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New Petroleum Industry Bill by Buhari administration to scrap NNPC, PPPRA

28 Sep 2020
Financial Nigeria

Summary

Uncertainties and delays in the reform efforts have cost the country an estimated $235 billion, according to Nigeria Natural Resource Charter.

Nigerian President Muhammadu Buhari

Nigerian President, Muhammadu Buhari, has sent a new oil reform bill, called the Petroleum Industry Bill 2020, to the National Assembly. Punch newspaper reported on Monday that it obtained a copy of the bill, which has not been formally submitted to the parliament.

Efforts to reform the oil and gas sector of Africa's top oil exporter have been in the works for 20 years, with the first Petroleum Industry Bill (PIB) presented in 2008 to the Sixth National Assembly by the administration of President Umaru Yar’Adua. Uncertainties and delays in the reform efforts have cost the country an estimated $235 billion, according to a report by Nigeria Natural Resource Charter (NNRC).

The PIB is expected to boost investors' confidence in the Nigerian oil and gas sector. The new legislation has been introduced by President Buhari at a time the government is seeking to mobilise resources to address the economic shocks of the Covid-19 pandemic. The pandemic has massively impacted the economy, especially the oil sector, resulting in about 60 per cent decline in government revenues.

The new bill, which seeks to reform the way the oil industry is regulated and funded, proposes the dissolution of the national oil company, Nigerian National Petroleum Corporation (NNPC), and the Petroleum Products Pricing Regulatory Agency (PPPRA). According to Section 54(1, 2 and3 )) of the bill as reported by the newspaper, the Minister of Petroleum, together with the Minister of Finance, will incorporate the Nigerian National Petroleum Company Limited and transfer the assets, interests and liabilities of NNPC to NNPC Limited or its subsidiaries.

“NNPC shall cease to exist after its remaining assets, interests and liabilities other than its interests, assets, and liabilities transferred to NNPC Limited or its subsidiaries under subsection 1 of this section shall have been extinguished or transferred to the government,” the bill reads in part.

According to Section 53 of the bill, the incorporation of NNPC Limited under the Companies and Allied Matters Act will be done “within six months from the commencement of this Act.” The bill says, “Ownership of all shares in NNPC Limited shall be vested in the government at incorporation and held by the Ministry of Finance incorporated on behalf of the government.”

The new PIB proposes the establishment of the Nigerian Upstream Regulatory Commission – to regulate upstream petroleum operations – and the creation of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, which will regulate midstream and downstream petroleum operations.

Last month, sources in the government told Reuters the petroleum ministry was set to send a new PIB to the president. During his first term, Buhari had declined to sign the Petroleum Industry Governance Bill (PIGB) – which was the first of four bills that were to replace the earlier version of the PIB. The PIGB, passed by the 8th National Assembly, sought to restructure the NNPC and the Department of Petroleum Resources (DPR), and create new organisations, including the Nigerian Petroleum Regulatory Commission (NPRC).
 
The president had reportedly vetoed the bill sent to him in 2018 because of a provision that would allow the NPRC to retain as much as 10 per cent of oil revenue generated, thereby depriving the federal, states, and local governments of revenues.

According to a report by Premium Times on Monday, the leadership of the National Assembly; the Minister of State for Petroleum Resources, Timipre Sylva; Group Managing Director of NNPC, Mele Kyari, and other officials are expected to meet today to discuss the proposed PIB 2020.

The 9th NASS is expected to pass the long-awaited oil reform bill, which includes provisions that would reduce oil and gas taxes and royalties, according to government sources. The bill also proposes an increase in payments to local oil and gas communities and for environmental cleanup by oil companies.


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