August 26, 2020

NNRC identifies gaps in Nigeria’s oil sector, proffers solutions to strengthen PIB

Refinery, 462,000 bpd

File photo of a refinery.

File photo of a refinery.

The Nigeria Natural Resource Charter (“NNRC”), a non profit organization, has said it has identified key petroleum sector gaps that must be resolved to strengthen Nigeria’s petroleum industry.

The NNRC in its 2019 Benchmarking Exercise Report also provided a broader analysis of petroleum sector gaps in country, while offering suggestions and recommendations.

The Report presents the biennial findings from an assessment of Nigeria’s petroleum sector which covers from 2017 to 2019.

According to the report, these identified gaps can be resolved for the benefit of Nigerians if the government incorporates the international best practice principles extoled by the NNRC into the anticipated industry reform legislation, the Petroleum Industry Bill (PIB).

It cautioned that, “If not addressed, the legislation will be insufficient to address the pervasive institutional, regulatory and process gaps experienced in the industry since the law was first contemplated two decades ago.”

The report identified gaps in for key areas which included governance, administration, fiscal framework and management of local contents
The gaps identified in administration, according to the report include unchecked discretionary power, non transparent bidding process, poor sector infrastructure, and multiplicity in license administration.

ALSO READ: Libyans protest corruption, living conditions for third day

It recommended that the Principles to improve such gaps in the Oil and Gas Industry should include reduction in bureaucracy, and improved efficiency, reduce cost of doing business, transparent licensing process, efficiency in acreage management and elimination of barriers to entry.

The report also identified lack of transparency in contract terms, multiple taxation, multiplicity of tax collecting agencies, declining competitiveness, revenue management issue as major gaps in the fiscal framework of oil industry industry.

It recommended that the principles to improve the fiscal framework should include flexible and responsive fiscal framework, capacity enhancement for administration Institutions, transparency of fiscal terms, simplify tax administration, establishment of savings mechanism for economic stabilization and future generations.

The report states further that Identify gaps in managing local impacts include lack of define frameworks to enhance trust, poor monitoring of the environmental impact of extraction, duplicity of functions, as well as ineffective institutions.

It stated that, “principles to improve managing local impacts include Transparency and accountable management of resources, adopt effective dispute resolution, compensation mechanism or penalties for pollution, direct economic benefits and disbursement to Host communities to restore sense of ownership, meaningful community  participation in project identification and development.”

Gaps in Governance identified include opaqueness, overlapping regulatory roles, leakage and theft, funding constraints for NoC, short term strategies  for sector, ineffective regulator.

It recommended Clarity and separation of roles, disclosure to achieve transparency, merit-based appointments, workable funding mechanism for NoC, strong regulator to ensure sector effectiveness, reduction of political interference in appointments, commercially defined priorities for NoC, penalties imposed to encourage legal compliance.