No to PIGB fuel tax

The Petroleum Industry Governance Bill (PIGB) passed by the
National Assembly would have been an excellent piece of legislation
that will provide governance and institutional framework for the
oil sector, but for the provision of a five per cent fuel tax meant
to finance the Petroleum Equalisation Fund (PEF).

The fuel tax has raised strong speculation of a hike in the
price of petroleum products across the country if the bill is
assented to by President Muhammadu Buhari. The assurance of the
Nigerian National Petroleum Corporation (NNPC) that government has
no plans to increase the pump price of fuel has not removed the
possibility of another fuel price increase, the second time under
the present administration.

The passage of the PIGB together with the contentious tax, a few
weeks ago, followed final consideration and adoption of the
conference committee report on the bill by the Joint Committee on
Petroleum Downstream sector.

Since the passage of the bill, civil society organisations and
organised labour have urged President Buhari to decline his assent
to the bill. We urge the president to withhold his assent in
respect to the five percent fuel tax. Section 36(1) of the bill
states inter alia: “There shall be established the petroleum
equalisation fund into which all monies payable to the Equalisation
fund by way of a 5 percent fuel levy in respect of all fuel sold
and distributed within the federation which shall be charged
subject to the approval of the minister”.

Other sources of funding of the PEF as contained in the bill
include subventions, fees and charges for services rendered, as
well as net surplus revenue recovered from petroleum marketing
companies. In addition, the bill states that the PEF shall collect
all revenues and levies charged pursuant to the provisions of the
bill, determine at such intervals as the board may direct the net
surplus revenue recoverable from all marketing firms and accruing
to that company from the sale of petroleum products at such uniform
prices as may be fixed by the minister of Petroleum Resources.

Besides, the PIGB also created a new outfit to be known as the
Nigeria Petroleum Regulatory Commission, which will, among other
things, administer and enforce policies, laws and regulations
relating to all aspects of petroleum operations, in addition to
enforcing compliance with the terms and conditions of all leases,
licences, permits and authorisations issued in respect of any
petroleum operation. Generally, the PIGB seeks to unbundle the
NNPC, provide for the establishment of the Federal Ministry of
Petroleum Incorporated, Nigeria Petroleum Regulatory Comission,
Nigeria Petroleum Assets Management Company, among other
entities.

Undoubtedly, some of the provisions of the bill could make the
oil industry to be efficiently managed. But, the PIGB is not a
one-size-fits-all legislation. It is just one of the four key
components of the omnibus Petroleum Industry Bill (PIB) designed to
provide framework for investors in the oil industry, but has
suffered endless delays at the National Assembly. It has passed
through five sessions of the National Assembly since 1999 without a
final legislation.

Clearly, the insertion of certain provisions into the PIGB has
watered down the original objectives. The imposition of the five
per cent tax is one of them. Also, absent in the bill passed by the
National Assembly, is the provision against gas flaring in the host
communities. The PIGB needs a more forceful action to protect the
environments of oil-bearing communities, which have suffered untold
environmental degradation. The President should, therefore,
withhold his assent until these grey areas are addressed.

There is no doubt that the PIB could reshape our oil industry
and make it more transparent and accountable. But the imposition of
the five per cent tax is objectionable. If it sails through and
becomes law, the enthusiasm that greeted the PIGB will wane.

However, we are not unmindful of the enormous benefits of the
PIGB and they need to be put in proper focus. Among these are the
promotion of the Nigerian content in the oil industry, the
protection of the health and safety of the environment in oil
operation. It will also enhance the exploitation and exploration of
petroleum resources in the country for the benefit of Nigerians,
optimise domestic gas supplies, especially for power generation and
industrial development as well as establish profit-driven
entities.

The PIB will also deregulate and liberalise the downstream oil
sector, maximise the benefits of the nation’s gas resources and
increase government revenue for developmental activities. These
lofty benefits may be threatened by the five per cent fuel levy. It
should be deleted from the PIGB.

