PIB Delay Costs Nigeria Annual N15bn In Lost Funding – Bloomberg

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Chibisi Ohakah, Abuja

The Ministry of Petroleum has said that the delay in passing critical petroleum bills into law may be costing the country an estimated sum of $15 billion a year in lost funding, Bloomberg has said in a report. 

Industry stakeholders are of the opinion that an overhaul of the oil policy that has been in the works for more than a decade is among a raft of laws President Muhammadu Buhari could steer through the parliament in his second term to help drive investment in Nigeria.

They said the ability to implement reforms would mark a departure from President Buhari’s first four years in office.

They say the ability to implement reforms would mark a departure from President Buhari’s first four years in office, when it was believed that he faced ‘hostility’ from the National Assembly.

In this his second tenure in office, Buhari loyalists have taken over as the heads of the Senate and the House of Representatives, as well as other arms of government

According to an analyst at Lagos-based Vetiva Capital Ltd, Mr Luke Ofojebe, the oil and gas industry in Nigeria should “expect an improved level of harmony between the National Assembly and the president going forward.”

On July 4, the new Senate President, Ahmed Lawan, held a meeting with head of Exxon Mobil, Paul McGrath, where they discussed the quick passage of the bill. 

He told reporters that as soon as the Senate inaugurates its committees, they will “start work on the Petroleum Industry Bill. This time around, we will work with every stakeholder in the industry,” Lawan told reporters

As a result, Nigeria’s crude output and reserves have stagnated over the past two decades, and targets to reach reserves of 40 billion barrels and output of 4 million barrels a day have been pushed back more than 15 years. The reforms are therefore needed to drive investment in oil exploration and production that have been withheld because of policy uncertainty.

Bloomberg said unless new investment comes in, the government may have to cut spending and could struggle to service existing debt. Nigeria relies on oil for two-thirds of the government revenue and has failed to meet its income targets in the past three years, mainly due to lower-than-expected crude volumes. 

The reforms being considered include: An intention to sell part of Nigeria’s controlling stakes in joint ventures. 

Another initiative being considered is the conversion of the partnerships into incorporated entities, which would enable them to raise funding from financial markets.

There are plans to introduce royalties and taxes for the first time on deep-water exploration — a proposal that has faced stiff opposition from oil companies including Exxon, Royal Dutch Shell Plc, Chevron Corp., Total SA and Eni SpA, Nigeria’s joint-venture partners. 

Ensuring that the state derives more benefit from oil and gas contracts, and addressing the root causes of violence in the oil-rich Niger River Delta that has plagued the industry for more than two decades.

Bloomberg said even with all the reins now in his hands, some analysts still doubt there will be rapid progress, given Buhari’s inclination for state intervention rather than market reforms. 

“When the economy was beset by falling revenue in 2016, the government-imposed capital controls banned certain imports and refused a currency devaluation amid a foreign-currency shortage,” the agency said

“I don’t think the government is interested in any reform, judging by history,” said Robert Omotunde, an analyst at Lagos-based Afrinvest West Africa Ltd. 

Foreign portfolio investors fled in the face of the interventionist measures, and only began to return when the Central Bank set up a market-determined trading window for exporters and importers. Confidence remains low. The Nigerian Stock Exchange Main-Board Index has declined 10% since the first trading day after Buhari’s re-election.

To arrive at a new law that satisfies the energy companies will take delicate negotiations in the coming months, given lawsuits filed by the government against joint-venture partners that accused them of taking more than their fair share of crude revenue.

Still, a more compliant legislature gives Buhari the muscle he needs to push his reform agenda through.

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