20 July 2013, Abuja – Key government agencies involved with petroleum revenues as well as other stakeholders have faulted the setting up of a special fund for oil communities as proposed in the Petroleum Industry Bill.
The Revenue Mobilisation, Allocation and Fiscal Commission, RMAFC, said creating the Petroleum Host Communities Fund will effectively create a 4th tier of government, while the Nigeria Extractive Industries Transparency Initiative, NEITI, said the fund may be doomed because procedures for administering it were not clearly defined.
Also, Niger State Governor Mu’azu Babangida Aliyu and his Kaduna State counterpart Mukhtar Ramalan Yero opposed the special fund, which would funnel additional N176 billion yearly to the oil communities. The bill seeks to create a Petroleum Host Communities Fund into which oil companies would have to pay 10 per cent of their monthly profits from exploration activities.
Speaking at a public hearing on the bill at the Senate in Abuja yesterday, RMAFC chairman Elias Mbam said the fund conflicts with the constitution and the problems it seeks to address have already been tackled by 13 per cent oil derivation, as well as by other federal intervention measures.
“The Petroleum Host Community Fund is already addressed by 13 per cent derivation, the Niger Delta Development Commission, NDDC, and the Federal Ministry of Niger Delta,” said Mbam, who was represented by Alhaji Umaru Abba Gana.
“It will also create a constitutional problem because it is attempting to create a fourth tier of government. According to the provisions of the 1999 constitution, revenue accrued to Nigeria can only be shared among the federal, states and local governments. Therefore when created it will grossly affect revenue for the three tiers of government, hence section 118 of the bill be expunged,” he added.
The RMAFC chairman also opposed what he called “enormous” powers for the petroleum minister as provided in the bill, saying this would “weaken the institutions” to be established under the PIB.
He said the bill was silent on revenues to be generated by about 10 agencies that it seeks to create, including the National Oil Company, National Gas Company and the National Petroleum Assets Management Company.
He said there should be a provision for such agencies to remit their revenues to the Federation Account in accordance with the constitution.
Also speaking at the hearing, NEITI chairman Mr. Ledum Mitee said the modalities of operating the Petroleum Host Communities Fund were not clearly defined and that this could affect its functionality.
“The mode of disbursement of revenues in the host community fund is not provided for in the bill and there is no structure, and no detailed functions and objectives. NEITI is however concerned that the bill has no governance rules, and fails to state how the PHC Fund shall be administered,” he said.
“Instead, the minister is mandated to make regulations on entitlement, governance and management. No time period is given for the minister to make these regulations, leaving open the possibility that the fund could end up not functioning in the absence of clearly defined procedures.
“The minister’s role should be primarily one of policy-making, and therefore this office should not be given the mandate of enacting regulations to govern its existence and utilisation.”
Mitee also spoke against the powers given to the oil minister in the bill. “It is necessary to reduce the powers of the minister and create strong autonomous institutions that will promote effective governance,” he said.
“Also, appointments and removal of heads of institutions created by the bill should be with concurrence of the National Assembly.”
In his submission, Niger State Governor Mu’azu Babangida Aliyu, represented by Attorney General Abdullahi bawa, said the enormous powers for the oil minister were “not justifiable,” as the bill will affect the whole federation.
He re-echoed RMAFC’s position on the host communities fund, saying “it is creating a fourth tier of government indirectly accessing the federal reserves. Ten per cent community fund is merely an attempt to increase the derivation component from 13 per cent to 23 per cent without the required constitutional amendment.”
Governor Mukhtar Ramalan Yero of Kaduna State, represented by his Attorney General Jonathan Kish Adamu, also opposed more powers for the oil minister as well as the creation of the host communities fund.
‘Don’t politicise PIB’
However, Petroleum Minister Diezani Alison-Madueke said the PIB did not in any way grant her too much powers.
“There is no law that confers on the minister of petroleum in Nigeria as many powers as the current Petroleum Act,” she said.
“The PIB has reduced those powers because we worked very hard to reduce them in a number of ways. As a matter of fact, we took as best practice the laws of those places like the United Kingdom, Malaysia and Norway and yet, we did not confer upon the Minister of Petroleum Resources in Nigeria the extent of powers that those countries have conferred on their ministers. So we actually mitigated about the powers of the petroleum minister.”
She lamented that the issue of powers conferred on her office by the PIB “has been completely taken out of context because if you compare the powers of the petroleum minister under the PIB in Nigeria, they are less than those of his/her counterparts in places like UK, Norway and Malaysia.”
Mrs. Alison-Madueke said full implementation of the law when enacted will be in the next seven years or more and that by then she would not be in office as minister.
“By the time your National Oil Company is fully up and running, working seamlessly, we are talking about four, five or six years down the road. By the time other institutions and entities look forward, as delineated in this bill, are in full implementation and running as efficiently as we expect them to run, we are talking of six, seven years’ time down the road. By that time, President Goodluck Jonathan and the Petroleum Minister, Allison-Madueke, will not be in office. That is obviously clear. So this is not a bill that should be personalised or politicised,” she said.
On their part, the Oil Producers Trade Section (OPTS), representing multinational oil companies in Nigeria, described the PIB as not “investment friendly.”
“Nigeria will have one of the harshest fiscal regimes in the world. This will make Nigeria uncompetitive, projects uneconomic, meaning there is not an acceptable return on investments,” said OPTS chairman Mr. Mark Ward.
“All these come on top of many other taxes and levies we pay today such as the NDDC levy, NCD levy, Education tax, etc which will make it difficult for Nigeria to attract the much needed capital investment,” he added.
The public hearing, which was organised by the Joint Senate Committees on Petroleum Upstream, Petroleum Downstream, Judiciary and Legal Matters, is scheduled to continue today.
*Turaki A. Hassan, Daily Trust