The Petroleum Industry Governance Bill (PIGB) passed by the
National Assembly would have been an excellent piece of legislation
that will provide governance and institutional framework for the
oil sector, but for the provision of a five per cent fuel tax meant
to finance the Petroleum Equalisation Fund (PEF).

The fuel tax has raised strong speculation of a hike in the
price of petroleum products across the country if the bill is
assented to by President Muhammadu Buhari. The assurance of the
Nigerian National Petroleum Corporation (NNPC) that government has
no plans to increase the pump price of fuel has not removed the
possibility of another fuel price increase, the second time under
the present administration.

The passage of the PIGB together with the contentious tax, a few
weeks ago, followed final consideration and adoption of the
conference committee report on the bill by the Joint Committee on
Petroleum Downstream sector.

Since the passage of the bill, civil society organisations and
organised labour have urged President Buhari to decline his assent
to the bill. We urge the president to withhold his assent in
respect to the five percent fuel tax. Section 36(1) of the bill
states inter alia: “There shall be established the petroleum
equalisation fund into which all monies payable to the Equalisation
fund by way of a 5 percent fuel levy in respect of all fuel sold
and distributed within the federation which shall be charged
subject to the approval of the minister”.

Other sources of funding of the PEF as contained in the bill
include subventions, fees and charges for services rendered, as
well as net surplus revenue recovered from petroleum marketing
companies. In addition, the bill states that the PEF shall collect
all revenues and levies charged pursuant to the provisions of the
bill, determine at such intervals as the board may direct the net
surplus revenue recoverable from all marketing firms and accruing
to that company from the sale of petroleum products at such uniform
prices as may be fixed by the minister of Petroleum Resources.

Besides, the PIGB also created a new outfit to be known as the
Nigeria Petroleum Regulatory Commission, which will, among other
things, administer and enforce policies, laws and regulations
relating to all aspects of petroleum operations, in addition to
enforcing compliance with the terms and conditions of all leases,
licences, permits and authorisations issued in respect of any
petroleum operation. Generally, the PIGB seeks to unbundle the
NNPC, provide for the establishment of the Federal Ministry of
Petroleum Incorporated, Nigeria Petroleum Regulatory Comission,
Nigeria Petroleum Assets Management Company, among other
entities.

Undoubtedly, some of the provisions of the bill could make the
oil industry to be efficiently managed. But, the PIGB is not a
one-size-fits-all legislation. It is just one of the four key
components of the omnibus Petroleum Industry Bill (PIB) designed to
provide framework for investors in the oil industry, but has
suffered endless delays at the National Assembly. It has passed
through five sessions of the National Assembly since 1999 without a
final legislation.

Clearly, the insertion of certain provisions into the PIGB has
watered down the original objectives. The imposition of the five
per cent tax is one of them. Also, absent in the bill passed by the
National Assembly, is the provision against gas flaring in the host
communities. The PIGB needs a more forceful action to protect the
environments of oil-bearing communities, which have suffered untold
environmental degradation. The President should, therefore,
withhold his assent until these grey areas are addressed.

There is no doubt that the PIB could reshape our oil industry
and make it more transparent and accountable. But the imposition of
the five per cent tax is objectionable. If it sails through and
becomes law, the enthusiasm that greeted the PIGB will wane.

However, we are not unmindful of the enormous benefits of the
PIGB and they need to be put in proper focus. Among these are the
promotion of the Nigerian content in the oil industry, the
protection of the health and safety of the environment in oil
operation. It will also enhance the exploitation and exploration of
petroleum resources in the country for the benefit of Nigerians,
optimise domestic gas supplies, especially for power generation and
industrial development as well as establish profit-driven
entities.

The PIB will also deregulate and liberalise the downstream oil
sector, maximise the benefits of the nation’s gas resources and
increase government revenue for developmental activities. These
lofty benefits may be threatened by the five per cent fuel levy. It
should be deleted from the PIGB.