Governors of the southern states of Nigeria have rejected that 30 per cent of the profit from oil revenue by the proposed Nigerian National Petroleum Company (NNPC) should be dedicated to oil exploration efforts in the oil basins, and other major sections of the Petroleum Industry Bill (PIB).
Following the passage of the PIB by the National Assembly last week, experts had said it was a sign of good things to come in the Nigerian oil and gas sector.
However, the 17 governors of the states issued a communiqué on Monday after their meeting in Lagos, rejecting the PIB section that allocates three per cent of oil revenue as a host community fund, insisting on 5%.
Stating their dissatisfaction with the bill which awaits assent by President Muhammadu Buhari, the governors said: “The Forum rejects the proposed 3% and support the 5% share of the oil revenue to the host community as recommended by the House of Representatives;
“The forum also rejects the proposed 30% share of profit for the exploration of oil and gas in the basins,” it stated.
NNPC has oil exploration activities in the Chad basin in Borno state, Niger, Sokoto, Benue Trough and other inland basins in Nigeria, a development seen by some observers as the reason the Southern governors kicked against dedicating enormous resources to these.
“The forum rejects the ownership structure of the proposed Nigeria National Petroleum Company Limited (NNPC).
“The Forum disagrees that the company be vested in the Federal Ministry of Finance but should be held in trust by Nigeria Sovereign Investment Authority (NSIA) since all tiers of Government have stakes in that vehicle,” the communiqué read in part.
Daily Trust spoke to some petroleum sector analysts on the implications of the stance of the governors. The experts held that the 30% share of profit for the oil and gas exploration is too high at a time Nigeria complains of shrinking revenue, noting that other infrastructural development would suffer.
An Abuja based economic expert Simon Samson Galadima said the 30% of oil revenue for oil exploration seems like a wild goose chase because that chunk of revenue shouldn’t be put on exploration at a time the world is moving towards renewable energy.
Furthermore, this large chunk of money is better utilised for infrastructural development”, Galadima said.
He said the NNPC being held in Trust by NSIA on behalf of the states and FG may seem like an improvement over the current arrangement. “However, it still leaves much to be desired.”
Another expert, Suraj Oyewale also said exploration activities require a lot of money with varying degrees of success chance.
“But 30 per cent of profit oil or gas is still a huge financial commitment to one activity. So the governors have a valid point on this”, Oyewale said.
On the 3% fund for host communities said he would recommend an even lower rate for the host community fund.
“If either of the two conflicting rates must be kept, it should be the 3%. The oil price plunge and foreign exchange crisis have already dealt oil and gas producers a big blow and many operators are struggling with profitability. This extra burden of host community levy is not friendly to investment, given the fact that the NDDC levy still exists at the rate of 3% of the annual budget from oil-producing and gas processing activities of oil and gas industry operators. I, therefore, disagree with the governors on this”, he stated.