It’s clear that for the Nigerian oil and gas sector to attract further investment – both at home and from abroad – it’s vitally important that we create an industry that is robust and transparent in the way that it is funded, regulated and structured. Our national government has already made great progress in this area and – combined with increased stability in some of the more volatile oil-producing areas – it seems that investment is on the way up in our sector. And while there is still much work to be done, we can be proud of the changes that have already been made.
A framework for change
One of the most fundamental pieces of governmental reform in this area has been the Petroleum Industry Governance Bill (PIGB). The bill – which was passed by our nation’s senate on 25 May last year – has gone a long way towards introducing a new legal framework for the country’s oil and gas industry to operate within. The Petroleum Industry Governance Bill addresses the urgent changes that were required in terms of the governing institutions that regulate the industry, defining and clarifying roles and establishing more efficient commercial structures.
“Our nation’s oil and gas industry has come a long way in the past few years,” says our Chairman, Onajite Okoloko. “Only a short time ago, the Nigerian oil and gas sector was struggling – the global price of crude oil was down, tax revenues from the industry were also suffering, and we had a state energy company that was badly in need of reform. It is to our government’s great credit that that process of reform has finally got underway – and we’re now seeing the fruits of that in terms of the increased investment in our sector.”
Energy consultancy Wood Mackenzie have estimated that our nation has lost around $75bn since 2014 due to plummeting royalties and tax revenues from the oil and gas industry – so it’s clear that reform was badly needed. The Petroleum Industry Governance Bill was a welcome step forward then, but it’s only the first stage in an ongoing process of reform by our nation’s government. PIGB has addressed the issues of how Nigeria’s oil and gas industry is structured, regulated and funded – but subsequent bills that are currently before the Senate – namely The Petroleum Industry Fiscal Bill and the Host Community Development Bill – will take the reforms to the next stage.
New opportunities to come
The signs for the industry overall are positive, and the impending sale of more state equity in joint-venture (JV) oil assets (which it is estimated will raise around N710bn) is another encouraging sign that the government feels that progress is being made in the sector to make it more attractive to investors.
“The reform is aimed at increasing private sector equity participation to improve efficiencies in the sector and also provides revenue to the government, which will be deployed solely and exclusively for creating new assets in Nigeria,” says the Debt Management Office (DMO).
“A key aim of the Petroleum Industry Governance Bill was to change how our industry is structured, regulated and funded, and it’s clear that great progress has already been made in this area,” says Mr Okoloko. “One of the key reforms introduced by PIGB was to restructure and reorganise the state oil company, the Nigerian National Petroleum Corporation (NNPC), and this increased transparency is hugely welcome. With a more robust system comes greater trust, and that should encourage even more inward investment in the longer term.”