Introduction:
The Nigerian Petroleum Industry Bill (PIB) is at the moment languishing in obscurity somewhere in the National Assembly unattended to by the honorable members at the instigation of Governor Babangida Aliyu of Niger State, representing the Northern Governors Association, and Mr. Anthony Sani, representing the Arewa Conservative Forum. The two gentlemen want the Bill dead as written, because of a certain clause within it, known as The Host Community Fund (PHC Fund) that mandates additional funding for oil producing communities from oil companies operating in the region. I disagree with the gentlemen for obvious reasons. There is nothing convoluted in the arithmetic of the PHC Fund as presently structured in the PIB. In addition, funding the PHC Fund does not constitute a drain on our national treasury nor imperil the ability of the Federal Government to meet its monthly disbursement of funds to Local Government Councils as well as to the Component States in the union. Its fundamental goal is to provide insurance against unforeseen catastrophic occurrences associated with oil and gas explorations, and at the same time, providing remedying effect for the social and economic deprivations that the indigenes contend with daily. The PIB is a beautiful law; we should not hold the entire Petroleum Industry in hostage because of a single provision. We can do better. A new energy regime, without any provision for meeting the expectations of the local communities is a misnomer and unsustainable.
Right to Legislate over Natural Resources.
A sovereign
nation is endowed with inalienable rights – rights that are inviolate,
sacrosanct, and undeniable. With these rights, comes statehood. A fundamental component of that statehood
is the inherent rights over natural resources and the ability to make laws to
regulate their exploitation and use. In a nutshell, the rights over natural
resources are not only inherent, but are dully protected by the United Nations
General Assembly Resolution 1803 (XVII) of December 14, 1962 - “Permanent
Sovereignty Over Natural Resources.” With these rights comes freedom to
negotiate and freedom to enter into investment agreements with local and
international investors, while providing safe harbor for the expression of
fundamental human rights, and the pursuit of happiness by the civil society –
the host communities. Nigeria is not an exception. And the Niger Delta region is
not an exception.
God gave us the
Niger Delta and its communities with all its natural resources for our use and enjoyment.
Be that as it may, it remains obligatory on our part to explore and exploit the
natural riches for the use and enjoyment of present generations, and at the
same time, making reservations for the needs and use of the unborn generations
who would have no other land, except the Niger Delta, to call their own. It is
called sustainable development of natural resources. That is the goal and
essence of a modern Host Community Fund. I had cause to review and study the
emerging Petroleum and Energy related laws of most countries that are very rich
in mineral resources, and the major approach these days, given the not so
friendly (protracted) relationship between host communities and host
governments on the one hand, and between the host communities and IOCs on the
other, is to make provisions for the protection of the investment interests of
IOCs, without undermining the expectations and sustainable development of the
host communities. It is all about the local communities or social license. That
is the first step to ensuring uninterrupted flow of revenue to investors as
well as steady influx of taxes and royalties to the host nation.
In the words of
Professor Luke Danielson, a notable figure in the emerging international
framework for the sustainable development of human and mineral resources in
mineral resources-rich regions of the world: “Truly successful projects must be successful for investors, local
communities, and host national economies. Increasingly, it appears that there
is little opportunity for success in one of these dimensions without success in
all of them. A project that has terrible results for investors is not going to
benefit anyone else very much. A project that burdens the government of a poor
country with all kinds of costs of social dislocation and environmental
problems while providing little or no revenue to deal with them is likely to
have a long list of other problems. The idea that the company is going to be
highly successful at meeting its own expectations without meeting the
expectations of other key players is increasingly difficult to accept.” In
other words, success is defined in the context of how much it benefits
investors, local communities and the economy of the host nation – it must be
well-embracing for enduring peace.
What is
required therefore, is a fundamental framework (a Host Community Fund, if you
want to call it that, but I would have rather we label it “Land and Water
Reclamation Fund), developed with a view to ensuring availability of funds for
future generations as well as in the event of unforeseen catastrophic
occurrences in the host communities. It requires balancing the investment interests
of the International Oil Companies and Domestic Oil Companies with those of the
host nation (Nigeria), without undermining the human rights and social
expectations of the host communities in the Niger Delta. That fundamental
framework must be explicitly embedded in the emerging PIB regime. It is a deal
breaker.
