of the Petroleum Industry Act (PIA) 2021, the Nigeria Governors Forum (NGF) might not be excited about the development. This is because the NGF had six days before the president signed the PIB into law, expressed concern about the structure of the legislation that was passed by the National Assembly, saying without considering the interest of the federating states it would be recipe for national disaster if signed into law.
However, in a veiled response to concerns raised by the NGF, host communities as well as other stakeholders, President of the Senate, Dr. Ahmad Lawan, yesterday said pitfalls identified in the PIA could be brought back to the National Assembly for amendment.
This is just as the Chairman of Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami has said the PIA would negatively impact government’s revenue expected from petroleum profits tax next year.
Speaking at a ceremony to mark the passage of the PIA, which preceded the Federal Executive Council (FEC) meeting at the State House, Abuja, President Buhari gave the nine-man steering committee headed by the Minister of State for Petroleum Resources, Timipre Sylva, which was constituted to oversee the implementation of the PIA 12 months to complete its assignment.
The president stressed that assenting to the PIB marked the end of decades of uncertainty and under-investment in the petroleum industry.
He said: “We are all aware that past administrations have identified the need to further align the industry for global competitiveness, but there was lack of political will to actualise this needed transformation.
This lack of progress has stagnated the growth of the industry and the prosperity of our economy.
“This administration believes that the timely passage of the PIB will help our country attract investments across the oil and gas value chain.
“In view of the value our nation and investors will derive from a stable fiscal framework for the oil and gas industry, our administration found it necessary to work with the two Chambers of the National Assembly to ensure the passage of the PIB.”
President Buhari noted that signing of the bill was part of the administration’s commitment to building a competitive and resilient petroleum industry that would attract investment, improve the country’s revenue base, create jobs and support our economic diversification agenda.
The president said as a, “nation that depends on oil resources for the development of other sectors, Nigeria runs a petroleum industry that is governed largely by laws enacted over 50 years ago such as the principal legislation; the Petroleum Act of 1969 and other obsolete legislations.’’
He said the Presidential assent of the bill to PIA 2021 marked the beginning of the journey towards a competitive and resilient petroleum industry that would attract investments to support the nation’s Economic Recovery and Growth Plan.
According to him: “The PIA 2021 creates a regulatory environment that would ensure efficiency and accountability across the oil and gas value chain and reposition NNPC to a commercially driven National Petroleum Company that is accountable to the Federation.
“The Act also provides for a direct benefit framework that will enable sustainable development of Host Communities. I appeal to the host communities to look carefully at the contents of the Bill which in the implementation will bring real and lasting benefits to them.
“Furthermore, the Act provides for deliberate end to gas flaring which would facilitate the attainment of Nigeria’s Nationally Determined Contributions of the Paris Agreement through a funding mechanism to support gas flare out project in host communities.”
While directing immediate implementation of the framework for the PIA, he urged all relevant stakeholders to comply and reposition for full activation within 12 months.
The president said Sylva, would head the implementation team, urging all Ministries, Departments and Agencies (MDA) to adjust to the transition, designed to reposition the economy.
“To consolidate the commitment of this administration to delivering the value proposition of this law, I have approved an implementation framework commencing immediately to ensure the industry envisaged in the new law begins to take shape.
“The implementation process to be headed by the Minister of State, Petroleum Resources is hereby tasked with the completion of the implementation of this act within 12 months. I am therefore directing all relevant Ministries, Departments and Agencies of government to fully cooperate in ensuring the successful and timely implementation of this law,’’ he said.
Other members of the steering committee are Permanent Secretary, Ministry of Petroleum Resources; Group Managing Director, NNPC; Executive Chairman, FIRS; Representative of the Ministry of Justice; Representative of the Ministry of Finance, Budget and National Planning; Senior Special Assistant to the President on Natural Resources; Mr. Olufemi Lijadu as External Legal Adviser, while the Executive Secretary, Petroleum Technology Development Fund, will serve as Head of the Coordinating Secretariat and the Implementation Working Group.
The primary responsibility of the steering committee shall be to guide the effective and timely implementation of the PIA in the course of transition to the petroleum industry envisaged in the reform program, and ensure that the new institutions created have the full capability to deliver on their mandate under the new legislation.
The ceremony was attended by the Senate President, Dr. Ahmed Lawan; Deputy Senate President, Senator Ovie Omo-Agege; Deputy Speaker of the House of Representatives, Hon. Ahmed Idris Wase; members of the Federal Executive Council (FEC) and Group Managing Director of the NNPC, Mele Kyari.
