When the idea for a Petroleum Industry Bill (PIB) was conceived nearly 20 years ago, Norway’s energy fund, which was started in 1990, had risen to over $150billion. Today, that fund is over $1trillion but Nigeria’s revised PIB has no provision that will ensure oil funds are accumulated.
This says it all that there is so much that is wrong with the much-hyped oil industry bill. That it is not a perfect document. Be that as it may, Nigerians, especially major stakeholders in the oil industry, still want the bill passed despite its imperfections.
It is so clear to see that Nigeria is not paying attention to what is happening around the world. The idea seems to be lost on the managers of the country and its economy that the country is no longer the oil game changer in Africa as other oil producing countries on the continent offer better and more incentives to operators in the industry.
In the past couple of years, we have seen more international oil companies move offshore which is a sign of discouragement. This means that it is high time Nigeria realized oil is no longer a big deal and, therefore, does not deserve the attention it gets, more so with its contribution to gross domestic product (GDP).
It is pertinent to note that, the revised PIB, like the ones that preceded it, ignores the fact that the world is moving away from fossil fuels and the opportunity to prepare for energy transition and make the most from crude oil is slipping away.
The warning from the Nigerian Extractive Industries Transparency Initiatives (NIETI) is quite instructive. The body has consistently warned that constant oil price volatility exposes oil-dependent countries like Nigeria to regular economic crises which calls for proactive actions.
One way to address this limitation is to set up a rainy day fund. Though Nigeria has a fund to save oil windfalls above budgetary benchmarks, NEITI said the funds are mostly inadequately ring-fenced and are too tiny to fully serve the intended purpose. As oil income dwindles and any hope of windfall dims to a flicker, the fund will get increasingly smaller.
The precarious nature of the Nigerian fund was exposed during the Covid-19 induced lockdown last year, when Nigeria’s three ‘rainy day’ funds – Stabilisation Fund, Excess Crude Account, Nigeria Sovereign Investment Authority (NSIA) – with about $2.25 billion, was able to fund about 7.7 percent of the revised 2020 federal budget.
But this, when compared to Norway with a sovereign wealth fund worth more than $1 trillion is very poor. To lessen the impact of COVID-19 on the government’s earning, Nigeria withdrew $150million but Norway cashed $37 billion. Norway’s withdrawal ($37bn) is about 25percent higher than the Federal Government’s N10.5 trillion 2020 budget. And that is the big worry.
We advise the Nigerian government to brace up for the future that is already here. There is a big picture, which the country does not seem to be looking at. Experts are of the view that energy transition from fossil fuel to renewable energy will happen in the next five years and that, to us, should be food for thought for the government.
This transition means that Nigeria’s strong hold on oil, which is a fading future, is outdated because the end of fossil fuel is here.
Although the PIB has some commendable provisions such as bringing clarity to what investors could get in return for their investments; attracting more revenue for government and bringing the oil sector abreast of modern global reality, there are still a few issues such as financial savings that are not dealt with.
We share analysts’ view that, to complement a progressive PIB, lawmakers would have to amend Section 162 (1) of the 1999 Constitution, which prescribes that government income, apart from personal income tax, should be placed in the Federation Account and shared among the Federal, State, and Local Governments.
All these imperfections notwithstanding, we are of the strong opinion that the bill should be passed. To follow on the heels of this is the privatization of the Nigeria National Petroleum Corporation (NNPC), which, we hope, will put a stop to corruption in the country’s opaque oil industry.