Page 5 - AfrOil Week 33 2021

AfrOil COMMENTARY AfrOil
Now that the president has signed the PIB, Abuja can start the process of implementation. This is likely to generate some controversy, given that the final version of the bill reserves only a 3% share of total oil expenditures in the previ- ous year for the communities that host oil and gas development operations. Representatives of many host communities in southern Nigeria, where most of the country’s onshore fields are located, have complained that this share is too small and have lobbied for 5% or 10%.
This issue has the potential to become con- tentious. Resentment of federal policies on oil and gas development is widespread and long-standing in these southern host commu- nities, and it could intensify if the PIB attracts more investment to the hydrocarbon sector as planned.
Host community concerns
But according to Mele Kyari, the group manag- ing director of state-owned Nigerian National Petroleum Corp. (NNPC), host communities are actually likely to realize greater gains under the new legal regime, even though the portion of investments to which they are entitled is rel- atively small.
During an appearance on the Arise televi- sion channel earlier this week, Kyari noted that the oil and gas sector’s total expenditures had amounted to about $16bn in 2020. A 3% share of this sum would put host communities’ take of 2020 investments at $480mn, and the NNPC chief reported that he expected the figure to rise to $500mn per year in the near future. This is more than the amount currently allotted to the Niger Delta Development Commission (NDDC), a parastatal agency established to fos- ter economic development in the Niger River Delta region, he noted.
“[Three percent] of your operating expend- iture is a huge number. Many people argue around whether it should be 10% or 5% or 3%. But percentage of what? I think that’s what most people don’t understand today,” Kyari told Arise. “Last year’s operating expenses for the year was about $16bn. [Three percent] of $16bn is a large number, somewhere around $500mn-plus. That’s because in today’s context, it is probably bigger than the NDDC. That’s really what it is. That’s what you’re providing.”
He went on to say that the PIB would also give host communities more flexibility. Rather than waiting for NDDC to decide which projects to execute and which sites to develop, these com- munities will be able to exercise far more control over their share of oil and gas investments and decide which projects to fund, he said.
This represents a significant departure from previous efforts to aid the Niger River Delta, he added. He acknowledged that the federal gov- ernment’s past attempts to do so had not been executed well, even though they were designed to meet corporate social responsibility (CSR) objectives.
Change in NNPC’s status
The managing director also made note of other changes in the pipeline, pointing to plans for transforming NNPC into a company that would no longer be directly funded by the government.
Under the PIB, NNPC will still be majority government-owned but will not act as an arm of the state. Instead, it will have to operate under the parameters of the Company and Allied Mat- ters Act (CAMA), he told Arise.
“The meaning of this is that this company will just be another privately-owned company, in a sense,” he commented. “This company will pay taxes, this company will pay royalties, and this company will deliver dividend[s] to its shareholders. This isn’t the situation today, because the corporation has no such obligation today.”
The switch to this new structure should be complete by early next year, he indicated. “What this bill will do now is that in the very short term, within the framework of the Petroleum Industry [Bill], within six months, a new company will be incorporated,” he said. “That means [nearly] all liabilities and assets of this company will be transferred to the new company.”
NNPC is heading for a certain amount of restructuring and divestment of assets, Kyari added. “By the way, the bill is also very clear that some toxic assets of the corporation [will] no longer would be with the corporation,” he stated. “But the shareholders can decide to keep some of the assets and leave some within the corporation.”
He did not say whether any specific assets were being targeted for sale or liquidation.™
Kyari acknowledged that the federal government’s past attempts to aid the Niger River Delta had not been executed well
Kyari says the PIB will allow southern host communities to choose their own development projects (Photo: NDDC)
Week 33 18•August•2021 w w w . N E W S B A S E . c o m
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