After two years of implementation of the Petroleum Industry Act (PIA), experts have decried low revenues to the federation account.
As a result of this, they are canvassing the review, amendment and overhauling of the PIA to guarantee maximum revenues to the federation.
Leading the pack of experts, Professor of Economics and senior fellow with Agora Policy, Babajide Fowowe, pointed out that rather than translating into more petroleum revenue to the federation two years after the implementing the PIA, evidence has shown that the federation has received significantly low revenues from the petroleum sector compared to the period before the law.
Also, oil and gas industry’s experts, Mr Henry Adigun and Dr Olisa Agbakoba, before now, had also canvassed for the review of the PIA to boost oil revenue to the federation and create employment.
In his article entitled, ‘Urgent Need to Amend the PIA to Boost Federation’s Petroleum Revenue,’ Professor Fowowe said: “The implementation of Nigeria’s landmark petroleum law has translated to an odd situation: NNPCL is better off in terms of revenues while the federation is significantly worse off. This needs to be urgently addressed.”
While total revenue accrued to the federation in 2021 was $11.902 billion, the professor said the federation received low revenue of $11.833 billion in 2023.
Low revenue to the federation, he said, is attributable to the implementation of the PIA where interpretation of certain sections of the Act gave the NNPCL a larger share of oil and gas revenue at the expense of the former.
Fowowe is seeking the review, amendment and overhaul of Sub-section 54 (1), sub-sections 9 (4) and 64 (c) of the PIA, pointing out the federation has not derived maximum benefits from the petroleum sector post-PIA
“We identified two areas of the PIA that need to be revisited to increase federation revenue: The interpretation of Sub-section 54 (1), which led to NNPCL acquiring federation JV assets; the interpretation of sub-sections 9 (4) and 64 (c), which led to NNPCL withholding 30 percent from profit oil and gas for management fee and 30 percent from profit oil and gas for frontier exploration fund.
“It is essential that relevant sections of the PIA be re-examined and appropriate revisions made to channel more petroleum revenue to the federation. Only then can the government realise the extra revenue urgently needed for critical expenditure needs,” he said.
He said: “It is clear that the federation is not getting maximum benefits from the post-PIA arrangement where JV assets are deemed owned by NNPCL. Sub-section 54 (1) of the PIA should be revisited to ensure the JV assets are returned to the federation.”
“Reduce the PSC management fee for NNPCL from 30 percent to between four percent and seven percent: in line with the collection fees of other revenue-generating agencies, sub-section 64 (c) of the PIA should be revisited to reduce the management or collection fee of NNPCL from PSCs from 30 percent to between four percent and seven percent.
He also wants the government to revisit the private or public status of NNPCL. “There is the argument that an entity such as the NNPCL that manages federation’s assets should be subject to appropriate oversight by relevant Federation entities. Converting NNPCL to a private company has created confusion at FAAC where oversight of NNPCL has become extremely difficult.
“NNPC had a history of opaqueness and secrecy, which has only been compounded by the change to a private company and the illusion that NNPCL is not answerable to questions about its operations,” he said.
Justifying his points for major amendment to the PIA, the professor said: “The federation had 23 revenue streams from the petroleum sector before the implementation of the PIA in 2021. In 2021, the NNPC accounted for eight revenue streams, which fetched $10.284 billion, or 44.63 percent of total federation petroleum revenue of $23.046 billion.
“Despite the increase in total number of revenue streams to 30, NNPCL’s contribution has reduced from eight to three streams. In 2023, NNPCL’s three revenue streams brought in $5.01 billion, or 16.23 percent of total federation petroleum revenue of $30.862 billion. It is important to note that the reduction in revenue from NNPCL is as a result of NNPCL retaining most of the petroleum revenue, rather than lower gross petroleum revenue.”
On the regulatory and business environment front, he said confusion and conflicting signals have meant the maintenance of the difficult and stifling operating environment.
Speaking further, the expert pointed out that, on the investment front, there has been an exodus of international oil companies (IOCs).
He commended President Bola Tinubu for being proactive in signing three Executive Orders to address the twin issues of attracting investment and enhancing the regulatory and business environment.
“Designed to make Nigeria’s petroleum sector globally competitive, the three executive orders, which became effective from February 28, 2024, are: Oil and Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order, 2024; Presidential Directive on Local Content Compliance Requirements, 2024 and Presidential Directive on Reduction of Petroleum Sector Contracting Costs and Timelines. This policy note argues that there is a need to address the third issue: revenue.
“After two years of implementing the PIA, evidence shows that the federation has received significantly lower revenues from the petroleum sector, compared to the period before the law,” he said.
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