Nigeria’s way forward after the failure of the PIGB

Existing laws in the industry are comprehensive, but there is a problem in their interpretation and implementation. The industry is notoriously over-regulated with well over 50 laws, regulations, guidelines, policies etc. currently governing the sector and a horde of regulators overseeing everything from capital investment to local content, with every regulator jostling for their own fraction of jurisdiction over the industry. The cumulative effect of this is that the Nigerian regulatory regime is plagued with uncertainty and legal advisers often have the challenge of convincing international clients of the need to recognise legal requirements and the rules in practice issued and implemented by the regulatory authorities. The need for reform in Nigeria is urgent and severe.

NEW BILL: Nigeria’s most recent attempt to tackle the reform challenge, the Petroleum Industry Governance Bill (PIGB), appears to have stumbled at the final hurdle as the Presidency withheld assent for constitutional and legal reasons.
Under Nigerian law, where the president withholds his signature to a bill presented to him, he is required to state the areas he wants amended before he signs the bill. If the National Assembly agrees with the president, the bill can be withdrawn for deliberation on the amendments suggested by the president.
Alternatively, the National Assembly is empowered by the constitution to overrule the veto of the president. It is highly unlikely, at the present time, that the National Assembly would try or even be capable of overruling the executive with a two-thirds majority vote. Therefore, the only real avenue for the PIGB to recover from this setback may be through an amendment.

LEGISLATIVE ISSUES: The senior special adviser to the president on the National Assembly, while noting that a subsequent executive communication on the PIGB would soon be read on the Senate floor, provided some clarification on the reasons behind the refusal to assent to the PIGB.
In a public statement he cited the following issues: The provision of the bill permitting the Petroleum Regulatory Commission (PRC) to retain as much as 10% of the revenue generated unduly increases the funds accruing to the PRC to the detriment of the revenue available to the federal, state, federal capital territory (FCT) and local governments in the country. It expands the scope of the Petroleum Equalisation Fund and some provisions in divergence from the administration’s policy and conflicting provisions on the independent Petroleum Equalisation Fund. He also noted some legislative drafting concerns which, if assented to in the form presented, will create ambiguity and conflicts in interpretation.
If the abovementioned issues represent the substance of the Presidency’s objections to the bill, then it would appear that the challenges are not insurmountable, and the executive and legislature may yet be able to reconcile their differences and ensure that the bill is passed into law.

ROLE OF THE COMMISSION: The PRC established under the PIGB was supposed to be a one stop-shop regulator vested with advisory, technical, commercial and regulatory functions, absorbing the roles, rights, assets and liabilities held by the Petroleum Inspectorate, the Department of Petroleum Resources (DPR) and the Petroleum Products Pricing and Regulatory Agency. The idea of the PRC was to avoid regulatory overlap, duplicity of functions and to cure the inefficiency in Nigeria’s regulatory framework.
The first issue raised by the Presidency in refusing to approve the PIGB, highlighted above, relates to Section 26 of the PIGB which provides for the establishment of a fund, from which all expenditure incurred by the PRC shall be defrayed.
Specifically, Section 26(3) of the PIGB states: “Such monies which shall be 10% of the revenue generated by the commission for the government of the federation may be determined and appropriated to the commission by the National Assembly.”
Notably, this section permits the PRC to retain up to 10% of the money it generates for the Federal Government of Nigeria. Our analysis of the PIGB indicates that the money generated by the PRC and the revenue available to the federal, state, FCT and local governments are derived from different sources; if so, it would seem that the provision reproduced above does not seek to detract from the revenue available to the aforementioned tiers of government.
Furthermore Section 26(6) of the PIGB clearly states: “The commission shall ensure that all monies accruing from upstream leases, bonuses, leases, renewal fees, assignment fees and concession rentals charged under this act or other enactment, or any subsidiary legislation or regulation made pursuant to such legislation are paid into the Federation Account.”
This seems to clarify the controversy which the Presidency has cited as a basis for not assenting to the PIGB. We would surmise that the reasoning behind the proposed establishment of a fund from which the PRC may defray its administrative costs is based on the need to safeguard the independence of the PRC, the proposed regulator of the industry, and to ensure that the PRC is able to operate efficiently. The constitutional restraints surrounding the appropriation from the federation accounts have the capacity to cripple the administrative efficacy of the PRC if it has no other means of funding its activities.
In any case, the funding of the PRC does not in our view go to the core of the proposed legislation and it is highly feasible that the executive and legislature would be able to achieve a satisfactory resolution on this matter that does not detract from the essence of the bill or curtail the reform effort.

FUND FUNCTION: An objection has also been raised on the expansion of the scope of the Petroleum Equalisation Fund. The Equalisation Fund was initially established under the provisions of the Petroleum Equalisation Fund Act, which would impliedly be repealed by the PIGB. The PIGB seeks to renovate the Equalisation Fund.
Under Section 36 of the PIGB the following monies are proposed to be paid into the said fund: a 5% fuel levy on all fuel sold and distributed within the federation, which shall be charged subject to the approval of the minister of petroleum resources; all subventions, fees and charges for services rendered or publications made by the Equalisation Fund; all other funding which may, from time to time, accrue to the Equalisation Fund; any net surplus revenue recovered from petroleum products marketing companies; and such sums as may be provided for the purpose of the Equalisation Fund by the government.
The PIGB states that the Equalisation Fund shall be utilised for, amongst other objectives, the provision of financing for infrastructural development throughout the federation and for the provision of financial and other support as may from time to time be determined by the minister.
Whilst we are of the view that the stated purposes of the Equalisation Fund are somewhat vague and ambiguous and could be an avenue for impropriety and corruption if care is not taken, we are not aware of the plan the Presidency has envisioned for an independent Petroleum Equalisation Fund at any point during the lifespan of the PIGB. At this late stage, we would propose that the issues surrounding the status and nature of the Equalisation Fund be resolved between the legislature and the executive in the interest of solving the current regulatory crisis in the industry.
In the same vein, the drafting considerations cited by the Presidency can be resolved between the legislature and the executive provided there are no controversial aspects to the stated drafting considerations.
In view of the urgent need to provide some stability in the industry, it is imperative that the arms of government work together to bring the country roaring back to life. The PIGB is not beyond repair, we would urge that all is done to repair it and take the bold step of passing it.

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