Still on the PIB (Petroleum Industry Bill) and the Host Community Funds

The essay you are about to read was first published on this blog on April 4, 2014. 

The Nigerian Petroleum Industry Bill (The PIB): Overcoming the Gerrymandering at the National Assembly. Alex Aidaghese, April 04, 2014. 

Introduction:

As of today, the Nigerian Petroleum Industry Bill (PIB) is languishing in obscurity somewhere inside of the National Assembly, unattended to by our honorable lawmakers at the instigation of Governor Babangida Aliyu of Niger State, the Chairman of the Northern Governors Association, and Mr. Anthony Sani, the Spokesperson for the Arewa Conservative Forum. The two gentlemen, in collaboration with some faceless powerful lobby/interest groups want the Bill dead as written, because of a certain clause within it, known as the Host Community Fund (the PHC Fund). The PHC Fund is, among other things, meant to ensure against unforeseen catastrophic occurrences associated with oil and gas exploration/exploitation in the local communities, with a view to ensuring cordial investment climate, sustainable development, as well as an uninterrupted revenue stream for stakeholders. In the beginning, it was the multi-nation oil companies, most often referred to as International Oil Companies (IOC) that posed the most stultifying heat regarding the passage of the Bill. However, after many years of negotiations, dilutions, and modifications, they reluctantly conceded; thus, paving way for the Bill to proceed to the National Assembly. And while the Minister of Petroleum and her team were busy flying across the globe from London to Houston and to New York back and forth, marketing the yet to be passed, Bill to the "big boys" in the petroleum industry, back home, Nigerian law makers, contrary to all expectations, willingly surrendered themselves as potent tools at the disposal of adversaries of the PIB. That highly respected political leader from the northern geopolitical zone should now pride themselves as "PIB Killer" at the point of breakthrough is heartbroken and very difficult to digest. My purpose in this essay is not to critic PIB or to lampoon its antagonists, but to address the convoluted arguments, the anti-federalism narrative, and the superficial talking points being bandied around to kill PIB by the two gentlemen mentioned above.

A Recap:

When the PIB was first brought before the National Assembly and the Nigerian Governors Forum, Governor Aliyu stated unequivocally that they (the Northern Governors) would have to, first, set up an advisory or expert committee to advise them with respect to the retention or exclusion of the Host Community Fund in the PIB. And until they seek and obtain the counsel of these experts or advisory committee, they will not be able to make any pronouncement on the Bill or instruct northern legislators on how to vote or proceed with respect to its passage.

From all indications, the lingering stalemate and the age-old anti-federalism talking points - collectively and individually marshaled by Governor Aliyu, Mr. Anthony Sani, and Governor Yero of Kaduna State to frustrate the passage of the Bill, as you will see later in this essay - are seemingly the handiwork of the advisory/expert committee. So far, the Northern Governors Forum, under the able leadership of the irrepressible Dr. Babangida Aliyu has succeeded in subduing their legislators and bamboozling them into believing that the entire PIB is written to “skew” more funds to Niger Delta at the expense of the northern region. But what they have succeeded in concealing from their gullible lawmakers or deliberately ignored to address is the source of the fund or its objectives.

As you read, the PIB is dying slowly, and disappointingly, no Southern Legislator or Governor - not even Governor Amaechi of River State, a close confidant of Speaker Aminu Tambuwal - could come up with a bold statement in the National Assembly or at a public forum to persuade or challenge their Northern colleagues to view the Bill in its entirety instead of dwelling on a single clause for their decision. In a similar vein, I am yet to see or read from any of the opportunists masquerading as political leaders and their glorified consultants and advisers in the southern region, audacious enough or conscientious enough to challenge Mr. Anthony Sani and put a lie to his perverted indignation and undo the gerrymandering.

