By Gideon Osaka
There are little chances that President Muhammadu Buhari would withhold assent to the Petroleum Industry Bill (PIB) 2021 when it finally gets to his table, going by the fact that the executive arm of the government did not only initiate the Bill, but has shown unparalleled commitment with the 9th National Assembly to see the Bill become a law.
Previous attempts to pass the PIB had failed due to stiff opposition to certain provisions in the Bill, just as agitations over certain provisions in the 2021 PIB have heightened uncertainties over potential assent to the Bill by the President. Several groups and individuals have voiced their concerns on the Bill, calling on President Buhari not to sign it into law. Would their growing clamour compel the President to take a second look at the Bill again? Valuechain findings, based on experts’ analysis and the voices in support of the Bill’s passage, showed that the President may be overwhelmed to sign the Bill into law this time.
The Senate and House of Representatives had, on Thursday, July 1, passed the PIB, after which a few reservations were raised, particularly about the clauses proposing 3 per cent and 5 per cent of oil companies’ operating expenditure be contributed to a fund for their host communities. While the Senate settled for 3 per cent, the House approved 5 per cent. This differential warranted both chambers to set up a harmonisation committee.
The harmonised version of the Bill, which was produced by a conference committee of both chambers, was passed, after it was submitted for consideration by the federal lawmakers the same day. Despite opposition, the Committee adopted the Senate’s recommendation of 3 per cent of oil companies’ operating expenditure to a fund established by the Trust for the host communities.
The passage of the Bill has not gone down well with people of the Niger Delta in particular and a cross section of Nigerians.
The controversy over the Host Community Development Trust was a crucial reason why the PIB was delayed. Previous attempts to pass the Bill in 2009, 2012 and 2018 also failed, partly because of the stiff opposition by the petroleum host communities. The communities, government and operators could not agree on the best way to address the concerns of the host communities. Moreover, there were also issues with defining what constitutes a host community.
While the host communities are demanding more to deal with the issue of the environmental effect of oil operations, the government believes that enough is already being done in this area, given all the agencies that are involved in the development of the Niger Delta region. It is based on this that the PIB 2021 adopted a novel approach to this issue by introducing the Petroleum Host Community Development (PHCD). The PHCD has the objectives of fostering sustainable prosperity, provide direct social and economic benefits from petroleum operations, enhance peaceful and harmonious co-existence between licensees or lessees and host communities, among others.
What is the Host Community Development Fund about?
Section 235 of the Bill requires a settlor (an oil company) or a group of settlors under a joint operating agreement to incorporate a Host Community Development Trust (HCDT). The Trust is to aid the development of the economic and social infrastructure of the communities within the petroleum-producing area. Unlike the 13 per cent derivation, which involves payments going from the Consolidated Revenue Fund (CFR) directly to the State Executive via FAAC transfers, the PIB requires a ‘settlor’ to incorporate an HCDT. The settlor will then appoint and authorise a Board of Trustees (BOT) registered with the Corporate Affairs Commission (CAC). The settlor will, in effect, set the constitution and memoranda of the HCDT BOT, and they will agree to regulations, qualifications and all matters relating to the BOT.
Section 251 requires the settlor to conduct a needs assessment of the community, and develop a community development plan (CDP) to address the identified needs. The PIB requires each settlor to contribute 3 per cent of its actual operating expenditure in the upstream petroleum operations in the preceding calendar year to a fund (Host Community Development Fund) established by the Trust. Seventy-five per cent of the annual contribution shall fund capital projects, 5 per cent is for administrative costs, while 20 per cent is retained as a reserve fund, and invested in utilising the Trust when contributions from the settlor cease.
Justifying 3% for host communities
The Senate had argued, during the consideration of its conference committee report on the harmonisation of the PIB, that it settled for the three per cent because it was convinced the money amounted to half a billion dollars.
According to the Chairman of the Senate Committee on Petroleum Resources (Downstream), Senator Sabo Mohammed Nakudu, the earlier percentage, which was 2.5, was increased to 5 per cent, but later reduced to 3 per cent.
He added that it was reduced after the Nigerian National Petroleum Corporation (NNPC) explained that five per cent was a huge amount of money, and that the enabling environment needed to be created to attract investors because fossil oil was fast going out of fashion.
Shedding more light on the matter, the Senate spokesperson, Senator Ajibola Bashiru, explained that the Bill does not end at its passage.
“From the projection made by the NNPC GMD (Mallam Mele Kyari), who briefed us, it will amount to $502.8 million for the host community development fund.
“That is a huge amount of money that we believe the host community will definitely benefit from.
“So, the 3 per cent operating expenditure will annually amount to $502.83 million.
“The initial projection was 2.5 per cent, and it was increased to 3 per cent. The caveat is that we can always amend the Bill as time goes on.”