As of today,
that emerging trend seems to be at variance with the philosophy of the major
adversaries of the PIB. Governor Babangida Aliyu, representing the Northern
Governors Association and Mr. Anthony Sani, representing the Arewa Conservative
Forum, so far, have succeeded in their toxic, age-old, retrogressive, and
anti-federalism arguments concocted to imperil the passage of the Petroleum
Industry Bill (PIB). These two gentlemen in concert with Governor Yero of
Kaduna State and other influential interest groups operating behind the scene
would rather the PIB died in its entirety, than see the retention of the Host
Community Fund (PHC Fund) or any section of the Bill benefiting the oil producing
communities in the PIB.
The late
President Yar’Adua was conscious of the UN Resolutions regarding rights over natural resources and the aftermath of the failure of the Federal Government to
live up to the demands of the resolution over the years. So he initiated a bold
mechanism for sustaining peace and ensuring human resources development and
socio-economic empowerment in and around the oil producing communities. In his
few years in government as President, he did more to enhance social welfare and
economic development in the Niger Delta than most of the Presidents before him. He understood the concept of social license, knowing full well that
absence of it, leads to social upheaval and hostile investment climate for
stakeholders. Sadly, he did not live long to nurture his baby project into
adulthood.
At this
juncture, I want to state categorically that a PIB, without a provision for a
PHC Fund, or something similar, is inconsistent with the current trends in
Petroleum legislation anywhere in the world. I would rather we don’t have an
energy bill, than to have one, without a provision for insuring against
unforeseen development in and around the oil producing communities.
In spite of every thing,
I am willing to support a gradual elimination of the Ministry of Niger Delta
from our federal system and merging it with NNDC. I will explain that later. My
purpose in this essay is not to critic PIB as currently written, but to address the convoluted
arguments contrived by Governor Aliyu, Mr. Sani, and their consultants to kill the Bill.
Perverted Logic is a Nigerian History.
“In the Universities themselves, the
Federal Government is now contemplating introducing free education. Whatever
may be the merits of this considered step, its likely effect on the University
population must be mentioned. It is going to result in an even greater
imbalance in enrolment, for the simple reason that at the moment, there are a
fair number of highly eligible candidates for University education, mainly from
the educational advanced state, who unfortunately cannot enter University
simply on financial grounds.”
That was
Professor (Senator) Jubrin Aminu, referred to then as Dr. Jubrin Aminu,
Executive Secretary, National University Commission in the mid-seventies. In
the long essay or memo, he successfully fought against the introduction of free
education at all levels by the federal government on the ground that the policy
will widen the already educational gap between north and south – northern
parents, he argued, will not take advantage of any free education initiative
due to their aversion to western culture. It is another way of saying: “Boko”
is indeed “Haram” in most part of northern Nigeria, and we cannot do anything
about it. In his judgment, funding the program wasn’t the issue; the fact that
more of the funds will likely go to the south was enough to kill the program.
And they did – a retrogressive idea, no doubt, which the Military Government
bought hook, line and sinker. See “Educational Imbalance: Its Extent, History,
Dangers and Correction in Nigeria.”
That argument
is consistent with the one being bandied about presently to kill the PIB by
Governor Babangiada Aliyu of Niger State, Governor Yero of Kaduna State, and
Mr. Anthony Sani of Arewa Conservative Forum. So far they have succeeded. In
the words of Mr. Anthony Sani, “I think
those clamouring for such fund must be reminded that we cannot claim one
country and live as if we are on different continents. The concept of
nationhood presupposes bringing of people together to enable them to live up
their synergy for common good. And that is why reduction of gaps in development
and income is not only good politics but good economics as well.” – Anthony
Sani, Sunday Punch of July 28, 2013. Indeed, in the world of Mr. Anthony Sani,
it’s all about the “reduction of gaps in development and income.” Unfortunately
the large scale ecological ills and the attendant adverse economic hardship
that the Niger Deltans have endured for years and will continue to endure are
irrelevant. Killing the PIB, as Anthony
Sani is crusading because a certain provision benefits oil producing areas is another
way of saying; unforeseen environmental catastrophes are figments of one’s
imagination. That’s a hallow presupposition - a perverted logic that reinforces
the view gaining ground in the global energy cycle that, indeed, oil is a curse
to developing countries, especially the Nigerian Niger Delta.
