The Petroleum and Natural Gas Senior Staff Association of Nigeria has written President Muhammadu Buhari on “critical national issues” it believes should be tackled by the government.
In the letter, signed by its President, Michael Ndukaku Ohaeri, and General Secretary, Lumumba Okugbawa, PENGASSAN also proffered solutions to the issues.
The letter, which was written based on the country’s celebration of 59 years of Independence on October 1, 2019, reads in full:
President Muhammadu Buhari (GCFR),
NIGERIA AT 59: RECOMMENDATIONS OF THE PETROLEUM AND NATURAL GAS SENIOR STAFF ASSOCIATION OF NIGERIA (PENGASSAN) ON SOME CRITICAL NATIONAL ISSUES
The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) felicitates with you and the good people of Nigeria on the occasion of our Nation’s Independence Anniversary.
The Association is aware that the Oil and Gas industry is dear to your heart, being a sector shaped by your footprints since you were the Federal Commissioner for Petroleum. Therefore, as we celebrate our Independence, we present recommendations that our Association strongly believes will support your Excellency in confronting some of the issues in the Oil and Gas industry and the Nation in general.
1. THE PETROLEUM INDUSTRY BILL (PIB)
The Petroleum Industry Bill is expected to combine under one law, the fiscal policies, instruments and the institutions that govern the Nigerian petroleum industry. It is our expectation that the PIB, when passed, will clarify the rules and procedures that will entrench good governance, transparency and accountability in the oil and gas sector as well as such operational and fiscal terms which will enable Nigeria retain equitable proportions of revenues accruing from Oil and Gas industry activities.
The delayed passage of the PIB has opened up several unresolved issues. The uncertainty and lack of alignment with the industry’s operators on the proposed fiscal regime in the PIB have stalled many investment decisions. Existing and prospective investors seriously yearn for basic incentives to stimulate their business interests across the industry’s value chain.
With the uncertainty surrounding the passage of the Bill to law, investors are wary of long-term investments in the industry, thereby hampering the creation and retention of jobs which are some of the cardinal focus areas of this Administration. Anxiety within the Host Communities waiting to benefit from the PIB’s provision of 10% Host Community Funds continues to grow. This absence of community stake in oil production activities remains an insidious motivator for perennial oil installations’ vandalization.
The Executive should harmonize with the National Assembly on grey areas of the already passed PIGB so that it can be signed into law by the President. This will definitely open the floodgate for other parts of the PIB to be worked on and passed by the National Assembly.
The Federal Government should take the lead in calling for a round table engagement of all stakeholders to ensure quick passage of other aspects of the Bill such as the Petroleum Industry Administration Bill, the Petroleum Industry Fiscal Bill and the Petroleum Host and Impacted Community Bill which will revolutionize the Industry and restore investors’ confidence.
2. DEREGULATION OF DOWNSTREAM OIL SECTOR AND FUEL SUBSIDY ISSUES
The focus of deregulation should be based on local production rather than importation. Nigerians expect that we should be able to provide white products at reasonable and affordable prices to the populace. This could have been possible if our local refining capacities are enhanced. Downstream sector continues to suffer setbacks over issues in the deregulation of fuel price.
Government is persistently confronted with import parity pricing and the burden of subsidizing the imported fuel. Importation of refined petroleum products is a major drain on our nation’s revenues. It rather creates jobs for the refining nations in spite of the high unemployment rate confronting Nigeria.
Abrupt removal of fuel subsidy will create chaos that may ground the economy, therefore we call for well-coordinated measures with timeline to achieve self-sufficiency in local refining as a means of proffering acceptable steps to end fuel subsidy. An aspect of the PIB should mandate International Oil Companies to refine certain percentage of their crude production locally. This should be combined with such other measures for effective optimization of gas especially for domestic, industrial, electricity and automotive energy. Such will create other affordable and friendly sources for energy needs.
3. THE REFINERIES
In a bid to participate in the full value chain of the oil and gas and to take advantage of the hydrocarbon resource endowment in the country, the Government established four refineries to meet our domestic demands of petroleum products, which should invariably make Nigeria to be self-reliant with vast job opportunities.
However, neglect by successive administrations has made these refineries inefficient. Nigeria’s quest to turn the tide of import-driven petroleum products and achieve self-sufficiency in local refining of petroleum products will be a forlorn hope if the refineries remain in their moribund state.