Among the many proponents of the Bill is the Minister of Niger Delta Affairs, Senator Godswill Akpabio, who has urged President Buhari to go ahead and assent to it, if it was brought before him.
“No matter the percentage that is given to the oil communities, we may end up with communal clashes. So, I think that we should get started. The journey of a thousand miles begins with a step. We can have 10 per cent of nothing.
“I want us to get started. Even if they arrive at one per cent – that was never there before. Let’s see how the host communities would make use of what they have. From there, we can say, ‘It’s okay. You have managed it properly. Let’s amend the law.’
“The law is amendable. There is always an amendment of the law whenever the need arises. Of course, if they use the money very well, there is always an opportunity for amendment,” the former Governor of oil-rich Akwa Ibom State submitted during a Town Hall Meeting at the NAF Conference Centre, Abuja on Protecting Oil and Gas Infrastructure.
Voices of opposition
The rationale offered for the adoption of 3 per cent to host communities has still not gone down well with the people of the Niger Delta and some prominent Nigerian political leaders. Voices against the perceived injustice to the region in the Bill have continued to escalate.
The governors of southern states (including those of the Niger Delta) have since communicated their rejection of the proposed 3 per cent share to host communities in the PIB. A communique that was issued by the governors at the end of their recent meeting in Lagos State said the governors, instead, supported 5 per cent share to the communities.
Similarly, former Bayelsa State Governor, and now senator representing Bayelsa Central Senatorial District, Seriake Dickson, called on President Buhari not to sign the Bill.
Dickson, who maintained that the Bill did not consider the people, added that it should be sent back for more legislative work and consultations.
Speaking during a press conference at the National Assembly Complex, Dickson pointed out that President Umaru Musa Yar’Adua, who initiated the Bill, proposed 10 per cent.
“As you know, I disagree completely with the 3 per cent. This country is not helping itself, and not helping the investors. If the host communities are not happy, will the investors come?
“You are not dealing with one community. You are dealing with hundreds of communities. No one is engaging the communities. No one is explaining to the people. People, who think they have majority votes, have imposed 3 per cent on the communities. Let’s not talk about signing the Bill. It should be sent back for more consultations,” Dickson said.
Also disagreeing with the clause is Governor Douye Diri of Bayelsa State, who spoke against it when he featured as a guest on Channels Television breakfast current affairs programme, Sunrise Daily. Diri argued that it was unthinkable and total injustice to allot 3 per cent to oil-producing communities, adding that the position of the state was 10 per cent.
“The definition of host communities or oil-producing communities is also worrisome. Oil-producing communities should not be where pipelines are laid. If the issue of what an oil-producing community is not addressed, it is a time bomb that could explode,” he warned.
During the consideration, the Deputy President of the Senate, Ovie Omo-Agege, said that while the Niger Delta wants a deal from the PIB, it, nonetheless, wants a good deal.
Speaking on the clamour for 10 per cent contribution by sector companies to the host communities’ trust fund, Omo-Agege said: “I understand we cannot meet the 10 per cent. But that is the clamour at home.”
He said that contrary to the popular belief that in the next 10 to 15 years, there would be no use for oil, the Niger Delta believes “that no matter the thinking of the investment community, oil will always be relevant.”
He disclosed: “in my Senatorial District and indeed in most of Niger Delta, they are prepared to let this oil remain on the ground until may be another 40 to 50 years when there may be no need for oil again.”
On his part, Professor of Petroleum Economics and Policy Research, Wumi Illedare, said that though there were provisions injected after the public hearing that leave much to be desired, the situation is still redeemable.
“The host community development fund is incapable of the type of development the communities would need. Five per cent or 3 per cent of OPEX is inadequate, stochastic, heterogenous and inequitable. More reliable funding sources are required for HCD to be effective.
“Knowing the benefits inherent in the Bill in an overall sense, I would still recommend the passing of the Bill, conditional on removing some of the provisions that are anticompetitive, inequitable, and perhaps skewed sentimentally to fulfil ‘prebendalistic’ and ephemeral political elitism and fervour!”
As opposition towards the 3 per cent host communities’ trust fund and demands bothering on the definition of a host community continues to gather steam, more questions continue to be thrown up for consideration.
For instance, given that companies operating in the industry already have corporate social responsibility (CSR) initiatives directed at some of these host communities, will such initiatives be transitioned to the HCDF, or will this be incremental to the initiatives already ongoing? It remains unclear whether the Niger Delta Development Commission (NDDC) levy will continue to operate alongside the HCDF, as the PIB did not specify that the NDDC levy will no longer be relevant. Should this be the case, companies may need to assess the impact of the additional cost primarily due to the multiplicity of taxes/levies.