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.
January 01, 2014