Abuja, today, is abuzz with preparation for the 2015 big event – the Presidential election. So, it is not necessarily business as usual; it is a season of intrigue, scheming, and schmoozing. Those who are in a position to talk are not talking. Everyone wants to be a friend of the north or be seen as a friend of the north as if there is a monolithic north or as is if the antagonists of the PIB are true representatives of the north. And everyone is making friends and scheming on how to appropriate power come 2015. Meanwhile, the goose that laid the golden eggs is on life support.

Without crude oil, the madness and the shenanigans of the moment at Abuja would be an afterthought.

The earlier this industry is regulated, the better it is for the government, the governed, and the stakeholders. It’s all about the conducive investment climate, steady income, and sustainable peace in the region. That is the fundamental goal of a PIB.

At this juncture, I want to state categorically that a PIB, without a provision for PHC Fund, or something similar, is not sustainable - it is blatantly inconsistent with the current trends in Petroleum legislation elsewhere in the developing world. As a compromise, I would rather we eliminate the Ministry of Niger Delta and merge it with Niger Delta Development Corporation (NDDC), than to have a new Petroleum regime, without provisions for Host Community Fund. I beg to move.

The remaining part of this essay is divided into six sections. (1) The contentious or the Ph.D. Fund sections of the Petroleum Industry Bill (PIB), (2) The inherent right of a nation-state to legislate over natural resources, (3) Indisputable facts, (4) Factual Analysis, (5) Moving Forward and Compromises, and (6) Conclusion.

Section 116, Section 117, and section 118 of the Petroleum Industry Bill covering the Host Community Fund (the PHC Fund):

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.

 (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.

The Right to Legislate Over Natural Resources:

A sovereign nation is endowed with inalienable rights – rights that are inviolate and sacrosanct. 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.” This section provides for freedom to negotiate and freedom to enter into investment agreements with local and international investors while providing a 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.

God gave us the Niger Delta and its communities with all its natural resources for our use and enjoyment. And it is mandatory on the part of the Nigerian Government 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 the sustainable development of natural resources. That is the goal and essence of a modern Host Community Fund.

The approach these days, given the protracted relationship between host communities and host governments on the one hand, and between the host communities and IOCs on the other, is to develop a package or framework for meeting the expectations of the host communities. It is all about the local communities and social license. That is the first step to ensuring the uninterrupted flow of revenue to investors as well as the steady influx of taxes and royalties to the host nation.

The arithmetic of the PHC Fund as presently structured in the PIB is free of ambiguity. Its fundamental goal is to provide insurance against unforeseen catastrophic occurrences associated with oil and gas explorations.

In addition, it provides a 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 unsustainable.

In the words of Professor Luke Danielson, a notable scholar in the crusade for 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 the scale an investment benefits investors, local communities and the economy of the host nation – it must be all-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 the availability of funds for future generations as well as in the event of unforeseen catastrophic occurrences in the host communities. That fundamental framework must be explicitly embedded in the emerging PIB regime. It is a deal-breaker.

As of today, the emerging trend seems to be at variance with the philosophy of the major adversaries of the PIB. So far, Governor Babangida Aliyu and Mr. Anthony Sani have succeeded in their toxic arguments concocted by their expert/advisory committee 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 or any section of the Bill benefiting the oil-producing areas.

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. 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.

Indeed, President Goodluck Jonathan’s election as President of Nigeria is important symbolically, but Niger Delta cannot overcome 50 years of abuse of federal character and 50 years of unbridled corporate irresponsibility and 50 years of environmental degradations and 50 years of indiscriminate destruction of their aquatic resources by multi-national oil companies and the Nigerian Federal Government.

Yes, they survived 50 years of neglect and deprivations. That is a fact.

They were fishermen, they were into rubber and they were into the timber. They were industrious, self-secured and self-sufficient. They were loyal landlords, until the uninvited quests confiscated their land, took away the riches of their earth, and imperiled their means of survival.

And yes, they produced and drank ogogoro, but there was no drunkard and no insane delusional or hopeless mind rummaging the swampy landscape scavenging for a piece of the black gold simmering from crevices along the pipelines.

