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Nigeria's Petroleum Industry Bill: Reasons to be Sceptical

Will the Petroleum Industry Bill reform the industry or will vested interests manage to maintain the status quo?
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Building a petrol station near Jos, Nigeria. Photograph by Mike Blyth.

In 2008, the Nigerian government introduced the Petroleum Industry Bill (PIB). Four years later, the bill has yet to become law. The bill was intended to reform Nigeria’s notoriously corrupt oil sector but powerful vested interests, among both the government and commercial sector, have repeatedly hindered progress.

Nigeria was the ninth largest oil exporter in 2009, is thought to be tenth largest holder of proven oil reserves in the world, and relies on oil for 80% of its national revenue. The high level of corruption in Nigeria’s oil sector is, however, also well-known.

The PIB bill was therefore originally designed to force Nigeria’s oil sector to conform more closely to international norms. The fiscal terms of oil production were to be amended in order for the government to collect more revenue while the state-owned Nigerian National Petroleum Corporation (NNPC), distinctly lacking in accountability, was to have its regulatory powers removed. These would be entrusted to the commercial sector. However, it seems the bill has been greatly watered down.

The new draft, due to be debated upon the return of parliament from recess in September, has been backed by President Goodluck Jonathan but there are a number of reasons to believe the new Petroleum Industry Bill could prove yet another failed attempt to reign in the sector's vested interests.

Vested interests?

Firstly, heading the reform team is Diezani Alison Madueke. Madueke is the minister of Petroleum Resources. She is also a former director of Shell Petroleum Development Corporation. This employment history potentially poses a conflict of interests.

Close observers of the industry believe that Shell is one of the biggest beneficiaries of the murkiness of Nigeria’s oil sector. The attempt by the sixth National Assembly (2007-11) to pass the Petroleum Industry Bill was allegedly cut short due to movements by international oil companies. In 2010, leaked US diplomatic cables quoted Ann Pickard, then Vice-President of Shell for Africa, boasting about how Shell encouraged employees to infiltrate all relevant government agencies.

Secondly, while some suggest expected reforms would convert Nigerian National Petroleum Corporation into a profit centre, this is perhaps overly optimistic. Until the NNPC ceases to be an appendage of the executive government and an epicentre of patronage this change does not appear plausible. The KPMG Report of 2010 details manipulative opacity, deliberate duplicity, self-inflicted inconsistencies and corruption within the NNPC network. In the name of data mismanagement, variable crude oil sales and exchange rate fluctuations, millions of dollars are siphoned daily from the coffers of the NNPC.

Why, then, should we expect those who benefit from the status quo to alter their biggest source of income and influence? Perhaps it is better to begin by reforming the political system that has allowed trillions of naira to be lost to fraudulent subsidy payments. Given that those allegedly indicted have yet to be prosecuted, how can the same regime be relied on to implement sector reforms now? The depth of decay discovered so far appears too colossal for the solutions touted by these ‘reformers’.

Parliamentary performances

Thirdly, recent conduct by Nigeria’s parliament has inspired little confidence. Parliamentary procedure dictates that the Petroleum Industry Bill supplied by the executive becomes the property of parliament. Parliament, then, includes or excludes what is deemed necessary and consistent with the national interest.

But given past performance, can Nigerians comfortably expect its parliamentarians to be able to rise to the task? How can we then rely on them to deliver a law that will reform the most important source of revenue to our national economy? Do the legislative and executive arms of government converge on such matters of urgent national importance? Can we trust them to muster the level of commitment and vigilance such an impactful law demands?

Actions speak louder than words

If he is genuine in his attempts to reform the oil and gas industry, President Jonathan should assign a minister with minimal baggage to lead the reforms and immediately loosen the executive grip on the NNPC. The current executive-legislative disharmony must also thaw and both arms of government must unite around this issue of urgent national importance.

Our parliamentarians have a golden opportunity to improve their image before the citizens by prioritising national interest above self-interested antics and by sincerely delivering a Petroleum Industry Bill that will comprehensively reform the sector and move our nation forward. We can only hope that they will seize it.

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