Benjamin Babine, Abuja
The Nigeria Natural Resource Charter (NNRC) has through its 2019 Benchmarking Exercise Report provided a broad analysis of several gaps it has identified in the petroleum sector, and has suggested several solutions.
The report, which presents the biennial findings of the NNRC from an assessment of the petroleum sector from 2017 to 2019, identified gaps in four key areas, including governance, administration, fiscal framework and management of local contents.
According to the report, these identified gaps can be resolved for the benefit of Nigerians if the government incorporates international best practice principles extoled by the NNRC into the anticipated industry reform legislation – the Petroleum Industry Bill (PIB).
The gaps identified in administration, according to the report included unchecked discretionary power, non transparent bidding process, poor sector infrastructure, and multiplicity in license administration.
It cautioned that ‘if not addressed, the legislation will be insufficient to address the pervasive institutional, regulatory and process gaps experienced in the industry since the law was first contemplated two decades ago.’
It recommended that the principles to improve such gaps in the oil and gas industry should include reduction in bureaucracy, and improved efficiency, reduce cost of doing business, transparent licensing process, efficiency in acreage management and elimination of barriers to entry.
The report also identified lack of transparency in contract terms, multiple taxation, multiplicity of tax collecting agencies, declining competitiveness, revenue management issue as major gaps in the fiscal framework of oil industry industry.
It suggested that the principles to improve the fiscal framework should include flexible and responsive fiscal framework, capacity enhancement for administration Institutions, transparency of fiscal terms, simplify tax administration, establishment of savings mechanism for economic stabilization and future generations
The report further identified gaps in managing local impacts include lack of define frameworks to enhance trust, poor monitoring of the environmental impact of extraction, duplicity of functions, as well as ineffective institutions
It stated that ‘principles to improve managing local impacts include Transparency and accountable management of resources, adopt effective dispute resolution, compensation mechanism or penalties for pollution, direct economic benefits and disbursement to Host communities to restore sense of ownership, meaningful community participation in project identification and development.’
Gaps in governance identified include opaqueness, overlapping regulatory roles, leakage and theft, funding constraints for NoC, short term strategies for sector, ineffective regulator
It recommended clarity and separation of roles, disclosure to achieve transparency, merit-based appointments, workable funding mechanism for NoC, strong regulator to ensure sector effectiveness, reduction of political interference in appointments, commercially defined priorities for NoC, penalties imposed to encourage legal compliance