ABUJA — Nigeria will lose $3 billion a year due to changes in tax terms proposed in an oil reform bill before the National Assembly, the government’s oil transparency agency said, yesterday.
The Petroleum Industry Bill, PIB, which was supposed to rewrite Nigeria’s decades-old relationship with its foreign oil partners and alter everything from fiscal terms to the structure of the state-oil firm, has missed many deadlines.
The latest draft failed to pass into law before the end of the last administration but a new set of lawmakers in the National Assembly, following April elections, were able to pick up where their predecessors left off.
Lawmakers were expected to begin debating the clauses within the PIB soon but the oil minister has said it is unlikely to pass before the end of the year and industry experts have said it could be even later. Due to the wide-ranging nature of the legislation, there have been years of negotiations between stakeholders in the industry.
Foreign oil companies, including Royal Dutch Shell, Exxon Mobil and Chevron, complained that the original PIB proposal imposed higher tax and royalty levies that would deter investment in deep offshore projects, the future for exploration in Africa’s biggest crude exporter.
Nigeria Extractive Industries Transparency Initiative, NEITI, a government agency in charge of auditing the nation’s oil industry, said the fiscal terms in the latest draft of the PIB were now in favour of oil companies.
The agency said: “NEITI does not see the rationale for passing a bill that is designed to reduce government revenue from petroleum operations by a minimum of $3 billion annually through inappropriate and unfavourable adjustments to the fiscal provisions.”
“Sadly, the House of Representatives Report establishes fiscal terms with a government share of oil revenues below internationally competitive levels and with a structure that will result in a rapid erosion of government petroleum revenues during the next 5 years.”Delays to the passage of the PIB have caused uncertainty over the future framework of working in Nigeria, costing the industry billions of dollars of potential investment and the government much-needed revenues. Foreign oil firms and the government have urged that some version of the bill is passed soon to bring certainty and investment back into Nigeria’s energy sector.