Also, you can
see similar language in this report by This Day Newspaper of August 06, 2013: “Niger State Governor, Dr. Mu’azu Babangida
Aliyu, and his Kaduna State counterpart, Alhaji Ramalan Yero, had opposed the
provision of 10 per cent host community fund in the PIB positing that it may
negatively impact their fiscal position by skewing yet more resources to the
oil-producing states.”
So far, these
gentlemen have succeeded in skewing up the debate to strengthen their perverted
indignation. It is irrelevant that the funding (the 10 percent) of the Host
Community Fund is from Oil Companies. It is irrelevant that the funding of the
Host Community Fund does not in any shape or form constitute a drain on the
Federation Account. It is irrelevant that funding the Host Community Fund does
not by any stretch of the imagination alter one bit the mandatory monthly
allocations from the Federation Account to any of the local councils or states
of the major antagonists of the PIB.
As long as the
funding benefits the oil producing states, it is a bad law. That is the
position of Northern Governors represented by Governor Aliyu and Governor of
Kaduna State, and the position of ACF, and to a large extent, the position of
the northern elders, as unambiguously represented by Mr. Anthony Sani.
While the PIB
languishes unattended in the hands of our law makers at the prompting of the
Northern Governors, gas flaring is continuing unabated in the Niger Delta, with
its devastating environmental and social problems. And yes, as the Bill
languishes unattended in congress, those who are in position to take action are
watching helplessly. Worst still, is the fact that the entire Nigeria Oil and
Gas industry is held hostage, because of a single provision meant to ensure
sustainable development and cordial investment climate in the oil producing
region. I will rather we have a Host Community Fund than the superfluous
Ministry of the Niger Delta. I will talk about that later.
Meanwhile,
below you will find a reproduction of the entire interview granted to Punch
Newspaper by Mr. Anthony Sani of the ACF, followed by a verbatim reproduction
of Section 116,117, and 118 that cover the Host Community Fund in the PIB.
The position of the Arewa Consultative Forum
(ACF) as presented by Mr. Anthony Sani
Mr. Anthony
Sani provides, in his interview with the Sunday Punch Newspaper of July 28,
2013, what I would consider, the most elaborate, but thought provoking position
of the Northern Political leaders with respect to the rejection of passage of
the Bill. According to the Sunday Punch
of July 28, 2013:
“The apex socio-cultural group in the
North, the Arewa Consultative Forum, in response to SUNDAY PUNCH’s inquiry,
said the establishment of the Host Community Fund, while leaving the 13 per
cent derivation to oil-producing states would amount to the whole nation
funding the managerial imperfection of the Niger Delta state governments.”
“The Publicity Secretary of the ACF,
Anthony Sani, said the group was not favourably disposed to the fund, adding
that funds that had been paid to Niger Delta states were used to develop only
the state capitals.”
He said, “ACF is not favourably disposed
to the Host Community Fund because while a section of the PIB provides that 10
per cent of the monthly profits of all oil operations of both onshore and off
shore be paid into the Host Community Fund, the following section provides that
the off shore part of the fund be removed and paid into littoral states.”
“Our grouse is that states have no
environment being degraded separate from the host communities. More troubling
is the tendency of the PIB to forget the existence of 13 per cent derivation
meant for amelioration of effects of degradation of environment of host
communities which have agitated that the 13 per cent derivation be paid
directly to them. Reasons are that the derivation is being used by state
governments to build airports, flyovers and five-star hotels in state capitals
to the chagrin of the host communities.”
“Sani added that though the argument of
compensating for environmental degradation might be tenable, the North was
opposed to the inclusion of profit from offshore operation in the calculation.”
“He said, “If derivation is to compensate
for environmental degradation and/or to reward effort, we still do not see the
wisdom of including proceeds from off shore exploration in the calculation of
derivation, precisely because off- shore exploration does not degrade any
environment and is not due to effort of any community, considering it is in
deep sea.” That was the
position ACF as represented by Mr. Anthony Sani.