IOCs and the Federal Government of Nigeria took their humility for granted and left them economically pulverized.

There was no burning, and there was no looting. There was no kidnapping of white men and not so white men for ransom. And there was no lamentation of force majeure by Shell, or BP, or by Chevron.

These companies cleaned up their mess in the Gulf of Mexico and elsewhere in the developed and developing World; they must be made to clean up their mess in the Niger Delta. If it is the Host Company Fund that is the best we can do for now, it is a good start.

That is not too much of a demand.

The demand for the integration of human rights and human development within the framework of every investment agreements relating to natural resources is not just an intellectual exercise. It is real and achievable, if diligently pursued.

The earlier our Federal Government and foreign investors embrace and acknowledge the interests and concerns of indigenous people and inculcate those concerns into their final investment agreements, the closer we are to peace and sustainable development in the mineral producing communities in the Niger Delta. Nothing enriches shareholders value more than sustainable income and peaceful investment climate.

It is our firm belief that any State Governor who has an interest in life, liberty, freedom, and fundamental human rights of others, especially people living in and around oil rigs and gas pipelines; any State Governor with genuine concern for living things, creatures, and the environment in and around gas flaring locations; any State Governor who appreciate peaceful investment climate and cordial business relationship with local communities, should not prevaricate on those issues that matter most to the petroleum-producing communities. The late President Musa Yar’Adua set a good example worthy of replication. 

Indisputable Facts:

The talking points being bandied about to kill the PIB by Governor Babangida Aliyu of Niger State, Governor Yero of Kaduna State, and Mr. Anthony Sani of Arewa Conservative Forum are consistent with the line of arguments they contrived to kill free education proposal many years ago - it will lead to widening the existing educational gap between North and South. In the words of Mr. Anthony Sani, “I think those clamoring 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.” - Sunday Punch of July 28, 2013.

Once again, in the world of Mr. Anthony Sani, it’s all about the “reduction of gaps in development and income.” Unfortunately, the large scale ecological devastation and the attendant adverse economic hardship that the people of the Niger Delta have endured for years and will continue to endure are irrelevant. Killing the PIB, as Anthony Sani is crusading, is another way of saying: unforeseen environmental catastrophes, as we have witnessed in the Niger Delta over the years, are figments of one’s imagination. In other words, the Bonga oil spillage did not happen.

With all due respect, Mr. Anthony Sani’s reduction of gaps in income and development argument, illogical as it is, is inconsistent with true federalism and it 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 will 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 percent 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."

I want to repeat; that was the same argument northern intellectuals put up successfully in the 70s to kill the introduction of free education 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 the western value system. That was the argument. In hindsight, they were wrong then, and they are wrong today. 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.

So far, they have succeeded in stewing up the debate to strengthen their perverted logic.

It is irrelevant that the funding (the 10 percent) of the Host Community Fund is from Oil Companies.

It is irrelevant that financing the Host Community Fund does not in any shape or form constitute a drain on the Federation Account.

It is irrelevant that financing 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 government councils or states of the major antagonists of the PIB. As long as the funding benefits the oil-producing states, in the opinion of Governor Aliyu and Mr. Anthony Sani, it is a bad law.

While the PIB languishes unattended in the hands of our lawmakers at the prompting of the Northern Governors, gas flaring is continuing unabated in the Niger Delta, with all its associated environmental imparts and socio-economic problems.

And yes, as the Bill languishes unattended in the National Assembly, those who are in a regulatory position to take action in the energy sector are watching helplessly. Worst still is the fact that the entire Nigeria Oil and Gas industry is being held hostage because of a single clause, and at the instance of a bunch of political careerists.

