IMF Endorses Nigeria’s Oil Industry Reform Bill

Written by Duncan Wednesday, 14 October 2009

Although international oil companies (IOCs) operating in Nigeria have been expressing reservations about the Petroleum Industry Bill (PIB), the proposed legislation yesterday got the endorsement of the International Monetary Fund (IMF).

The IMF delegation is in Nigeria on a 10-day visit as an independent arbitrator to provide an objective evaluation of the controversial PIB.

Under the proposed reforms, the oil industry is to be substantially free from government control and run strictly as a business in a deregulated environment.

Government is also aiming at deriving more revenue from petroleum resources by increasing royalties and taxes payable by oil companies, in addition to giving host communities stakes in the ventures.

But the bill has come under criticism from IOCs who believe the government was trying to create a monopoly for the national oil company and also for the fiscal proposals which are considered uneconomical.
IMF’s Fiscal Affairs Adviser and leader of the delegation, Mr. Charles Mcpherson, told reporters: “It is a very, very exciting project, particularly after knowing how it began and how you worked it out over the years. It’s very professional, very thorough work and so I don’t know what we can add, I hope we can add something.

“The essence of the visit to the Ministry of Finance is to work with the team and look at various aspects of the bill and simply offer our own objective comments. Those themes will be fiscal themes, so the taxation of oil and gas and the economic incentives to be provided and retained. And the second theme I guess is on the commercialisation and funding aspects, that is the IJVs (incorporated joint ventures) and the commercialisation of the NNPC itself.”

He described as very impressive the presentation on the transformation plans for the Nigerian National Petro-leum Corporation (NNPC) which is “absolutely central” to the success of any incorporated joint venture approach and the freeing up of funds in the budget to independent financiers that have NNPC’s activities.

“The third thing we have is obviously very important to you and that is on sector organisation and governance and transparency. Once again, we see all the things that we like to see underscored like transparency and accountability. We may have some observations to make that we hope will help,” he said.

Minister of Petroleum Resources, Dr. Rilwanu Lukman, said Nigeria would visit the World Bank in Washington by year end to seek support for some aspects of the bill.

“We are indeed due to go to Washington before the end of the year to see the World Bank and have discussions with them on the implementation of certain aspects of the draft bill when it is passed into law,” he said.

“We want to prepare ourselves for that eventuality and you will see from the presentation that the idea is to bring in a more robust oil and gas industry, more accountable, more transparent and we will be able to cover the best interest of our country as well as protect our partners who have been with us for a very long time. We are also interested in crafting a bill that will enable other new comers to come in,” he added.

Lukman stated that there was no intention to create a monopoly for the national oil company. According to him, in other countries nobody else was allowed into the oil industry.

He said: “In fact in some countries that we know international oil companies are only there as sort of contractors to the national oil companies. We are confident that when this bill is passed it will usher in a new era in the oil and gas industry and will enable us to benefit maximally from the oil and gas resources and develop these resources in the best way possible so that all the stakeholders are able to benefit. In the long run we have to be in a position to be able to exploit our full capacity and we will continue to moderately invest in exploration development and production capacity.

“We are going ahead with NNPCs transformation as quickly as we can because it is key to this transformation. The National Petroleum Directorate is intended to supplant the ministry because we want to move away from the civil service mentality and really professionalize the department so it can effectively carry out its functions.”

Meanwhile, NNPC has attributed the resurgence of fuel queues in Abuja to the intentional slowdown in product bridging by independent and major oil marketers.

A statement by the Group General Manager, Public Affairs Division, Dr. Levi Ajuonuma, also linked the situation to the refusal of filling station attendants to dispense products through all the nozzles at the filling stations.

Describing the development as “totally unacceptable”,  Ajuonuma accused some independent and major marketers of reducing the number of trucks sent out to bring in products to their stations.

“What has just emerged in Abuja is an illustration. We have noticed that some independent and major marketers have reduced the number of trucks sent out to bring in products to their stations and upon arrival of the few trucks resort to dispensing with a single nozzle.

“The result of this is the artificial queue noticed in Abuja. The NNPC wishes to assure the nation that nothing has changed in its supply dynamics. NNPC maintained that it has over 50 days supply of products in stock,” he said.

Ajuonuma disclosed that the corporation had mobilised all its reception depots to push out as many trucks as are available to overcome the attempt to create artificial scarcity by marketers.

“In view of the robust supply of the product, we wish to appeal to consumers not to resort to panic buying and we also wish to appeal to independent and major marketers to dispense petroleum products with all their serving nozzles. NNPC assures the public that everything is being done to ensure steady supply of petroleum products all over the country,” the statement added.