December 7, 2015/ The Will
The federal government has resolved to break up the Petroleum Industry Bill, PIB, which has lasted for years in the National Assembly without passage, replacing it first with a law to overhaul the Nigerian National Petroleum Corporation, NNPC, such that loopholes that bred corruption can be blocked.
Under the draft legislation, the state oil company will be split in two – rather than a series of units as contained in the stalled 2012 bill – including a national oil company that will be run on commercial lines and partly privatised, a Reuters report said Monday.
This bill, which the news wire says is expected to be presented to senators this week, repeals the act establishing NNPC which contained legal grey areas that allowed mismanagement to go unchecked and billions of dollars in revenues to go seemingly unaccounted for as operating costs rocketed.
The draft bill was rid of some noticeably problematic amendments such as allowing the Minister of Petroleum Resources to decide what to do with any surplus or allowing the President to allocate oil blocks for exploration.
The Nigerian constitution expects the NNPC to hand over its revenues to the federal government, which then returns what the firm needs to operate based on a budget approved by parliament. However, the act establishing the state firm allows it to cover costs before remitting funds, in effect enabling it to do what it wants with the cash.
THEWILL recalls that President Muhammadu Buhari, shortly after taking office in May, announced that he inherited an empty treasury from President Goodluck Jonathan.
The institutional changes observed in the new draft have been greatly simplified from the 2012 PIB that created many new regulators and broke up the oil company into separate downstream (refining and retail), upstream oil and gas companies.
This time round, it is being proposed for the NNPC to be split into two: the Nigeria Petroleum Assets Management Company, NPAM, and a National Oil Company, NOC.
The document states that the NOC will be an “integrated oil and gas company operating as a fully commercial entity” and will run like a private company, adding that it will be partially privatised, with at least 30 percent of its shares being divested within six years of its incorporation.
As regards the NPAM, it is expected to manage assets “where the government is not obligated to provide any upfront funding”, listing these assets to include oil licences run under production-sharing agreements in which independent oil companies cover operating costs and pay tax and royalties on output.
The proposed law, when compared with previous PIB drafts, curtails ministerial powers as board appointments are made by the Nigerian president and confirmed by the Senate.
If passed, the bill would also establish a Nigeria Petroleum Regulatory Commission, NPRC, to oversee everything from oil licence bid rounds to fuel prices. This contravenes what had been the case where regulation was carried out by many bodies with ill-defined roles, leading NNPC to act in part as its own watchdog in a conflict of interest.
Nigeria relies mostly on revenue from crude to finance 80 percent of annual expenditure.
