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PIA: Lacunas, Criticisms and the Expectations
Oil-producing countries experienced an unprecedented slump in the price of crude oil and crude oil production in 2020 due to the pandemic. Nigeria’s crude oil production declined from 1.89 million barrels per day recorded in the fourth quarter of 2019 to 1.52 million barrels per day in the fourth quarter of 2020, representing a 19.6% average decline. However, despite this, Nigeria is still one of the largest oil-producing countries in the world.
Even with these declines, Nigeria witnessed a steady hike in the country’s official pump price of premium motor spirit. This is not a new phenomenon in Nigeria.
The Petroleum Industrial Act
The assent of the long-awaited Petroleum Industry Bill (PIB) into law by President Muhammadu Buhari, making it Petroleum Industry Act (PIA), received wide applause, especially by civil society organizations and human rights advocates who for several years made it a point of duty to press for its actualization.
Amongst other vital issues, the Act addressed the commercialization of the Nigerian National Petroleum Corporation (NNPC) which its Group Managing Director, Mele Kyari, confirmed will cease to exist and has been incorporated as a limited company by the Corporate Affairs Commission (CAC); removal of the petroleum equalization fund and the Petroleum Products Pricing Regulatory Agency (PPPRA); provision of 3% of oil revenue as development funds for host communities; and, the provision of a legal, governance, regulatory and fiscal framework for the industry to restore sanity in its management.
According to the PIA, it means that NNPC will henceforth be under the Company Allied Matters Act (CAMA) and the company will function as a limited liability company that would pay taxes and dividends to its shareholders with all its shares invested in the local, state and federal governments.
However, despite how juicy the PIA appeared, it sparked criticisms including speculation that Nigeria’s official pump price of fuel would skyrocket to as high as N300 per litre or more; but the Minister of State for Petroleum Resources, Chief Timipre Sylva, said that although the Act had made the deregulation of the oil sector a matter of law, the federal government would still retain the pump price within N162—N165 until a proper framework for the deregulation was put in place.
But is that the current situation?
Stakeholders and experts applauded the deregulation of the oil sector as provided in the Act, but expressed worry over some clauses in it, including the scrapping of the petroleum equalization fund and PPPRA, the commercialization of the NNPC, and more especially, the implementation of the Act’s provisions.
Aminu Usman, a professor of Economics at Kaduna State University, pointed out that the federal government has to establish specific timelines for the unbundling of the NNPC, the removal of subsidy, and implementation of other provisions of the Petroleum Industry Act.
In a similar view, the Trade Union Congress (TUC), the Major Oil Marketers Association of Nigeria (MOMAN), and the Petroleum Marketers Association of Nigeria (DAPPMAN), had also faulted some clauses in the Act, especially the restriction of fuel importations to only local refiners.
The oil marketers argued that the restriction poses a monopoly risk as any provision that does not guarantee a free and open market will give room to price inefficiencies and eventually kill off small businesses in the downstream sector.
The 3% host communities’ allocation rejected
Another weakness of the Act pointed out by some analysts is the unfair discrepancy that 3% of oil revenue is allocated to host communities in the major oil-producing Niger Delta region of the country despite their demand for 10% while 30% is allocated for the exploration of oil in frontier basins which are predominantly northern states in the Northern region of the country.
The host communities and experts rejected in strong terms the 3% allocated to them for development in the PIA. The 3% allocated to host communities had become controversial since July this year when the Senate turned deaf ear to the communities’ 10% or at least, 5% demand.
Speaking on Sunrise Daily, a current affairs program in July, the Bayelsa State Governor, Douye Diri, had restated the position of governors of the Southern states that it was an “injustice to allocate only 3% of oil revenue to the host communities who are bearing the brunt of oil exploration and exploitation activities.”
Governor Diri insisted that it was unthinkable and unacceptable to people of the South that a provision of 30% profit of the NNPC was inserted in the controversial bill for frontier exploration in areas that were not clearly specified.
Also, a coalition of Niger Delta youth groups who rejected the 3% allocated to host communities warned the federal government not to implement the 3%. The groups maintained that if implemented, the nation’s economy would suffer incalculable harm.
The groups who spoke through its convener, Solomon Lenu, who is also the spokesman of the Ogoni Development Drive (ODD), in Port Harcourt, Rivers State capital, lamented that the PIA was a fraud and coup against the oil-producing communities and the Niger Delta people and threatened that what would happen if the federal government implemented the 3% allocation would exceed the #EndSARS protests.
Similarly, the leadership of Pan Niger Delta Forum (PANDEF), the Centre for Human Rights and Anti-Corruption Crusade (CHURAC), and communities in Rivers State under the aegis of the Coalition of Rivers Oil and Gas Host Communities (CROGHCOM), berated Buhari’s decision to sign the bill into law with the controversial 3% oil revenue allocation to host communities.
PANDEF National Publicity Secretary, Ken Robinson, in a statement said, “It’s quite unfortunate that President Muhammadu Buhari went ahead to assent to the Petroleum Industry Bill despite the overwhelming outcry and condemnation that greeted its passage by the National Assembly, especially with regards to the paltry 3% provision for the host communities development trust fund and the brazen appropriation of an outrageous 30% of NNPC Limited profit for a dubious, nebulous frontier oil exploration fund.”
According to Robinson, “This assent, by President Buhari, simply speaks to the repugnant attitude of disregard, propelled by arrogance, disdain, and contempt with which issues concerning the Niger Delta region are treated, particularly, by the present administration.”
He stated that “What this act signifies is an unequivocal message to the Niger Delta people that how they feel and what they say, do not count, at all, in the schemes of the Nigerian project. That’s insensitive, abominable, and afar every boundary of proper democratic practice, and, therefore, unacceptable to the good people of the Niger Delta, the critical economic nexus of the entire Nigerian territory.”
In the same echo, the Chairman of the CROGHCOM, Barituka Loanyie, stated that “We want our people and indeed the world to know that the meager 3% provided for the host community trust signed into law by the president is to be managed by the oil companies. The oil companies are the ones that have the responsibility of setting up and managing their respective host community trusts. It is like the case of the Niger Delta Development Commission (NDDC) where they give with one hand and take with the other hand.”
For CHURAC President/Chairman Board of Trustees, Cleric Alaowei, it appears President Buhari is yielding to the desires of a section of the country, especially the core Northern supremacists. He maintained that for the people of Niger Delta, “the hasty signing into law of that rather repressive act only marked another draconian legal regime where the region is being subjected to the whims and caprices of the inimical petroleum laws.”
“The new Petroleum Industry Act only adds up to the laws that have been colonizing the Niger Delta people. 3% host community funds is an insult to the beleaguered oil-bearing but environmentally degraded communities as far as 30% is approved for oil exploration at the frontier basin which is tactically provided to favor the northern states.”
The PIA is here but the big question is, will its contents truly enthrone the public desired pricing system and profitable transformation in Nigeria’s oil and gas sector?
Sunday Elom is an investigative journalist based in Awka, Southeast region of Nigeria. He writes on budget implementation, human rights, education, health, oil and gas, policies, governance and politics. For over three years, he has been practicing journalism as a freelancer, reporter and content creator for the International Centre for Investigative Reporting (ICIR), Ripples Nigeria, Orient Daily Newspaper, Boldscholar News, amongst other local media outlets. He is a graduate of Mass Communication from the University of Nigeria, Nsukka.