The Petroleum Industry Bill: 14 years in the making
Crude petroleum is Nigeria’s most important non-renewable energy source, contributing over 90 percent of the country’s foreign exchange earnings and about 80 percent of recurrent and capital expenditure. The Nigerian oil industry has served only international and elite domestic oil interests, which is highlighted by the paradoxical reality that Nigeria exports crude oil but imports refined petroleum products for domestic consumption. Despite state ownership, Nigeria is not in control of its oil industry, allowing for the gross disparity between oil wealth and development.
Whether or not the oil is to blame for Nigeria’s shocking lack of development, there is clearly a need to reform the legislative framework that ‘controls’ the industry. Nigeria’s mono-product economy has both destroyed traditional livelihoods as well as reducing the economic potential for the majority of citizens. While extractive practices have themselves polluted the environment, the lack of economic diversification has reduced employment options, increasing the likelihood for illegal oil bunkering and artisanal refining which cases further environmental degradation.
In 2000, the Oil and Gas Sector Reform Implementation Committee was commissioned by the central government to produce recommendations for the betterment of industry practices. However a concrete legislative proposal was not introduced until 2008; The Petroleum Industry Bill (PIB), which never completed passage through Congress. A revised version of the Bill was introduced in 2012, however this is yet to be passed into legislation.
The PIB represents the most comprehensive overhaul of the petroleum sector since Nigeria first discovered oil in the 1950s. As the sector is so central to the national economy, the repercussions are potentially enormous. Impacting the economic, social, and environmental foundations of the country. Due to its 14 years in preparation, the rejection of the PIB would be damaging to global perceptions of the future of the Nigerian economy and government’s efforts to reform the petroleum sector. Thus SDN supports the ratification of the PIB, whilst lamenting its certain short-comings.
The key objectives of the PIB are as follows:
• Secure the long term macroeconomic stability of Nigeria
• Reform the Extractive Industry institutional framework
• Support production to ensure Nigeria remains the top African oil producer
• Kick-start a domestic gas to power market
• Provide clarity and stability for Nigeria and its partnership with the oil and gas industry for the next decade
• Increase oil and gas production whilst protecting the environment
• Support economic diversification of Nigeria
SDN’s independent analysis hails the proposed PIB for its ability to raise revenues, deregulate the industry and raise environmental standards. However, our analysis also highlights key areas in which the proposed legislation needs strengthening in order to deliver long-term impact and stability.
This month’s blogs will place the PIB under the microscope; examining the Bill’s potential for curbing Nigeria’s hedonistic oil industry to become more inclusive and accountable.