Nigeria’s Petroleum Investment Bill (PIB) is finally starting to make some progress through parliament. The Senate approved it after a second reading in November and now parliamentary committees are preparing their final reports before the third and final reading. Senate President Bukola Saraki said they aim to have the bill “signed, sealed and delivered for the benefit of the Nigerian public early in 2017.”
The PIB’s passage has taken more than a decade to date. Given such glacial progress and the plethora of problems facing the Nigerian oil industry, it could be argued that the bill just needs to be forced over the line. However, as ever, the devil will be in the detail.
President Muhammadu Buhari’s government is using the previous administration’s PIB as the basis for its deep-seated reforms, but with a number of significant changes. The Nigerian National Petroleum Corporation has long dominated the industry, acting as regulator, marketer, policy-maker and upstream participant in its own right. Buhari has sought to overcome opposition from the NNPC to its break up by totally replacing its senior management, including by bringing in new executives from outside the organization.
The NNPC’s responsibilities are to be transferred to three main companies: the Nigeria Petroleum Regulatory Commission (NRPC), which will regulate the sector; the National Petroleum Company (NPC); and the Nigeria Petroleum Assets Management Company (NPAMC). The NPAMC will take control of the NNPC’s upstream assets.
As the proposals stand, the NPC and NPAMC are both to be permitted to market oil to create competition in the sector, but the NNPC wants the NPC to be given sole responsibility for sales. If the government accepts the proposal, the NPAMC would be restricted to overseeing oil production and joint venture agreements with oil companies.
Whatever the composition of the final bill, one thing is important above all else — the system must be as transparent as possible. The Nigerian oil industry has had problems with corruption and inefficiency of monumental proportions. There is nothing inevitable about this. But when a culture has been so deeply ingrained, it will take a huge effort to root it out.
The keys are clarity and simplicity. The web of acronyms provided by the new structure may seem complicated and having a single national oil industry organization in the form of the NNPC may seem simple. Yet the byzantine nature of the NNPC’s financial flows stymied accountability and bled the company — and the state — of much needed revenue. It also prevented the NNPC from performing as a competent joint venture partner.
There are some positive signs. The NPC will be required to publish an annual, detailed report on all petroleum revenue payments made to government. There is to be an initial public offering of at least 40% in the NPC and the higher standards required of listed companies should help to improve financial standards. Buhari has also been sensible in opting to recruit executives from outside the NNPC.