The Petroleum Host Community Fund (PHC
Fund) – As it is presently in the PIB.
116. Establishment of the Petroleum Host
Community Fund
There is established a fund to be known as
the Petroleum Host Communities Fund (in this Act referred to as ‘the PHC
Fund’).
117. Purpose of the PHC Fund
The PHC Fund shall be utilized for the
development of the economic and social infrastructure of the communities within
the petroleum producing area.
118. Beneficial entitlements to the
communities
(1) Every upstream petroleum producing
company shall remit on a monthly basis ten percent of its net profit as follows
-.
(a) for profit derived from upstream
petroleum operations in onshore areas and in the offshore and shallow water
areas, all of such remittance shall be made directly into the PHC Fund; and
(b) For profit derived from upstream
petroleum operations in deep-water areas, all of the remittance directly in to
the Fund for the benefit of the petroleum producing littoral States.
(2) For the purpose of this section ‘net
profit’ means the adjusted profit less royalty, allowable deductions and
allowances, less Nigerian Hydrocarbon Tax less Companies Income Tax.
(3) At the end of each fiscal year, each
upstream petroleum company shall reconcile its remittance pursuant to
subsection (1) of this section with its actual filed tax return to the Service
and settle any such difference.
(4) The contributions made by each upstream
petroleum company pursuant to subsection (1) of this section, will constitute
an immediate credit to its total fiscal rent obligations as defined in this
Act.
(5) Where an act of vandalism, sabotage or
other civil unrest occurs that causes damage to any petroleum facilities within
a host community, the cost of repair of such facility shall be paid from PHC
Fund entitlement unless it is established that no member of the community is
responsible. .
(6) The Minister shall, subject to the
provisions of section 8 of this Act, make regulations on entitlement,
governance and management structure with respect to the PHC Fund established
under this Act.
Analysis
First and
foremost, creating and funding of PHC Fund does not in any shape or form pose
any drain on our federal budget or federation account. I want to emphasize
that. Also, the Fund does not by any stretch of the imagination cut into the funds
accruing to the federating states and local councils from the federation
account. I also want to emphasize the fact that funding is from the net profit
made by oil companies – local and international. That is it. But Mr. Anthony
Sani is not buying any of those indisputable facts. He is vehemently and unambiguously
demanding for “reduction of gaps in development and income …” not minding the
social and economic dislocations associated with oil spillage and environmental
degradations prevalent in oil producing communities.
Arguing in
similar vein, Niger State Governor, Dr. Babangida Aliyu, and Governor Ramalan
Yero of Kaduna State, posited that the “10
per cent host community fund in the PIB may negatively impact their fiscal
position by skewing yet more resources to the oil-producing states.” That
was the same argument northern academics put up successfully in the 70s to kill
the introduction of free education at all levels by the federal government - it
will skew more funds to the south, in light of the fact that northern parents
are not favorably disposed to western value system. That was the argument. In
hindsight, they were wrong then, and they are wrong now. Boko Haram insurgency
and the Almajiris population explosion remind everyone that it was a wrong
argument and a faulty premise to defeat free education at all levels.
With respect to
the Host Community Fund, what the Governors are not telling Nigerians and their
supporters is the source or sources of the “skewed” fund. And how that may
adversely “impact their fiscal position” is as illogical as saying gas flaring is
a common occurrence in Niger State - which is a known fallacy.
Making more
funds available to oil producing states to remedy past abuse of federal
character that places south-southerners and mid-westerners in subordinate position
in the distribution of federal largesse and public offices is a legitimate undertaking.
In addition, making
more funds available to oil producing communities is not enough to assuage the
communities for years of unbridled corporate irresponsibility perpetuated by
IOCs and our federal institutions. Making fund available to oil producing
communities from outside federal sources to insure against unforeseen
environmental occurrences prevalent in oil rich regions does not constitute a cut
into the revenue accruing to Niger State or Kaduna State from the Federation
Account. Common guys, speak up and get the facts right.
When the PIB
was first brought before the National Assembly, Governor Aliyu stated
unequivocally that they (the northern Governors) will not offer any statement or
act on the Bill until they consult with the Expert Consultants or Team that they
hope to set up to that effect. So far so good, the hostile language from
Governor Aliyu and that of Mr. Anthony Sani of ACF are seemingly from the same
source - something that their southern colleagues do not know how to do or
consider germane in the circumstance. I will come to that later under “Indictment.”
