Month: August 2015

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Six Reforms the Nigerian Government can Undertake Prior to the Passage of the PIB (Part I)

Introduction

Nigeria’s proposed wide ranging oil and gas industry reform bill, the Petroleum Industry Bill (“PIB”), has failed to secure the approval of the National Assembly since 2008. The bill which seeks to reform government institutions, change the fiscal framework,and institute domestic gas reforms amongst other objectives has stalled at the National Assembly due to a wide range of disputes over its terms and mechanisms. According to Austin Avuru, the Managing Director of Seplat, one of Nigeria’s leading indigenous oil and gas companies, the delay in passing the PIB has contributed considerably to reduced investments into the sector.

 

The fall in investments will have a long term negative impact on Nigeria’s oil and gas industry with a reduction in government revenues, loss of jobs and the damaging effects associated with a failure to replace reserves. In spite of these apparent consequences, the new government is yet to enunciate its proposals with respect to the PIB, its passage and proposed timelines. Indeed, the Senate Majority Leader, Ali Ndume has stated that the passage of the PIB is not currently a priority of this Senate.  In any case, we believe that the new government will seek to make changes to certain aspects of the bill including fiscal & institutional reforms.

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Oil and Gas Industry Reforms to Commence Prior to the Passage of the PIB

The newly appointed Group Managing Director of NNPC, Dr. Ibe Kachikwu recently indicated that the reform of Nigeria’s oil and gas industry will start prior to the passage of the Petroleum Industry Bill.

We reported earlier this year that the House of Representatives passed the Bill in the 7th National Assembly, however, the Senate failed to pass the PIB and has not taken up the House version in its 8th Assembly. Indeed, the Senate Majority Leader, Ali Ndume, has been quoted as saying that the PIB was not a priority of this Senate.

The Buhari government is expected to make a number of changes to the Bill, particularly in relation to institutional reforms and the fiscal regime. The absence of a clear policy statement and indicative timelines from the government is, however, a cause for concern for investors.