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PIB 2020: Perspectives on the Governance and Institution Provisions (1)

-By Professor Omowumi O. Iledare

Preamble:

Decades of delay in enacting a Petroleum Industry Reform Bill (PIB) to effectively and efficiently manage the Nigerian petroleum resources, despite many attempts, have caused dwindling revenue, diversion of major investments, very low rig activities for exploration and production, low reserves additions, poor economic development, very high unemployment rate, very low per capita income, and many economic woes for the nation.

Thus, the 65 Sections on Petroleum Industry Governance and Institutions (PIGI), in Chapter One of the Petroleum Industry Bill (PIB) 2020 seek to eliminate the amorphous governance and institutional ineptness that have undermined Nigeria petroleum industry growth for decades; and put the sustainability of the industry, in the face of the energy transition dynamics, in jeopardy.  PIGI strives to create and strengthen the industry governance institutions in pursuant of an effective and efficient value creation and delivery to stakeholders. The principles of clear and separation of roles, resolute focus, transparent and good governance across the petroleum industry value chain triggers the PIGI provisions in PIB 2020.

The core objectives of the Petroleum Industry Governance and Institutions are similar to the objectives of the PIGB 2018, which is commendable.  These objectives are laudable and achievable and they are as follows:

1. Create efficient and effective governing institutions with clear and separate roles for the petroleum industry;

2. Establish a framework for the creation of commercially oriented and profit-driven petroleum entities to ensure value addition and internationalization of the petroleum industry;

3. Promote transparency and accountability in the administration of petroleum resources of Nigeria; and

4. Foster a conducive business environment for the petroleum industry operations.

To achieve these objectives, implementable governance and institutional provisions in the PIB 2020 to drive the process is imperative. Hence, the creation and empowerment of the following proposed four (4) institutions, a clear departure from the six institutions proposed in the PIGB 2018. In a nutshell, however, the four key institutions in the executive PIB 2020 in the 9th National Assembly of the Federal Republic of Nigeria are as follows:

a. Minister of Petroleum

b. Nigerian Upstream Petroleum Commission (the Commission)

c. Nigerian Petroleum Midstream and Downstream Regulatory Authority (the Authority)

d. Nigerian National Petroleum Company Limited

The two discarded institutions from the proposed PIB 2020 are as follows but it was observed that the expanded role of the Commission seems to include the role of the NPAMC to some extent.

a.  Nigerian Petroleum Assets Management Company (NPAMC).

b. Nigeria Petroleum Liability Management Company.

Permit me, however, to not reverberate or rehearse the provisions verbatim but limit my discourse, in this op-ed, to key PIGI provisions of consequence in terms of  policy, regulatory, and commercial institutions established to improve good governance, enhance competitiveness, and embrace relevant global best practice with the goal to promote the ease of doing business.

PIGI Provisions on the Policy Institution—the Minister of Petroleum:

Part II of Chapter One of PIB 2020 defines without mincing words the powers of the Minister of Petroleum (MOP), insinuating that MOP is the Institution. The fact that the Minister is responsible for policy setting and direction, coordination and supervision of the oil and gas industry is well articulated.  However, missing conspicuously are the tools, the how, and the manpower to execute this power and discharge the ministerial responsibilities and duties. These omissions make the dependence of the Minister on the commercial and regulatory institutions unescapable.

There are some who have argued and I concur, that personalizing institutional responsibilities, as the immediate ministerial experience suggests, may not be the way to go if transparent and accountable governance of the industry is not to be elusive perpetually.  In fact, I hasten to suggest, that nearly every President of Nigeria since 1999, held unto the Ministerial Portfolio of the Ministry of petroleum because of the absolute power confer on the holder of the office.  President Jonathan was an exception and the industry knows what happened during his term in office.