Factual Analysis:

First and foremost, financing the PHC Fund is independent of the Federal Republic of Nigeria. I want to emphasize that point. Also, the Fund does not by any stretch of the imagination cut into the funds accruing to the various 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 “reduction of gaps in development and income …” not minding the social and economic dislocations associated with oil spillage as well as the prolonged ecological ills characteristics of gas flaring.

With respect to the Host Community Fund, what the Governors are not telling their supporters is the source or sources of the “skewed” fund. And to say that funding may negatively impact their financial position is as illogical as saying gas flaring is a common occurrence in Niger or Kaduna State - which is a known fallacy.

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 ensure 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, get the facts right.

Another argument put forward by Mr. Anthony Sani is that the oil-producing states are not spending their allocations wisely. In his words, 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 – developing infrastructures is a component part, and in fact, the core foundation of an expanding economy.

At this juncture, I want to remind Governor Babangida Aliyu, Governor Yero, and Mr. Anthony Sani that every state in a 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 own state.

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.

No one, I repeat, no one has questioned the resourcefulness of the Kano State Government in its yearly ritual in the name of group marriage 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 could 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.

On a similar note, that principle of true federalism is consistent with the funding of State Police and the implementation of Sharia Law in most part of the northern region by the State Governors. 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.

With respect to deep-water exploration/exploitation, there should be a dividing line where the littoral states and the federal government should exercise joint ownership and where the Federal Government should exercise absolute control – that is without sharing with the Littoral States. Exercising joint control or ownership over proceeds from the defined boundary in the deep-water by the littoral states and the central government is not uncommon.

I would like to remind Mr. Sani, who, no doubt, is the major antagonist of the littoral state's funding, that in the event of spillage, as was the case in the US Gulf of Mexico a few years ago, it is the Littoral States that suffer the most hardship, ecologically and economically speaking. Tourism along the gulf coast of and the entire seafood industry of the Littoral States went under following the massive spillage.

Back at home, our Fulani brethren who are 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 story with those involved in the seafood industry in the oil-producing communities. Traversing the deep water for bounteous harvest is the name of the game. Yes, the 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 a 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 vacate the land. That’s where Host Community fund comes in. In most jurisdictions, it is not a fund for immediate use, 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.

As I said in the opening statement in this section, NDDC 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 the state government. Adding the Ministry of Niger Delta to the field was to assuage the region for the massive deprivations they suffered under past administrations. It was a massive effort designed to overcome the endless pains, anger, and resentment of the Federal Government. It was a massive measure to remedy the massive failure of the Federal Government in the region, but in the process, it creates overlaps. 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 NDDC 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 NDDC. Truth is that there would not have been any need for a Ministry of Niger Delta if past administrations understood the true essence of sustainable development and accountability. We can eliminate the Ministry of the Niger Delta, but retention of the PHC Fund in the PIB is sacrosanct.

The arguments propounded by Governor Aliyu and Mr. Anthony Sani to frustrate the passage of PIB are not new to us – they are enticing but inherently superficial. They do not serve any useful benefit to anyone or any region in 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 conclusion.

Conclusion:

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. We cannot afford to do less. President Jonathan and Governor Amaechi of River State, for the moment, should set aside their political differences and collaborate to ensure the passage of PIB as soon as possible.

At this juncture, it is worth emphasizing that 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 counterproductive and blatantly inconsistent with the true essence of federalism. Therefore, it requires vibrant and coordinated political muscles and multi-dimensional counter-attacks for the Bill to sail through the hearing process in the National Assembly.

Oil is our major income earner; until we effectively manage peace in that part of the country and with genuine intent, no State Governor is safe and no Local Government Chairman is safe. Let’s strive to move beyond regional considerations and demagoguery in our legislative process. Late President Yar’Adua was very much aware of the repercussions of gerrymandering, which informed his pragmatic approach and a willingness to do what no one has ever tried in the region – negotiate and consent. And it works. Let’s pass the PIB into law now and dedicate it to his memory. If that is the best we can do for him at this point in time, it is a welcome development.

 April 4, 2014