On Wednesday, August 18, Nigerian president Muhammadu Buhari completed the ceremonial procedure for enacting into law the controversial Petroleum Industry Bill (PIB) 2021, replacing the Petroleum Act of 1969 and nine other laws.
The pro-corporate bill had already received Buhari’s assent on Monday. Communities in the oil producing Niger Delta have expressed strong disapproval of the bill, claiming that they have been denied a fair share of the oil revenues. The law had been in the making since the 2000s.
Meanwhile, amendments made through this bill have been welcomed by the international business community, which the Nigerian government is trying to woo in the hope of securing investments for its ailing oil sector. Although accounting for only 9% of the GDP, the oil sector brings 60% of Nigeria’s revenue and 90% of its foreign exchange earnings.
However, in an over-the-top attempt to please private investors, the government is undertaking reforms which will in effect allow this important sector to be monopolized by Dangote Group, owned by Africa’s wealthiest billionaire, Aliko Dangote.
“It hinders the country’s financial and economic progress because it transfers a huge chunk of public wealth to favored businessmen,” Nigeria’s Trade Union Congress had complained in July, when the Senate and the House of Representatives had passed the bill.
This fear of monopolization is a result of one of the bill’s features, which restricts the import of fuel, permitting only those companies which have active refining licenses to import in volumes that correspond to their refining capacity.
Only 23 companies presently hold active licenses, most of whom have a capacity to process below 12,000 barrels per day (bpd). Reuters reported that the Dangote refinery which is being constructed in Lagos has a capacity to process 650,000 barrels daily. As a consequence of PIB, once this construction is complete, Dangote can control most of the imported fuel in the country.
This will ruin smaller businesses and prevent competitive pricing of oil, complained the two main fuel marketers’ associations in the country – Major Oil Marketers Association of Nigeria (MOMAN) and Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN).
Providing further perks to oil companies, the PIB reduces the royalties they must pay to the state from 7.5% to 5% in case of new extraction from deepwater oil fields. While higher royalties were previously applicable to companies producing 15,000 bpd or more, the threshold has now been raised to 50,000 bpd.
Setting the ground for privatization of the state-owned Nigerian National Petroleum Corporation (NNPC), PIB will incorporate “a commercial and profit focused NNPC Limited.. within 6 months from commencement of the new law,” states an explainer by London-based PricewaterhouseCoopers (PwC).
The ownership will initially be vested in the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated “on behalf of the Federation to take over assets, interests and liabilities of NNPC. This structure is expected to pave the way for eventually sale of shares to Nigerians.”
30% of the profits of NNLC Ltd will be diverted to the Frontier Oil Exploration Fund, which has been created by the PIB. This fund is described as “dubious” by the regional groups in Niger Delta, where the bill has elicited the most hostile reaction.
With little economic opportunities available and the environment in the region destroyed due to decades of extraction, the communities here have been demanding a 10% share of the annual expenditure of petroleum companies operating on the Delta.
PIB offers only 3%, which the Pan Niger Delta Forum (PANDEF) has rejected on the grounds that it is grossly insufficient to make a difference to the communities. PANDEF head Edwin Clark has complained in a letter to the Senate president and speaker that the parliament has not only disregarded the Niger peoples’ demand for a 10% share, but has further diluted the 3% share by spreading it wider.
This is accomplished “by redefining host communities to include pipeline-bearing pathway communities, in which case States, where pipelines pass through to aid them with the privilege of cheap supplies of Niger Delta petroleum products, could also be entitled to the ridiculous and unacceptable percentages that the legislators are willing to cede to oil-bearing Communities.” Clark stated.
In a separate statement in July, when the parliament cleared the bill for presidential assent, Clark warned that if the government fails to revise the law to address these concerns, “the Niger Delta people may be forced to take their destiny into their own hands and all International Oil Companies IOCs may find themselves denied access to their oil activities in such communities.”
The PwC’s explainer states that “[I]n the event of vandalism, sabotage and other civil unrest causing damage to petroleum facilities or disruption of production activities,” the cost of repairs will be deducted from the meager allocation made to these communities.