Time is running out on PIBs

The value of deliberating about the legal and institutional frameworks for adequate optimisation of our oil and gas assets cannot be over-emphasised. Despite that oil prices are still not back in the $100+ per barrel territory and despite that the best days of hydrocarbons are possibly behind us, the petroleum sector still accounted for almost 60% of government revenues and more than 80% of our export earnings in 2017. And given the disproportionate impact of government revenues and export earnings on our economy, it will not be far-fetched to insist that this sector remains the backbone of not just our economy but also of our national life.

Governing and running this strategic sector in a more transparent, more accountable, more equitable, more efficient, and more optimal manner is thus in our collective interest. It is difficult to have a national consensus on many things in Nigeria. But there seems to be one on the oil and gas sector: the status quo is sub-optimal, despite our more than sixty years of experience as an oil-and-gas country. That is why the search for better management and governance of the sector has assumed the salience that it does. But it has turned out to be a long search, as we have wandered about as if nothing were at stake and as if the world would always wait for us. But there are serious costs, and the world has not waited, and will not wait, for us.

In October 2016, the Nigeria Extractive Industries Transparency Initiative (NEITI) published a policy brief, entitled “The Urgency of a New Petroleum Sector Law.” The paper estimated the cost of business uncertainty, lack of clarity, and inadequate transparency mechanisms in eight years at more than $200bn. The paper showed how Nigeria is increasingly in competition for oil and gas investments with many other African countries, not to talk of other oil jurisdictions. In addition, the paper also traced the beginning of the search for a composite and more appropriate law for the sector to the inauguration of the Oil and Gas Reform Committee on 24th April 2000 (about 18 years ago) and to the presentation of the first Petroleum Industry Bill (PIB) to the National Assembly in September 2008 (almost ten years ago).

Now that we are hopefully close to the end of this circuitous journey, it is important for us to focus on the next tasks in a way that will proactively and strategically ensure the intention of the proposed laws are fully realised, and to ensure that we have not undertaken the long journey in vain.

For the umpteenth time, NEITI wants to join others to commend the 8th National Assembly in getting the Petroleum Industry Governance Bill (PIGB) passed within two years. It will be recalled that the PIGB was first introduced in the Senate in April 2016, withdrawn for further consultation in June 2016, and eventually passed by the Senate on 25th May 2017. The House of Representatives followed suit on 19th January this year when it passed its own version of the PIGB. Even as we all wait for the harmonised PIGB, it is clear a landmark has already been recorded.

This is the farthest we have come on the petroleum industry bills since 2000 when the OGRC was inaugurated and since 2008 when the first PIB was presented to the parliament. The leadership of the 8th National Assembly and the relevant committees and their members deserve all the commendation they have received on this. The 8th National Assembly has succeeded where the 6th and 7th spectacularly faltered. The executive arm also deserves commendation for providing policy support and allowing the legislature to take the lead on the bills.

But we will be deluded to think the job is done. It is not. Succumbing to such a temptation will be wrong-headed and misdirected. And here we are not just talking about the need to finally pass the PIGB and transmit it to the President for assent. And not even about ensuring that the other three bills are passed and signed. It is more about ensuring effective implementation of the resultant laws in ways that will reposition and transform our oil and gas sector to become a real blessing, and not this lingering and needless curse, for our people.

It is important to address many of the questions that have been asked, including those yet to be asked. Or at least to start thinking seriously about questions such as: what transitional arrangements are being contemplated? What is the plan for the fiscal, host community, and administrative bills? How do we create a Pareto optimal equilibrium between revenues for government and returns for investors on one hand and among the geo-political zones on the other? How do we ensure that the new institutions created by the bills do not end up as replicas of the existing ones, or even worse? How do we use the proposed laws to embed contract disclosure, beneficial ownership, and other new frontiers of openness? And what will success look like?

In wrestling with this hopefully last phase, here are four things worth considering: one, there is no perfect law. This is why there is provision for amendments, even of the most rigid of constitutions. The proposed bills will have evident and non-evident areas of contentions, flaws even. But that should not stop us from going ahead and running them through the crucible of implementation. We should not make the best the enemy of the good. Two, this process will continue to throw up areas of political contestations, but there is no political challenge that good politics cannot solve. Politics, at the end of the day, is the art of the possible.

Three, having the laws should not and cannot be an end by themselves. The ultimate goal, the desirable end, is the positive transformation of the fortunes of Nigeria and Nigerians. And lastly, time is running out on us. Our oil and gas reserves will run out, and oil will soon run out of fashion based on what is happening around alternative energy and electric cars. We have wasted so much time, at enormous costs. Time is a luxury we don’t have again. The last best time to act was yesterday. The next is now.

Being excerpts of an address by the executive secretary of NEITI, at a symposium hosted by the agency on 20 March 2018 on the next steps on PIGB and other petroleum laws.