How to allocate resources: Nigeria’s petroleum industry bill splits stakeholders
State governors in the Niger Delta want oil firms to commit 10% of their accrued revenue toward developing host communities. Meanwhile, the federal parliament is working on a petroleum industry bill (PIB) that will require oil firms to establish a development trust for every host community where they operate, and fund it with 2.5% of their operating expenses there. Governor Ifeanyi Okowa, chairman of the South-South Governors Forum, said on 10 March that the region’s governors believe this allocation is inadequate.
Significance – Authority over resource distribution
The Muhammadu Buhari administration has proposed the PIB to restructure the regulatory framework and address unrest in the Niger Delta. It was presented to parliament that month and public hearings began in January this year. See more background in our October 2020 note - Nigeria Steps Toward Landmark Oil Reform with New PIB).
The current bill is similar in content to previous versions proposed since 2009, which parliament either failed to pass or a president vetoed due to disagreements concerning the allocation of powers and resources. In 2018 it was reported that Buhari vetoed a version of the bill because it would cut the powers of the president and the oil minister (Buhari is presently both).
Another sticking point has been the structure for putting more money into host community development – for instance, how a trust should be governed and whether it should be funded with a proportion of an oil firm’s revenue, profits or expenses. A previous version of the PIB would have required firms to put up 10% of their net profits for this purpose.
This is more than a technical discussion. There was a scuffle among host community representatives during one of the public hearings that parliament organised this year. The dispute was about which community leaders should speak at this event on behalf of the others. It typifies divisions among local groups that contribute to unrest in the Niger Delta.
Outlook – Papering over difference
The National Assembly has promised to pass the PIB around May of this year. A slippage may occur, but the bill will likely be enacted this year despite objections from local stakeholders. With 217 of 360 seats in the House of Representatives, and 64 of 109 in the Senate, Buhari’s All Progressives Congress firmly controls the parliament. And so, despite holding a minority of seats in the oil producing South South and South East regions of the country[1], his administration is capable of withstanding political opposition on this proposed law.
As such, while it reduces regulatory uncertainty, the PIB is unlikely to improve relations between communities and oil firms. Locals reasonably believe the PIB will put them in the backseat of decision-making, and that gaps in the legislation will give oil firms discretionary powers – for example, in defining a host community and picking a trust’s board.
Legislative defects, local divisions and inadequate representation will further impair outcomes. These are the same factors that hampered the Niger Delta Development Commission (NNDC), which was created in 2000 for a similar purpose. NDDC was put into sole administration in December 2020 after its leadership collapsed both literally and figuratively. It was plagued with corruption, infighting and other inefficiencies from the outset, and four interim heads have been successively sacked for alleged corruption in the last two years. When the last head was being questioned in parliament for the same reason, he collapsed.
[1] In 2019, the APC won twelve of 99 House of Representatives and six of 34 senate seats in the South South and South East.
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