We acknowledge the huge challenge the Government is facing due to the state of the Refineries and we also note the efforts that are going into rehabilitating them for optimal delivery. We have also, in our various submissions and presentations at public fora, recommended the adoption of the Nigeria Liquefied Natural Gas (NLNG) model in addressing the issues of the Refineries. In the NLNG model, the Federal Government, through Nigerian National Petroleum Corporation (NNPC), owns a major percentage of the equity share while the remaining percentage is owned by the investors. We believe that this model will address all the inherent challenges anticipated in a Government Private Partnership approach and also remove the bureaucracy currently experienced in the running of our refineries.
4. MULTIPLE TAXATION
Multiple taxation is understood to include both incidences of double taxation whereby the same asset or event is taxed multiple times by different jurisdictions and multiplicity of small, nuisance taxes. Multiple taxation creates a hostile business environment in any economy. There are several taxes collected by the Federal, State and Local Governments in Nigeria. These taxes have significant cost implications on businesses and create uncertainty for intending investors. It has been discovered that tax related issues are responsible for the untimely closure of several businesses in Nigeria.
We implore the government to come up with a uniform tax policy that will favour the development of businesses in Nigeria and drive down cost of production. The digital economy is becoming the most innovative and widest reaching economy. Most businesses now require little or no physical presence to operate in a country. While the Nigerian Tax authorities are working towards ensuring the digitalization of the tax collection process, such digitalization must be extended to cover effective monitoring and taxation of digital transactions.
5. POWER & INFRASTRUCTURE
Nigeria has a fairly extensive infrastructure of roads, railroads, airports, and communication networks. The road system is by far the most important element in the country’s transportation network, carrying about 95 percent of all the nation’s goods and passengers. Currently, many of the roads are in disrepair because of poor maintenance and years of heavy traffic. The Air transport industry faces various challenges including poor airport infrastructures, limited connectivity, huge tariff regime and lack of transit facilities. The significant gap between the demand and supply of electricity has led to recurrent power shortcuts. The heavy reliance on gas, limited technical/technological know-how, inadequate regulations, lack of energy efficiency practices and infrastructure maintenance contribute to these challenges. The effect of good roads, world class airports, adequate power supply and other infrastructure on our economy cannot be overemphasized. These are business drivers that will encourage investors and stimulate the economy which will in turn improve standard of living.
PENGASSAN acknowledges the ongoing reforms targeted at developing infrastructure but the challenges still persist. There is an urgent need for the
government to finish critical infrastructure projects in roads, rail, dredging and maintenance of ports as these will improve investment.
Despite the tremendous effort to generate more power, the transmission network is currently overloaded due to poor maintenance and vandalization. The Government should begin to earnestly look at off grid solutions using conventional sources as well as encourage private investments in power generation and distribution.
6. DIVERSIFICATION OF ECONOMY
The Nigerian economy is highly dependent on oil. It is crucial to note that oil does not provide an endless source of revenue. A good percentage of the citizenry lives in abject poverty. Unemployment is high and productivity is at a low level.
As a matter of priority, the government must encourage the diversification of the economy. Diversification presents the most competitive and strategic option for the nation in view of our developmental challenges and the global economic uncertainty with the volatility of oil prices. The government should come up with better initiatives including tax breaks that will drive agriculture and agro-based industries, solid minerals and tourism.
We should also aim at harnessing the energies of our entrepreneurial youth by creating an enabling business environment for small and medium scale enterprises to thrive. Nigeria must be made an easier place to do business.
Mr. President, the resolution of the issues raised in this document will not be effective if the insecurity challenge in the Nation is not properly tackled.
Social, economic and political developments of any country depend on peaceful co-existence by the people. In the absence of security, development is
unattainable because insecurity destroys economic, human and social capitals. For instance, the Boko Haram insurgence in Northern Nigeria has almost crippled economic activities in that region while the activities of Niger Delta militants in the oil-producing part of the country pose serious threats to the economic health of the region in particular, and Nigeria in general. The security crises in different parts of Nigeria are destroying existing infrastructure and fouling the environment for the development of further infrastructure. Indeed, no Nation can achieve sustainable development in an environment of insecurity.
We believe that the solution to this is for the government to govern in a way that fosters development. Development in this context consists of creating an economy with relevant social, economic and physical superstructures for business operations and industrial growth so that the people can have gainful employment, functional and useful education, and quality healthcare.
Furthermore, there is the need for government to rearrange the security architecture for optimal performance so that Nigerians will experience the much-desired peace and security of lives and property.