Sylva: NNPC Will No Longer Handle Federation Crude Sales
The Minister of State for Petroleum Resources has said with the PIA, the NNPC will no longer handle the sale of crude oil that goes into the federation account.
Speaking on a national television, the minister noted that the function will henceforth be performed by the Upstream Regulatory Commission, which will sell the commodity and retire the funds to the account from which the federal, state and local governments share monies monthly.
He stated that because NNPC Limited will be a company that would be operating commercially , it would no longer be dependent on the government, while the corporation would stop being the custodian of the crude oil as currently obtains.
“That will no longer happen because NNPC will be a commercial venture, completely decoupled from government and will be operating commercially. So, for the average Nigerian, he will be seeing a more serious NNPC and a more professional NNPC.
“Monies will still accrue to the federation account, but NNPC will now have to give the federation crude to the upstream regulatory commission, and NNPC will no longer be in charge of the federation crude, they will be in charge of their own crude.
“The commission will sell that crude and pay to the federation account, so the federation of course will still get their crude, but it will no longer be through the NNPC,” he said.
Sylva assured that no jobs would be lost as a result of the new Act, noting that rather, the benefits to the workers as a commercial entity may even be more, since they would henceforth operate under a largely more efficient organisation.
He further clarified why President Muhammadu Buhari gave the implementation committee more than six months, saying while the incorporation of the NNPC Limited would be done in six months as provided for in the law, the implementation of the whole piece of legislation would go beyond that period.
According to the minister, with its incorporation , NNPC would need to sit up to meet stakeholders’ expectations as it would no longer operate as an agency of government.
“NNPC today is more or less a parastatal of government, the NNPC of tomorrow will no longer be a parastatal of government. It will be a Companies and Allied Matters Act (CAMA) company, operating commercially.
“The shareholder of that company will then be the Ministry of Petroleum Incorporated and the Ministry of Finance Incorporated, but it will be registered as a company in Nigeria, and will operate according to the laws of companies and allied matters act.
“Today, for example, NNPC cannot be taken to court, NNPC is not operating under the CAMA. But now, it means they can be sued. And of course, because of that, you expect that there will be a lot more seriousness within the corporation,” he stated.
Sylva added that if petroleum products are sold at deregulated prices, then there would be no need for the Petroleum Equalisation Fund (PEF) which would then be subsumed into the midstream and downstream sectors.
On labour unions not being carried along, he promised that they would be part of the implementation process which takes off today, but pointed out that there was no need to add them statutorily to the new document, since it’s no longer a wholly public company.
He reiterated that frontier basins are not only found in the north, saying that they exist in the south-west, Anambra in the south-east and Cross River in the South-south.
“Everybody knows that we are at the last mile of the oil economy and there’s a lot of places in Nigeria where we still have the possibility of finding crude but we have not.
“We have those frontier territories. That is where we believe we can find oil that we have not found. We have them in the north, we have them in the southwest. You have the Anambra basin in the southeast, you have the Calabar basin,” he explained.
Governors Pick Holes in New Law
The NGF had six days before President Muhammadu Buhari signed the PIB into law, expressed concern about the form that the legislation was passed by the National Assembly, saying without considering the interest of the federating states it would be recipe for national disaster if signed into law.
The NGF’s warning was contained in a letter it addressed to the president dated August 10, 2021, which was titled, “Petroleum Industry Bill 2021- Appeal to Mr. President to Withhold Assent,” that was signed by its Chairman and Governor of Ekiti State, Dr. Kayode Fayemi.
In the letter, the 36 state governors in the country had expressed, “great shock and displeasure that the interest of the sub-nationals were not put into consideration in the bill that was recently passed by both chambers of the National Assembly.”
They said the PIB as passed by the National Assembly without giving adequate consideration to all facets of Nigeria’s federation could be, “a recipe for disaster” and “we respectfully pray Mr. President to withhold assent pending resolution of all the thorny issues.”
The NGF were worried that the PIB conferred on the federal government alone the sole ownership of all the shares of the commercialised Nigerian National Petroleum Company (NNPC) Limited and the sole beneficiary of the proceeds of the NNPC and totally excluded state governments from owning a stake or enjoying from the proceeds that would accrue from the business operations of the NNPC.
According to the governors, none of the proceeds of the NNPC would be transferred to the Federation Account for onward sharing to all the tiers of governments in the country, adding that, “setting aside of 30 per cent profit oil and gas as frontier exploration funds constitute further depletion of the fund that should ordinarily accrue to the Federation Account.”
