‘Delayed petroleum bill cost Nigeria $235bn in investments’

Nigeria lost between $230bn and $235bn in potential investments because of the prolonged failure to pass the Petroleum Industry Bill, former Senate President Ahmad Lawan has said, recounting how he and the then Speaker of the House of Representatives, Femi Gbajabiamila, approached former President Muhammadu Buhari to secure his support for a joint strategy to enact the legislation.

Lawan said the country also lost substantial revenue as investors moved their capital to competing oil-producing countries because of uncertainty surrounding Nigeria’s petroleum laws.

He attributed the eventual passage of the Petroleum Industry Act in August 2021 to cooperation between the executive and legislative arms of government, saying previous attempts failed because the two branches pursued separate approaches and disagreed over key provisions.

The former Senate President spoke in an interview published in the fifth-anniversary special edition of the Nigerian Upstream Petroleum Regulatory Commission’s in-house magazine, The Upstream Gaze, obtained by our correspondent on Sunday in Abuja.

He recalled that he and Gbajabiamila approached Buhari after the inauguration of the Ninth National Assembly in 2019, proposing that both arms of government work together from the beginning to prevent another failed attempt at petroleum sector reform.

“We decided that having seen the failures of the solo efforts by the executive arm of government twice, and the failure of the legislature’s solo effort, we needed to bring everybody together around a roundtable,” Lawan said.

“The legislature and the executive arms would start the process together, create a framework, and work from the beginning to limit areas of disagreement and contention.

“So, the Speaker at the time, Femi Gbajabiamila, and I approached the President. We told him we wanted to pass the PIB, but we wanted to avoid the hurdles, and mistakes, challenges, misunderstandings that the PIB had suffered previously. We told him we wanted a joint effort from the beginning.”

Lawan said the strategy brought lawmakers and key officials in the petroleum sector together to develop a framework before the bill was formally presented to the National Assembly.

The legislative team included the chairmen of the Senate committees on upstream petroleum resources, downstream petroleum resources and gas resources. The executive team included the then Group Managing Director of the Nigerian National Petroleum Company, Mele Kyari, the Minister of State for Petroleum Resources, Timipre Sylva, and officials of the Petroleum Technology Development Fund.

Although the two arms worked together on the initial framework, Lawan said lawmakers still reviewed and amended several provisions when the bill reached the National Assembly.

The Senate passed the PIB in July 2021, and Buhari assented to it in August of the same year, ending more than a decade of unsuccessful attempts to overhaul Nigeria’s petroleum laws.

Explaining the economic cost of the delay, Lawan said the absence of a predictable regulatory framework had discouraged international oil companies and other investors from committing capital to Nigeria.

“They were not sure why they should invest in Nigeria’s oil and gas industry when there was no certain legal framework to protect their investments. Therefore, they preferred to take their investments to competing regions such as Angola,” he said.

“We were losing about $15bn every year in funds that could easily have been invested in Nigeria. Cumulatively, Nigeria lost investments worth about $230bn to $235bn over the years because of the lack of passage of the Petroleum Industry Bill. We also lost revenues.”

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He said the old petroleum laws failed to provide adequate certainty for investors and did not sufficiently address the concerns of oil-producing communities, which frequently protested against the extraction of resources from their land without adequate benefits.

Lawan said the PIA introduced a more structured regulatory framework, including the establishment of the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority from the former Department of Petroleum Resources.

He added that the legislation gave greater attention to natural gas, helping to create conditions for investment across the wider energy sector.

The former Senate President also cited the 2019 amendment of the Deep Offshore and Inland Basin Production Sharing Contracts Act as evidence of the revenue Nigeria had been missing under outdated legislation.

He said the previous law had remained unchanged for about two decades, leaving the country with annual receipts of approximately $260m from the relevant arrangement.

Following the amendment, he said, government receipts rose to nearly $2bn, demonstrating the potential gains from reforming the petroleum industry’s legal framework.

Lawan maintained that securing the PIA was more important than waiting for a perfect law, arguing that weaknesses could be corrected through subsequent amendments.

“Our determination was that no matter how imperfect the PIB, or subsequently the PIA, might be, having a law was better than allowing the reform to fail again,” he said. “Subsequent assemblies and governments could amend weak points or deficits in the law, but there needed to be a law in the first instance.”

Reflecting on the PIA’s first five years, Lawan urged the NUPRC not to become complacent, saying Nigeria must compete more aggressively for international investment, particularly in the gas industry.

“The commission must not rest on its oars because the global oil and gas sector is highly competitive,” he said.

He also urged the government and industry regulators to build on the reforms by attracting more investment into gas development, pointing to countries such as Qatar as examples of how gas resources can support sustained economic growth.

The PIA, signed into law in August 2021, was designed to restructure Nigeria’s petroleum industry, strengthen regulatory institutions, improve transparency, attract investment and establish a framework for addressing the interests of host communities.