Agora Policy, an Abuja-based think tank, says that two years after the Petroleum Industry Act (PIA) came into force, the federation has received significantly less revenue from the oil sector than before the law came into force. Ta.
Former President Muhammadu Buhari signed the Petroleum Industry Bill (PIB) on August 16, 2021.
This bill became the Petroleum Industry Act 2021 (PIA).
Agora Policy, in a policy note on the need to amend the PIA to increase the federation’s oil revenues, said the law will attract investment into the domestic oil sector, strengthen the regulatory and business framework and increase revenues. He said the aim is to increase the number.
But in reality, Agora Policy said none of its goals have been achieved.
“The federation has not seen an increase in its income as oil revenues to the federation have decreased significantly after the implementation of the PIA. This is not solely due to lower oil production and prices,” the policy document said.
“Two years after implementing the PIA, the evidence shows that the federation is receiving significantly less revenue from the oil sector than before the law,” the group said.
“We focus on the interpretation of two aspects of the PIA that the implementation of the PIA has increased the proportion of oil revenue retained by NNPCL and thereby reduced the oil revenue accruing to the federation.”
“Nigeria is receiving less income from joint venture assets.”
Agora Policy said that with the implementation of the PIA, the Nigerian National Petroleum Corporation (NNPC) Limited assumed ownership of the shareholding in the joint venture (JV) assets of the federation.
“As per NNPCL’s interpretation of Article 54(1) of PIA, NNPCL acquires the JV assets of the federation and pays dividends to the federation,” the think tank said.
The group said the federation had “reduced the income it receives from its JV assets due to very low declared dividends and many months in which no dividends were paid.”
“For context, in 2021, the last full year before implementation of the PIA, the federation will receive $10.65 billion from joint venture crude oil sales and $1.252 billion from joint venture capital gas and feedstock sales. , generated revenues totaling $11.92 billion from “sales of crude oil and gas from joint venture assets,” Agora Policy said.
“In contrast, in 2023, the first full year of PIA implementation, the federation will receive $399,000 from joint venture crude oil sales, $701,287,000 from joint venture capital gas sales, and $1.13 billion as dividends from NNPCL. million, and the total income was $1.833 billion.
“This is a dramatic revenue decline and clearly shows that the federation has not materially benefited from the new arrangements with the JV assets post-PIA.”
The think tank further said that with the implementation of the PIA, NNPC is deducting “60% of the oil and gas profits earned from production sharing contracts (PSCs).”
“The NNPCL’s interpretation of subsections 9(4) and 64(c) of the PIA results in the company deducting 30% for administrative expenses and a further 30% for the Frontier Exploration Fund, with the Federation receiving 40% of the balance. %,” the group said.
“Again, similar to the JV dividend, there were many months where NNPCL did not remit 40% of the balance.”
Agora Policy said it was also questionable that the federation, the owner of the assets, receives only 40% of the profits derived from such assets, and sometimes nothing.