Another
argument put forward by Mr. Anthony Sani is that the oil producing states are
not spending their allocations wisely – they are using the funds “to build
their state capitals and airports.” Even if that’s the case; it is legitimate.
It’s all about sustainable development - infrastructural facilities are
component part, and in fact, the core foundation of an expanding economy. In addition, what Mr. Sani is not saying is
how the funding of the Host Communities Fund would impact his position as a
northerner and the interests of those he is representing. No, it does not in
any shape or form alter one bit the revenue allocations to any of the states or
local government councils in the geographical north. Also, it does not alter
one bit the revenue source or sources of the federal government. That position
is very clear: the Host Community Fund is based on the net profit of the oil
companies. I do not know how many times I am going to repeat that.
On the issue of
the littoral states, Mr. Sani should be reminded that the fund is not meant to
be shared to any state at the end of every fiscal year; rather, it is set up
for ameliorating goal in the event of the kind of disaster that took place in
the US Gulf of Mexico few years ago. There must be ready funds for such unexpected
occurrences. However, I am willing to cut Mr. Sani some slack here: Section 118
(1) (b) that provides for littoral states should be reworded to read in the
event of natural disaster or catastrophic occurrences, like the Bonga Oil
Spillage, etc. Also, with respect to deep-water exploration/exploitation, there
should be a dividing line between where both the littoral states and the
federal government would share equally and where the federal government would
exercise total control. I have my reason for not excluding littoral states from
sharing with the federal governments with respect to proceeds from deep-water
operations.
I would like to
remind Mr. Sani, who is no doubt, the major antagonist of the littoral states
funding, that in the event of spillage, as was the case in the Gulf of Mexico
few years ago in the United States of America; it is the littoral States that
suffer ecological and economic hardship the most – the sea food industry in
that part of the littoral state went caput.
Our Fulani brethren involved in Cattle rearing and animal
husbandry, are reputed for traversing thousands of hostile and treacherous terrain
sourcing for greener pasture. It is the
same with Sea Food farmers in the oil producing communities – they have to traverse
the deep water for bounteous harvest. Yes, littoral states should not be
excluded from benefiting from proceeds of the exploratory activities going on
in the deep-water around them. They are naturally placed to suffer economically
in the event of oil spillage and related disasters. We should not wait for such
disaster to erupt before sourcing for funds.
Moving Forward:
For a start,
most oil producing countries do not have a Ministry of Niger Delta and Niger
Delta Development Corporation (NDDC), catering to the same region. But most of
them do have a fund, set up to address unexpected ‘catastrophic occurrences’,
spillage, decommissioning exercises, and something for the community to fall
back on when the oil companies ceased operations or when the wells dried up.
That’s where Host Community Fund comes in. In most jurisdictions, it is not a
fund for immediate utilization, but for the future and for the younger and
unborn generations coming into the oil producing communities or communities
that were once endowed with oil and gas.
That is the
main reason that PHC Fund should be rewritten – it shouldn’t be Fund to be
shared to host communities or host states or littoral states, but fund for the
future, when oil ceased to exist, or fund to address ‘catastrophic
occurrences.’ Again, in most
jurisdictions, the funding is directly into a consolidated account – not
reachable by any Governor or council member, except in the event of any of the
occurrences specified in the enabling law.
As I said in the opening statement in this section, most oil producing
nations do not have multiple bodies or agencies catering to oil producing
communities. In the case of the Niger Delta, NNDC is best suited to represent
the interests of the Federal Government in meeting the demands and the
expectations of the host communities that are not adequately addressed by state
government. Adding the Ministry of Niger Delta to the field was to assuage the
region for the massive deprivations that they suffered under past
administrations. It was a massive effort designed to overcome the pains, anger,
and resentment of the Federal Government following the Odi massacre authorized
by President Obasanjo. It was a massive measure to remedy massive failure of
the Federal Government in the region, but in the process, it creates overlaps -
saturation of government presence with little tangible result to show. The need
to coordinate efforts of all the government agencies on the ground, with a view
to ensuring accountability cannot be overemphasized. On that ground, I
respectfully hold that NNDC as presently structured is capable of representing
the interests and the economic objectives of the Federal Government in the
Niger Delta. In that case, the Ministry of Niger Delta should be eliminated,
and systematically merged with NNDC. Truth is there would not have been any
need for a Ministry of Niger Delta, if the past management of NNDC understood
the true essence of sustainable development and accountability. But let it be in record that I am in full and total support of the Host Community Fund (The PHC Fund). That's a deal breaker. You can eliminate the Ministry of the Niger Delta, but the retention of the Host Community Fund in the PIB sacrosanct.