Further, there is a suggestion, which I wholeheartedly subscribed, that calling the institution the Office of the Minister with permanent technical staff for policy continuity is worth consideration. Of course, looking at the importance of the petroleum sector, a reorganization of the ministry staff structure into technical and administrative cadres can be easily effected with a provision to that effect in order to prepare the Minister to executive the power of the office effectively and efficiently and if I may, add ethically too. On another note power and responsibility seem to be used synonymously in Section 3. I hasten to opine that the Powers of the Minister stated particularly in subsections 2 – 5 with respect to usurping the powers of the Boards of the regulatory institutions are bothersome.

For example, stating in 3(3) that the Minister can pre-empt a petroleum product market in a deregulated environment is seemingly anti-competitive. The Minister is not a regulator.  The petroleum product market as envisaged is not a monopoly, either.  Why preempting the market? The language in Section 3 (5) seems authoritarian, unless the President would perpetually occupy the Office of the Minister going forward! No Minister should unilaterally has the power to gazette a policy. Section 3 (5), and of course, I agree that I am not a learned friend, is nebulous to me that the Board cannot debate a policy directive issued by the Minister. I think some of the languages used in describing the powers of the Minister are dictatorial, and perhaps less innovative.

PIGI Provisions on the Regulatory Institutions—the Commission and the Authority

Unlike the PIGB 2018, which proposed the establishment of the Nigeria Petroleum Regulatory Commission as a single regulator, vested with petroleum administration and regulatory powers across the petroleum industry value chain – upstream, midstream, and downstream; The PIB 2020 proposes a dual regulator, the Nigerian Upstream Regulatory Commission (the Commission) and Nigerian Midstream and Downstream Petroleum Regulatory Authority (the Authority). The rationale for Dual Regulator, according to PIB 2020 Executive Team, include but not limited to the following, which to some experts are spur-of-the-moment reasoning to a large extent as far as I am concerned.

First the argument that no jurisdiction has a single regulator for the entire petroleum industry value chain does not make single regulator a local best practice for Nigeria. Linearizing global best practice may not in most cases be the best practice for an emerging local economy like Nigeria. More so if the cost-benefit analysis is not optimal.  For example, the adoption of the presidential system of government in Nigeria when it did, supports the illogicality of the rationale.  In addition, there is no policy analysis on record to support the dual regulator, yet the petroleum policy gazette endorses a single regulator after a thorough debate by the Federal Executive Council of the Federal Republic of Nigeria. The second rationale based on the absence of skills and regulatory capacity constraints in mid and downstream seemingly supports a CBN type regulator than the Norway or Brazilian type in the PIB 2020.

The third rationale seems to be based on fear in terms of regulatory capture and super regulatory power.  This is avoidable if institutions are not personalized. The argument for a single regulator is not diminished because of super regulator fear.  CBN is exemplary with respect to the efficacy of a single regulatory institution with a well-defined governance Board that is apolitical. I am not sure two strong regulators as proposed would serve the Oil and Gas Industry in Nigeria well or better than a single regulator.  We have practiced the single regulatory structure for nearly 60 years and it did work but can be better with the Commission with a Board approach. The Department of Petroleum Resources as the regulator of the oil and gas industry across the value ranks the best Nigeria has, despite political interference, of all regulatory institutions as far as I am concerned. Perhaps, if I am allowed to think aloud, the CBN is the only exception, that ranks along with DPR in that regards. So I stand corrected but a CBN type regulator is what the industry needs in times like this where the administrative cost of governing the oil and gas industry is excessively high and compared to none worldwide. Of course, I have no vote in the NASS push through a single regulator and I can live with dual regulator for political expediency sake, in order for PIB 2020 to avoid the doom or casualty the PIGB 2018 suffered. …To be continued in February Edition

OMOWUMI O. ILEDARE, PhD, DFNAEE, SFUASEE, SPEiARD is a GNPC Professor & Chair in Petroleum Economics & Management, UCC Institute for Oil and Gas Studies, Cape Coast, Ghana.

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