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PIA and the triumph of mischief

By Simon Kolawole
Have you heard the news? The Petroleum Industry Act (PIA) signed by President Muhammadu Buhari is the most anti-Niger Delta legislation in history, conceived and designed to further exploit the oil-producing region in favour of the north. How can PIA allocate a mere 3% to host communities while giving a whopping 30% of the profit of the Nigerian National Petroleum Corporation (NNPC) to frontier exploration which is absolutely in favour of the north? This amounts to further stealing the resources of the traumatised people of Niger Delta. In fact, Niger Delta militants should start bombing pipelines again to fight this grave injustice and total disrespect for the region.
If you believe this, I will not blame you that much. You are probably a victim of misinformation. In my study of media-based agitations over the last two decades, what I found out — and quite intriguingly — is that most of those who make initial comments on a national issue and stir long-lasting controversies often have two things in common: ignorance and mischief. They deploy these two disabilities to create and shape public debate. People begin to parrot them without cross-checking. The “alternative fact” becomes the established “truth” — no matter the corrections and rebuttals thereafter. People often succeed mainly because they play on our divisions and emotions.
The hysteria around the PIA started with the mischievous comparison between the allocations to the trust fund for host communities and the frontier exploration. In logic, this is called “false equivalence”. The 3% from the operational expenditure (OPEX) of oil companies will go directly to the host communities. The 30% for frontier basin is to be set aside by the NNPC from its “profit oil and profit gas” for oil exploration across Nigeria — to increase our reserves. How are these two the same? One goes directly to communities from oil companies. The other does not go to any community. It is for the NNPC to spend on prospecting for oil for the benefit of the whole country.
Two, what the PIA says is that 30% of NNPC’s “profit oil and profit gas” should go into frontier exploration. Some have clandestinely changed “profit oil and profit gas” to “profit”. “Profit oil and profit gas” is NNPC’s share of the profit from its production sharing contracts (PSCs) after the contractor — the provider of finance and expertise — has taken the bulk. In 2019, “profit oil and profit gas” contributed just 2% of total revenue from oil, according to a NEITI report. Others were: sale of equity crude, 30.4%; petroleum profit tax, 19%; sale of royalty oil, 13%; sale of domestic crude, 7.85%; VAT, 3.5%; corporate tax, 3.4%; signature bonus, 2.7%; and NLNG dividend, 2.68%.
Total revenue from the sector in 2019 was $34.2 billion. “Profit oil and profit gas” accounted for just 0.6% of that in 2019. What we are preparing to go to war over now is 30% of the 0.6% revenue from profit oil and profit gas. In naira terms, about N60 billion will be set aside by NNPC yearly for frontier exploration — compared to the estimated $500 million (over N200 billion) that will go to the host communities from the annual OPEX of oil companies under PIA. Please compare and contrast. Ironically, NNPC already budgets N50 billion annually for frontier exploration in the Chad basin. PIA has now extended the fund to the Anambra, Dahomey, Bida, Sokoto and Benue troughs. Phew!
Three, even if we say it is 30% of “profit” (which is untrue), does NNPC make profit? What is 30% of zero? My math is atrocious, but 30% of nothing will be equal to nothing any day. Conversely, 3% of OPEX is a sure banker: it will be built into the annual budgets of the oil companies, NNPC inclusive. The oil companies already devote 3% of their annual budgets to the Niger Delta Development Commission (NDDC) as required by law. So, this is another 3% charge on the companies. Based on the budget for OPEX by oil companies for 2021, the communities will have a provision of, give or take, $500 million yearly. This never existed before the PIA. And this is what is called gross injustice.
Four, when you add the $500 million to what already goes to oil-producing areas through 13 per cent derivation, Ministry of Niger Delta, NDDC and Amnesty Programme, you really need to search elsewhere for the injustice these critics are talking about. The N200 billion to host communities is an entirely new stream of income to the oil-producing areas since we found oil in 1956. And there is even more: the PIA provides that the host communities will share from the gas flare penalties. That is roughly another N130 billion in the kitty! Yet, the PIA is gross injustice. That is why if I had my way, I would hand over the entire oil revenue to the Niger Delta, hoping it would finally bring peace.