Conclusion.
In spite of everything, I want to make some exceptions to Governor
Uduaghan of Delta State, Akpabio of Akwa Ibom, as well as Imoke, if I remember
correctly, for their positive contributions, so far, with respect to the
unresolved impasse suffocating the passage of the PIB. Unfortunately, I cannot
say the same Governor Rotimi Amaechi of River State, and Governor Oshiomole of
Edo State. I do not know if they are working behind the scene, if not, it is
time they step out and put up a bold face to counter line by line, word by
word, the bogus arguments put forward by Mr. Anthony Sani on behalf of the
Arewa Conservative Forum.
The PIB is a beautiful law, and I do recommend it for everyone to
read. There is more to it than just Host Community Fund; let’s join hands to
rescue it from the stranglehold of Governor Aliyu and Anthony Sani, and give
life once again to a new energy regime. We cannot afford to do less. President
Jonathan and Governor Amaechi, for the moment, should set aside their
differences and collaborate to ensure the passage of PIB in the first Quarter
of 2014. In addition, former President Babangida, as well as his neighbor,
former President Abubakar Ibrahim and all the major owners of oil blocs all
over Nigerians should intervene and save our oil and gas industry from imminent
collapse.
The PIB war is no longer a battle for the NNPC or Ministry of
Petroleum or the Department of Energy to fight; this is a deliberately
contrived political impasse that is blatantly inconsistent with the true
essence of true federalism. Therefore, it requires vibrant and coordinated
political muscles and multi-dimensional counter-attacks to surmount – from the
Presidency, Congress men and women for oil producing areas, State Governors,
every stakeholder in the industry, professional lawyers like us in the Energy
Industry, social media commentators, etc., should all get involved.
At this juncture, I want to remind Governor Babangida Aliyu,
Governor Yero, and Mr. Anthony Sani that every state in a true federal system
has every right to develop at its own pace and to spend its funds as to the
dictate of the realities on the ground in his or her state. On that ground, I
insist that Mr. Anthony Sani of the Arewa Conservative Forum, do his arithmetic
and calculate the revenue accruing to Kano State from the federation account
every year as a result of its numerical strength with respect to the number of
local government councils created for it by the Abacha Government. No one, I
repeat, no one has questioned the resourcefulness of the Kano State Government
in its yearly ritual in the name of group marriages for runaway lovers, who,
history has told us, are incapable of sustaining the marriage forced on them.
If that is the best the State Government can do to alleviate poverty and social
unrest in Kano State; it is a worthy undertaking, in light of the realities on
the ground – realities unknown, for instance, to the Governors in the oil
producing states who, in the instant case, are allegedly building airports and
state capitals. It is the same story with funding of State Police Authority and
implementation of Sharia Law in most part of the northern region. That is the
true essence of true federalism – the ability of each federating state to
develop at its own space – channeling its resources to areas that best suit the
needs of its people. The arguments propounded by Governor Aliyu and Mr. Anthony
Sani to frustrate passage of PIB are not new to us – they are enticing, but
superficial; they serve no useful benefit to no one on the long run. The war
against free education at all levels in the seventies and the accompanied
explosion of amajiris population in the northern region bear witness to that. Oil
is our major income earner; until we manage peace in that part of the country
with genuine intent, no one is safe, economically speaking. Late President
Yar’Adua was very conscious of that reality. Let’s pass the PIB in this first
quarter of 2014, and dedicate it to his memory. If that is the best we could do
for him, it is okay for now.
Happy New Year Every Body.
Alex Ehimhantie'Aiyo Aidaghese
Houston, TX
January 01, 2014
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