The NGF specifically had grudges with Section 53 of the PIB that provided for the incorporation of the NNPC Limited under the Companies and Allied Matters Act to carry out petroleum operations on a commercial basis.
It noted that the same Section 53(2) went on to provide for consultations between the Ministers of Petroleum and Finance on the number and nominal value of the shares to be allotted which, “shall form the initial paid-up capital,” of NNPC Limited and further added that the company shall subscribe and pay cash for the shares.
However, the NGF observed that the wording of sub-section (3), “suggested that only the federal government would have shares in this company and stated that all shares in the company shall be vested in the government and held by the Ministry of Finance as the sole custodian of the shares.
“We then recommend that a framework that accommodates states be worked out and included in the allotment of shares and incorporation of the NNPC Limited.
“We observed that excluding the states from this arrangement precluded them from having a voice in the running and administration of the company and exclude them from sharing in the distribution of dividends when they become due.”
The governors lamented that, “in the same vein, Section 53 (4) of the PIB provides that the Ministry of Finance incorporated in consultation with the government, may increase the equity capital of NNPC Limited.
“Here again, we note the non-inclusion of sub-nationals in the consideration of this very important provision and recommend that the Nigerian Sovereign Investment Authority (NSIA) and Central Bank of Nigeria in consultation with the Federation Governments and Federal Capital Territory, may from time to time increase the equity of NNPC Plc.
“The removal of the requirement to transfer fiscal payments to the Federation Account is unconstitutional and of grave concern to Nigerians. NNPC Limited is an entity created from a national asset whose proceeds always went to the Federation Account for distribution amongst the tiers of government and we are at a loss as to the reason for excluding a necessary component of the Federation from owing stakes in a successor vehicle.”
The NGF further observed that in Section 33, “the imposition of gas flare penalties arising out of midstream operations which penalty shall be paid into the Midstream and Downstream Gas Infrastructure Fund, an account within the control of the NNPC and one in which only the NNPC alone would have access to carry out any infrastructural projects, constitute significant loss of revenue to the federation account.”
Again, the NGF noted that, “Section 54 (1) and (2) of the bill empowered the Ministers of Petroleum and Finance to jointly determine assets, liabilities, and interests to be transferred to NNPC Limited.
“Again, we recommended that the states ought to be consulted and involved in the process to determine the transfer of these assets, liabilities and interest of the new company.
“Our advice was predicated on the joint ownership of these assets, liabilities, and interests. We extended our opinion on this to the winding down process covered by Section 55 (1).”
The NGF also disagreed with section 64 (b) that granted the NNPC an additional responsibility to act as state agent in all Production Sharing Contracts (PSCs) and entitled to oil and gas profits.
They were worried that this provision has made the NNPC to appear, “in every commercial arrangement making its status even less commercial oriented and more favoured than is obtainable today.
“We are concerned that rather than reforming and by extension the oil sector, the PIB as presently constituted makes NNPC Limited an even more powerful oil company.”
The governors hoped that the President would understand their shocks as the version passed by the National Assembly did not consider the concerns of the NGF and the states.
PIA Can Be Brought Back to NASS for Amendment, Says Lawan
Lawan has said issues identified in the PIA could be brought back to the National Assembly for amendment.
Lawan stated this while answering questions from journalists shortly after a brief ceremony at the Presidential Villa where the President announced the setting up of an implementation Committee for the new law.
He said it is when implementation starts that people would start to see where amendments are required.
According to him, “So this is something we all have to address with some optimism and hope that it would be okay. But because we are human beings, no act of human beings could be perfect. So when we are able to see issues, the National Assembly is there. Bring them for amendment. Even the most difficult issues can still be brought back to the National Assembly.
“If it is worthwhile to do so. But I believe that there is no need for us to be emphasising the problems rather than the prospects.”
Responding to questions on the agitation for more funds for the host communities, Lawan described the host communities as winners as well.
He said, “But you know from zero to over $500 million and with time, such issues will be further addressed, but I want to also caution that it is not the $500 million that is more but how we are able to prudently and transparently deploy this $500 million in the host communities. This time around, there should be no excuses for anybody to tamper with this money. The host communities have suffered enough, even when NDDC was established, I’m sure it was established because of the host communities’ issues and yet the host communities did not get much attention.
“This time, the host communities have been specifically mentioned and these funds should go there. We want to see people who will be appointed, taking this as trust and do what is right. Of course, there will be so much employment and jobs especially in the midstream of the value chain. This midstream has not been in existence so to speak. What we have is the upstream and then, the downstream. When our refineries will be better and more will be established, I’m sure the value chain will have opportunity for more Nigerians to have jobs and so on.”
