The Nigeria Natural Resource Chartered (NNRC) has raised the need for urgent passage of the Petroleum Industry Governance Bill (PIGB). The NNRC is a global initiative designed to help governments and societies effectively harness the opportunities created by natural resources.
The organisation described the PIGB as a platform that will ensure reforms in the nation’s oil and gas industry. It said the PIGB has set out the foundations that will ensure optimum management (perform and drive growth) of the Nigeria’s petroleum resources.
“The Bill has satisfactorily defined the governance and institutional frameworks necessary to put the country in line with contemporary global and industry trends, and expedient passage of the bill and purposeful implementation will be key to the turnaround aspirations of the reforms in the oil and gas industry,” said the NNRC programme coordinator, Tengi Goerge-Okoli.
She said the PIGB will create efficient and effective governing institutions, clarify and separate roles and accountabilities, which means the restructuring of the industry to assure clarity, efficiency and effectiveness. To her, one of the objectives of the PIGB is the establishment of a framework for the creation of commercially oriented and profit driven petroleum entities, which will lead to restructuring of the NNPC to ensure delivery of profits on a sustainable basis.
She further stated that PIGB will promote transparency and accountability, which will strengthen governance by legislating processes and controls, promotion of systems that minimize corruptive behaviours and actions, and enforce consequences.
It will also create a conducive business environment for petroleum industry operations by establishing structures, systems and processes that promote ease of doing business in the sector.
The NNRC Benchmarking Exercise Report (BER) 2017 assessed the operational activities in the nation’s oil and gas sector between 2015 and 2017 against the Natural Resource Charter. The exercise unveiled the true state of oil resource extraction, governance, and transparency among others based on a set of underlying economic principles in line with international best practices. One of the precepts assessed is on State Owned Enterprises (SOE) with Nigeria National Petroleum Corporation (NNPC) as a case study.
Although the report recognized mild positive changes in the NNPC, it scored the corporation low on the aggregate in the focus period. It concludes that Nigeria is not getting the most from the nation’s oil and gas firm in many fronts and suggests a reform that gravitates the corporation towards a commercially-driven and globally-competitive entity. This brief provides actionable policy recommendations that can enhance the operational and financial competitiveness of NNPC, especially in response to the challenges identified in the 2017 BER.
The body recommended that the NNPC’s corporate governance structure has to limit political interference in technical decision-making, while allowing for effective oversight. It said in its 2017 BER, which relates to the high level of political interference in the affairs of the corporation, that incessant political meddling is observed in the recruitment into top hierarchy positions of the corporation. This is detrimental to policy consistency and stability in the corporation as well as limiting to the effective operation of the board of directors.
The body also said that at the heart of corporation’s effectiveness lies its struggle to key into commercially-effective principles in its operations.
The corporation’s commercial and non-commercial functions are not well aligned and, in most cases, conflicting each other. For example, part of the non-commercial roles discharged by the NNPC is to ensure regular supply of refined petroleum products irrespective of the prevailing economic conditions. This quasi-fiscal activity distorts market incentives and hampers its profitability and commercial viability – part of the explanation for the serial operational losses in the corporation.
The Petroleum Industry Governance Bill (PIGB) is just a fraction of a more comprehensive Petroleum Industry Bill (PIB). The PIGB was first proposed some 17 years ago by stakeholders in the oil and gas sector, as an answer to the massive corruption and theft that has confronted every administration since the 1960s.
On Thursday, May 25, 2017, the Bukola Saraki-led Senate broke a 17-year jinx by passing the Petroleum Industry Governance Bill (PIGB) into law. The bill was passed after a clause-by-clause consideration and amendment of the report by the Senate. Weeks later, the House of Representatives passed its own version. On March 28, 2018, the PIGB was harmonised and passed by the Senate and the House of Representatives. On July 3, 2018, the PIGB arrived Aso Rock for President Buhari’s assent. But the bill is yet to be assented to by the President.