28 November 2014
Nigeria’s Oil Reforms
It is ironic that Nigeria – the tenth largest country in oil reserves – imports most of its fuel. This fact may perhaps explain why Nigeria's oil industry -- rather than reducing socio-economic tensions -- has contributed to false hopes and listless GDP growth. Much of Nigeria’s current woes are the result of corruption, governmental incompetence and underinvestment in industry. Rather than Nigeria showing mere symptoms of the Dutch disease, it seems to have died entirely. It is time for Nigeria to be brought back to life.
The Petroleum Industry Bill (PIB) promises to improve Nigeria’s situation. First presented in 2012, it was based on a list of recommendations by the Oil and Gas Sector Reform Implementation Committee. The PIB recommended a new regulatory and institutional framework that would guarantee greater transparency and accountability in the sector. The PIB would also ensure a greater fiscal take by the government, acknowledge the potential of gas investments, and overhaul the tax regime.
Opposition from International Oil Companies (IOCs) and the National Assembly has stopped the bill from approval, thereby converting an opportunity to stimulate investment into a barrier against it. IOCs do not want to invest amidst uncertainty over the PIB, Nigeria’s fiscal take, and changing definitions of "profit." Inaction from Nigeria’s legislature is even more striking. Perhaps corruption explains their preference for an opaque system plague by fraud, but they should see the need for action to protect Nigeria from collapse.
Bottom Line: It is sink or swim for Nigeria’s petrol industry. The improving investment climate for extraction industries in neighboring countries threatens Nigeria’s domination, and the current legislative paralysis is not helping. The PIB must be approved.
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