Weep for PIGB, weak governance institutions in Nigeria

Nigeria’s erratic democratisation process has been built around strong personalities, crony capitalism and weakening institutional frameworks, a situation the Petroleum Industry Governance Bill (PIGB) sought to rectify for the oil and gas sector.

Weep for the PIGB, it has hit an end of the road and may take a while to rebound, as Nigeria loses seventeen years of effort. The point of the PIGB was to reduce the concentration of power in one person, which is the petroleum resources minister.

Nigeria presidency’s failure to assent to such industry regulation will continue to choke new investments in the oil and gas sector. This is because the clarity, certainty, accountability and transparency, which investors seek, can only be guaranteed where there are strong institutions which check and balance each other.

The only option available is for the National Assembly to overrule the President. This would require a 2/3rds majority of members present and voting in both houses of the Assembly. In view of the current political climate, this does not seem likely.

The opacity in Nigeria’s oil and gas sector stifles the inflow of new investments into the sector, which is estimated at $15 billion per annum, in lost opportunities.

One of the signs of dearth of new investments in Nigeria’s oil and gas industry is the declining crude and condensate production. Nigeria’s crude and condensate production has declined by 30 percent relative to its peak in 2005, 2.65 million barrel per day in July as against 1.84 mbpd in June 2018.

This can only worsen as Muhammadu Buhari, president of the Federal Republic of Nigeria fears that moving the decision making centre in the sector away from the whims of a petroleum minister to institutions such the proposed Nigeria Petroleum Regulatory Commisssion (NPRC), will dilute a long tradition of power concentration.

Meanwhile, the NPRC will report to the National Assembly, putting in place a system of checks and balances necessary for vibrant institutions in the oil and gas sector and drive investment inflows.

Perhaps, the best advice to Africans on governance was the one given by Barack Obama, former United States President, at a speech in Accra, Ghana in 2009 where he stated that Africa does not need strongmen but strong institutions. He traced the violent history and poor economic performance of the continent to failure of institutions. The PIGB was designed to enthrone the reign of strong institutions in the governance of the oil and gas sector.

Sadly, his admonition did not cut any ice with Nigerians. They continued to believe in the possibility of a strongman coming to fix the country in one go. That was largely the motivation for electing Buhari as Nigeria’s president during the 2015 elections.

Buhari’s appeal, aside from his famed integrity, has a lot to do with his tyrannical past as a no-nonsense military dictator who could be brutal, bypass laws, if necessary, in dealing with corrupt people and in pursuance of the common good. He was seen as the Nigerian messiah.

But as is often the case, reforms initiated even by the strongest of rulers run into the headwind of weak institutions and are sooner or later torpedoed by predatory public officials who thrive in the context of weak institutions.  This explains the recursive nature of economic growth and progress in many sub-Saharan African countries.

August 29, Buhari, declined assent to the Bill, alleging it whittles down his powers and in a press release raised three concerns. However, energy experts and analysts have faulted these claims.

The first executive claim was that the proposed retention by Nigerian Petroleum Regulatory Commission (NPRC) of 10 percent of revenue it generates from various sources will nibble away revenue accruing to the Federation Account Allocation Committee (FAAC). Secondly, that the scope of the Petroleum Equalisation Fund (PEF) is unclear and lastly, that the legal wording of the Bill is ambiguous. These concerns were addressed in the PIGB. Besides, there were several public hearings and these concerns could have been raised then.

However, people with deep knowledge of the oil and gas industry in Nigeria and across Africa have said one of the major reasons for not assenting to the PIGB is the president’s loss of power to “award and renew oil licenses, award marginal fields, and appoint board members to the Nigeria Petroleum Regulatory Commission (NPRC)” Dolapo Oni, former head of energy research at Ecobank Plc tweeted August 30.