Nigeria: Report on the Petroleum Industry Bill

Aaron Sayne, a consultant for the Revenue Watch Institute, has published policy recommendations with background on Nigeria’s Petroleum Industry Bill (PIB). It is a complex piece of legislation that promises to reform to the country’s energy sector and highlights the potential benefits of greater transparency and accountability. If passed, the PIB—which has undergone at least three iterations in as many years—would directly affect international oil companies (IOCs), investors, intergovernmental relations, and nongovernmental organizations alike. While oil historically provides 80 percent of government revenues and at least 98 percent of Nigeria’s export earnings, the energy sector  has long been characterized by graft, opaque licensing processes, and decreased outputs. The delay over the PIB has unnerved investors and perhaps discouraged new activity by IOCs.

Recent developments in the upstream and downstream sectors have also raised concerns. The Nigerian government removed a clause in the PIB that allows for incorporated joint ventures among international firms and the Nigeria National Petroleum Corporation (NNPC), leading to some criticism in the local media. One IOC has decided to sell four of its onshore blocks. Deziani Alison-Madueke, Goodluck Jonathan’s controversial oil minister, has been cleared to return to the cabinet and faces renewed criticism over the sluggish passage of the PIB through the National Assembly.

In the context of current and longstanding issues in Nigeria’s oil industry, Sayne’s new report provides succinct policy recommendations, with six tangible objectives specifically aimed at improving transparency and accountability. His prescriptions range from creating new regulations of downstream licensing and lifting (during 2008, nearly 70 percent of all government oil revenues changed hands during this process), to increasing the transparency surrounding upstream contracts, to mandating annual audits of NNPC and its subsidiaries. The report is part of a larger five year project called the Facility for Oil Sector Transparency (FOSTER). Implemented by Revenue Watch Institute, Oxford Policy Management, and the Center for the Study of African Economies, FOSTER began in 2009. Sayne’s report and its useful appendix are available here.

A few weeks ago, I also blogged about another piece of legislation in Nigeria, the newly passed Freedom of Information Act, that Sayne notes may also help to improve transparency and accountability in the oil sector. The bill took over a decade to become law, and it is a major step forward. In response to a number of requests I received, I am publishing the text of the law here (pdf).