Five, “frontier exploration” is being framed as “northern exploration”. Those pushing this line and creating a false equivalence with the host fund actually think they are fighting the north. Unfortunately, there are frontier basins elsewhere. The frontier fund is for oil exploration outside the Niger Delta. We have the Anambra, Benue and Dahomey troughs which cut across southern and middle belt states such as Benue, Taraba, Enugu, Ebonyi, Anambra, Lagos, Ogun and Ondo, etc. The PIA has clearly extended frontier exploration to all the troughs in the country. Why not monitor, instead, to make sure southern states benefit from the fund? Isn’t that more reasonable?
Six, let us even say the frontier exploration fund is only for the north (which is untrue). The sense I have been getting from some outspoken southern leaders, at least from reading newspapers, is that they do not want to be in the same country with northerners. They say northerners are parasites and beggars. In that case, why not encourage them to prospect for oil in their own region so that they can leave your oil for you? Why should you be angry or afraid that oil may be found up north? You want only your region to have oil so that you can continue to belittle others as parasites? Really? This is what the Yoruba call the spirit of “kenimani” (wishing others will not prosper like you).
What I find most troubling is that it appears we have been programmed in Nigeria to see and amplify the worst of things. The Petroleum Industry Bill (PIB) had been gathering dust on the shelves of the national assembly since 2008. The original idea was to create an omnibus and contemporary law to govern the oil industry. In 2000, President Olusegun Obasanjo set up the Dr Emmanuel Egbogah-led Oil and Gas Implementation Committee (OGIC) for this purpose. Egbogah, now of blessed memory, was one of the most respected experts in the oil industry globally. The work of OGIC gave birth to the PIB, which was first sent to the national legislature in 2008 by President Umaru Musa Yar’Adua.
Bedevilled by intrigues (including the absurd claim in 2012 that fake versions were being circulated among the federal lawmakers), the PIB remained a dream. Now that we have finally crossed the finish line, the first wave of reaction has been so predictable: condemnation, laced with threats. Of course, the Buhari administration has done a poor job in the area of communication. (Lai Mohammed, the information minister, is only interested in bullying the social media.) That governors are issuing press statements to air their reservations over the PIA says a lot about how this administration communicates with the key stakeholders. Victory is gradually turning to defeat!
States have legitimate reasons to be worried over the PIA. The frontier exploration fund will affect FAAC. The host community fund will also affect FAAC. At a time of dwindling revenues, everyone, including the federal government, has reasons to worry. Every little kobo will impact on federation allocation. But we have to see this as a matter of trade-off: more revenue to communities and less to FAAC, more revenue for investment in exploration and less money to FAAC — but the “losses” are balanced with peace in the host communities and the benefit of investing in frontier exploration today so that we can have more revenue to share tomorrow. This should be seen as a win-win.
For full disclosure, I am a “petro-sceptic”. I hold the position that oil wealth has done extensive damage to Nigeria and Nigerians. I am one of those who theorise that the hydrocarbon has ruined or retarded Nigeria’s human, economic and political development in the last 45 years. I am of the view that the petrodollar has led to poor governance and fuelled corruption and conflict. I believe we would have attained real development if we had not enjoyed oil boom and had continued on our path of agriculture and industrialisation as it was in the 1950s and 60s. I believe the boom-bust cycle of oil has derailed our development trajectory and thrown us into a chronic cyclical economic crisis.
Nevertheless, I cannot deceive myself by trying to run away from the fact that the petrodollar remains the backbone of Nigeria’s public finance and the supplier of most of the forex. We cannot deny that. Therefore, when you realise the amount of investments Nigeria has lost over the years because of the uncertainty over the PIB, you would appreciate why passing the legislation is a milestone worth celebrating. According to Buhari, Nigeria lost $50 billion worth of investments in the past 10 years to the uncertainty. If this economy can receive such investments in the next 10 years, assuming things go well, there is no way we won’t feel some positive impact.
I understand that people must play politics. I also understand that part of playing politics in Nigeria is to raise the stakes to take as much as you can get from the system. The oil communities have every right to try to hold on tightly to their natural resources. It is their luck that there is plenty hydrocarbon in the bellies of their earth. Left to me, they can keep all the revenue. Nobody will die. Many countries don’t have oil. However, in all these agitations, we should appreciate progress. From zero naira to N200 billion is progress in my books. We should also not stop other parts of Nigeria from exploring for more oil. And, above all, let us stick to the facts and stop the mischief.
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