FIRS: New Law Will Affect Revenues in 2022
Meanwhile, Nami has said the signing of the PIA would negatively impact government’s revenue expected from petroleum profits tax next year.
According to Nami, the agency had projected some N10.1 trillion revenue generation for the country in 2022, but reckoned the Petroleum Industry Act (PIA) would now affect the projection.
However, he said with certain investigations being carried out as well as an audit, he was certain that 2023 hold better fortunes for government in terms of revenue generation.
Nami made these disclosures, when he appeared before the House of Representatives Committee on Finance at its ongoing 2022-2024 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF & FSP) Interactive Session with MDAS at the National Assembly Complex, Abuja.
He noted that of the total amount projected, N2.053 trillion would be remitted to the federal government while the balance would go to the states and local governments of the federation.
Nami, who told the lawmakers that the agency generated N4.9 trillion revenues in 2020,which was about 98 per cent of its set target for the year, said there was the possibility of surpassing the set target for revenue generation in 2022.
He assured the lawmakers that after some investigations and audit, which would be carried out by the agency in 2022, government’s revenue might increase significantly in 2023.
He also disclosed that the FIRS has taken cognisance of the coming into effect of the digital economy in the country and was taking advantage of it to increase revenue generation, adding that Twitter and other social media platforms were already registering with the service for the purpose of tax payment.
“We expect that with the new Petroleum Industry Act, there are some reconciliations that will be carried out that might affect the projections for 2022. We expect that there are new expenditure that will be rolled over to the new regime.
“So, what we are trying to do is to ensure that we adjust those expenses for the year 2022. We know that if we do that, it is going to affect our ability to collect more revenue in that area. There are currently some allowances they have been able to use; but they will use it because this will be a new regime.
“It is not going to be the one that has investment tax allowance any more. It is going to be based on actual performance. But we are going to recognise whatever they have now as a cost before you arrive at the actual profit they are going to generate. So, what we have planned to do is to aggressively conduct audit and investigations in the year 2022. So, we are projecting that by 2023, the result of that audit will begin to manifest. That is why we have projected 2023 to be N6.2 trillion,” Nami said.
PIA Not Perfect, But Step in Right Direction, Says NEITI Boss
The Executive Secretary, Nigeria Extractive Industries Transparency Initiative (NEITI), Dr. Orji Ogbonnaya Orji has said the Petroleum Industry Act (PIA) may not be a perfect document to address all the challenges in the petroleum industry, describing it as a legislation in the right direction.
He stressed that the PIA would encourage unity and development of oil host communities.
Orji who spoke yesterday on ARISE NEWS Channel, the broadcast arm of THISDAY Newspapers, said: “No law can be perfect, but the PIA law has a template that will bring about transparency and level playing ground to manage our oil asset.
“It will go a long way to address challenges of insecurity, and weak resources and also address key issues like access to education, hospitals, and roads. The most important thing about the implementation of PIA law is that it will make Nigeria move forward.”
According to him, the PIA law would allow for two standing independent regulatory authorities – one for the upstream sector and the other for the mainstream sector – adding that they would afford host communities a lot of benefits and opportunities.
He said accountability has been the challenge for oil host communities in the past, but explained that all of that have been addressed in the PIA.
He further explained that Act would accommodate the interest of host communities, because of the trust fund embedded in the document.
He said the situation where host communities ended up not getting the actual disbursement from oil companies and the situation where projects were designed outside of the needs of host communities, would be addressed in the PIA.
A legal practitioner, Frank Tietie, who also spoke on ARISE NEWS Channels, about the steering committee put in place to guide the implementation of the PIA law, commended President Muhammadu Buhari for the speed in the passage of the PIA law and the speed with which he assembled the steering committee on PIA implementation.
He expressed the optimism that the document would address a whole lot of issues in the petroleum industry.
Commenting on the three per cent set aside for oil host communities, Tietie said it would help in developing the host communities.
He, however, said the make-up of the steering committee, does not translate into a true representation of the oil communities.
According to him, “There are uncertainties that the steering committee needs to address. Before now oil companies disburse money to host communities in the manner that please them, which has generated crisis among host communities in the past.
“The steering committee must ensure that the money from the minimum three per cent operational expenses of oil communities, is well disbursed among oil communities, and avoid all forms of manipulation.”
Reacting to the position of state governors who have expressed their displeasure over the contents of the PIA law, Tietie said the governors were only selfish and do not have the interest of the masses at heart.
