Since our report earlier this year on the Petroleum Industry
Bill (PIB), the PIB has been sent by the Presidency to the house of
Assembly. It is presently under debate with the lower house of the
Nigerian National Assembly. Yet there are key commentators who
claim that the PIB is weak on the crucial component of National Oil
The Revenue Watch Institute in its assessment has stated that the draft Petroleum Industry Bill (PIB) currently before Nigeria's parliament is unlikely to significantly boost the performance of the NNPC. The report, based on research comparing relevant parts of the 2012 Executive PIB with the rules and practices of 12 national oil companies worldwide, found that provisions for restructuring the Nigerian National Petroleum Corporation (NNPC) fell short of best practices, failed to address the corporation's biggest existing challenges and could create new problems. "NNPC dominates the Nigerian oil sector as an asset manager, regulator, and commercial player. Nigeria cannot fully address the big issues its oil industry faces today unless it improves how NNPC works." - Patrick Heller, senior legal advisor at RWI.
The bill's sponsors have argued that passing the PIB would turn the sector around, in part because the bill would transform NNPC into a world class "commercialized" national oil company. This would involve making it profit-minded, financially self-sustaining, politically independent and accountable to the public.
The notable areas of concern are:
2. The PIB does not define how NNPC will participate in oil exploration and production going forward.
3. The PIB sets out a limited privatization process for two of the three new companies, but with unclear rules, undefined shareholder rights and arbitrary timelines.
4. The PIB omits basic fiscal terms and rules for when the new companies can retain earnings, thereby failing to place NNPC on a path to sustainable financial independence.
5. The PIB, by not setting up technically competent, independent boards or legislative oversight, allows high-level political interference in NNPC to continue.
6. The PIB undermines transparency by allowing two out of the three new companies not to publish their contracts or audits.
Improving the PIB provisions represents one useful step towards a successful transformation of NNPC. Such provisions would, however, form only one part of the larger plans needed to advance the issues identified as crucial in the report. These include a careful delimitation of commercial and non-commercial roles, the development of a workable model for revenue retention and clear rules for publication of independent audits and reporting to the legislature
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.