- Wednesday, 29 January 2014
Nigeria occupies the position of the world’s 12th largest producer, and 6th largest exporter of petroleum. The country sits over the largest natural gas reserves in the African continent. Crude oil exploration, refining and sales contributes an estimated 20 per cent of Nigeria’s Gross Domestic Product (GDP), 93% of hard currency earnings, and almost 66% of revenues accrued by the country’s Exchequer authority and allotted as national budgetary expenditure in 2007.
While the 1995 Nigerian Investment Promotion Commission Act Nigerian Investment Promotion Commission Act, Chapter N117, Articles 17-27 of Decree No 16 of 1995
Laws of the Federation of Nigeria provides for 100% foreign ownership of businesses in every other industrial sector, this provision excludes foreign ownership of companies in the country’s lucrative oil and gas industry (“Foreign firms may participate as technical partners, but they will be limited to a maximum of 40% equity participation”, Bronwen Mamby; “The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria’s Oil Producing Communities” p.31,). For instance, Nigeria’s Federal Government retains between 60% to 80% equity in all international oil majors involved in oil exploration activities in Nigeria and provides funds for their activities in equal measure.
Reasonably, Nigeria’s Federal Government authority is interested in attracting investment in oil sector of the economy, as a way of providing sufficient funds to expand capacity in oil production, in pursuit of the country’s aspiration towards becoming among the first 20 most prosperous economies by the year 2020.
Towards this end, a brand new legislation christened the Petroleum Industry Bill (PIB) was introduced in the country’s Federal Parliament. Tailored to increase efficiency and transparency in gas and oil production, the proposed legislation seeks to transform structure, tone and enforcement of regulations governing the country’s oil industry. In this regard, the proposed legislation would achieve the splitting into three parts and full commercialization of the country’s oil monopoly, i.e., the state owned National Petroleum Corporation (NNPC). Previous to this, the Nigerian an Oil and Gas Sector Reform Implementation Committee (OGIC) was established by Nigeria’s Federal Government, with the mandate to submit recommendations for PIB take-off. The OGIC recommendations were submitted in 2008, while first draft of the PIB, specifying the framework for the restructuring of Nigeria’s hydrocarbon sector, clarifying the regulatory and operational roles of the various Nigerian energy institutions, increasing the government’s share of revenues, and increasing and mandating local content requirements was read in the country’s federal parliament submitted in 2008. By 2012, PIB a watershed was achieved in the evolution of the country’s PIB legislation with the provision relevant authorities permitting the deregulation of the downstream sector of Nigeria’s oil and gas sector of the economy