PIA Reflects APC’s Commitment to Restructure Nigerian Economy
But members of the Progressives Governors Forum (PGF), the umbrella body of the governors elected on the platform of the All Progressives Congress (APC) has said the signing of the PIB into law by Buhari presents a convincing credential of the commitment of APC to restructure the Nigerian economy.
The Chairman of the Forum and the Governor of Kebbi State, Atiku Bagudu, said with the PIA, Buhari has demonstrated unwavering commitment to change Nigeria democratically.
The Forum noted that the Act also created a Host Communities Development Trust to be managed by Board of Trustees as provided by the Act, adding that the three per cent of profit from the operations of oil and gas businesses would be used for the development of the host communities.
It added that it was noteworthy that this is in addition to the existing 13 per cent derivation to oil producing states and funds allocated to Niger Delta Development Commission (NDDC).
The Forum said: “After more than two decades of endless national debates and stalemate, there is today a new Petroleum Industry Act in the country, which has provided six months transition for the emergence of new institutional framework for the operations of oil and gas industry in the country.”
The Forum added that with the NNPC now unbundled, and in its place three new structures – Nigerian Upstream Regulatory Commission, Nigerian Midstream and Downstream Petroleum Regulatory Authority and Nigerian National Petroleum Company Limited – stronger accountability structures, each with a Board drawing representation from stakeholders in the oil and gas industry is instituted.
It noted that the monopoly status of the old NNPC, which vested it with both the powers of regulating the industry as well as extraction and sales of crude oil in both the upstream, midstream and downstream has been abolished.
“It is noteworthy that this is in addition to the existing 13 per cent derivation to oil producing states and funds allocated to Niger Delta Development Commission (NDDC), which Mr. President has continuously emphasised that all the resources must be put to judicious use for the benefits of the people in the oil producing areas.”
The Forum pointed out that even critics APC and its governments cannot ignore the fact that the coming into law of the Petroleum Industry Act was an important democratic milestone.
It added that the development signposts the commitment of the party and the government to develop the oil and gas sector and resolve all the challenges associated with the operations of the sector.
It said with the new Act, there should be remarkable improvement in revenue collection from the oil and gas sector, noting that this is expectedly the ‘Next Level’ governance initiatives that APC promised Nigerians during the 2019 campaigns.
“The new Petroleum Industry Act present a convincing credential of the commitment of our party, APC, to restructure Nigerian economy through democratic process in line with provisions of the 1999 Nigerian Constitution as amended. “Inspired by our leader, President Muhammadu Buhari, we are confident that democratic engagements based on strategic considerations of legislative proposals in the National Assembly to make or review existing laws, the Nigerian economy will be fully restructured,” it noted.
Ozekhome Says Its Robbing Peter to Pay Paul
Also yesterday, Human Rights activists and Senior Advocate of Nigeria, Chief Mike Ozekhome has condemned the Petroleum Industry Bill just assented to as an Act of Parliament by President Muhammadu Buhari.
Ozekhome, who described the Act as a mere ruse, carefully crafted, to actually do irretrievable violence to Nigeria’s progress, said it constitutes a direct assault on age-long cherished principles of federalism and the doctrine of separation of powers.
“The PIB Act seeks to frontally attack the provisions of section 162 of the 1999 Constitution, which state that all revenues accruing to the Federation shall be paid into a Federation account from which sharing shall be made amongst the three tiers of government – the federal, government, the 36 states and the 774 Local Government Areas of Nigeria.
“No expenditure can be made by the Federal Government outside the provisions of section 162. Nor can any monies be expended without going through an Appropriation Bill through submission of budgetary proposals”, he said.
He added that to the extent that the Act seeks to redesign the provisions of the Constitution to that extent is the Act unconstitutional, and that it must therefore be struck down.
In further condemning the Act, the senior lawyer argued that the NNPC, ought to be totally unbundled , to make it more viable, productive, transparent and accountable to the Nigerian people.
He queried why the federal government alone should have shares in NNPC to the total exclusion of the other three tiers of government, major stakeholders, oil-bearing communities and the long-suffering people of the Niger Delta.
According to him, the Act was never designed to reform the NNPC, nor passed to advance the principles of federalism or doctrine of separation of powers.
“The 36 States Attorneys- General should immediately approach the Supreme Court and challenge this latest Federal Government’s impunity and the outrageous acts of executive lawlessness and legislative rascality we are beholding , by invoking the Supreme Court’s original jurisdiction under section 233(1) of the 1999 Constitution.
“That is the way to go. Allowing the Act to stay will further cement the present misguided unitary system of government that Nigeria is currently operating, under our thinly garnished disguise of a pseudo-federalism” he added.
