Nigeria governors: 30% frontier exploration, host communities’ 3% deplete federation account
Chairman of the Nigeria Governors’ Forum (NGF), Dr. Kayode Fayemi, yesterday, reiterated the state governors’ concerns about the 30 per cent allocation for frontier exploration and the three per cent for host communities as contained in the Petroleum Industry Act (PIA). Fayemi said those provisions in the law assented to by President Muhammadu Buhari on August 16 greatly depleted the Federation Account.
Fayemi spoke in an interview with the Arise News Channel.
The NGF chairman, who is also the governor of Ekiti State, said the governors were not carried along in the enactment of the law. But he pledged that the state chief executives would cooperate with the PIA implementation committee headed by Minister of State for Petroleum Resources, Chief Timipre Sylva.
Fayemi said court action would be the governors’ last resort in trying to address their concerns over the PIA.
However, the federal government yesterday clarified that the proposed Nigerian Upstream Regulatory Commission (NURC), not the Nigerian National Petroleum Corporation (NNPC) Limited, will handle proceeds from the sale of crude oil accruing to the three tiers of government when the PIA becomes fully operational.
Fayemi said the forum believed the provisions of the 1999 Constitution should be adhered to with regard to concerns raised by the governors, including ownership structure, accountability, and transparency.
He criticised the federal government’s handling of repatriated loots, saying the management of such funds is not the exclusive preserve of the federal government since the monies ought to be part of the federation account originally.
Fayemi said, “This is a matter that the entire forum has discussed extensively, and we have come to certain conclusions about what is called frontier funds. Whether it is three per cent or not, our concern there is that whatever you are taking into these places is a depletion of the federation account, that money will not go to the federation account, it would be spread across the few areas that you described as volunteer basis, rather than to the entire federation.
“And we worry more about the entire federation not about selected parts of the federation. For us as governors, that is a distinction without a difference. We are talking about depletion from the federation account, whether it is three per cent or 30 per cent.
“It is money that should come to federation account, that should then be subjected to fair and equitable distribution on principles of sharing, rather than one that is going to be at the whims and caprices of this new limited company.”
The Ekiti State governor said the forum would explore all available options before seeking legal interpretation. He said the Minister of Petroleum Resources had reached out to the forum to say that their concerns would be addressed as an amendment to the new petroleum law.
He stated, “It is not everything that we have to resort to court to resolve. We only do that when all options have been exhausted and we haven’t secured a reprieve.
“On this particular instance, we will work with the implementation committee. And if there is any reason for us to take an alternative measure, we will cross that bridge when we get to that. But at least it has been acknowledged that these issues can be resolved, in some way, shape or form, as we are proposing. We will wait and see before we take any further steps.”
However, Fayemi commended the president for signing the Act. He maintained that the constitutional issues the NGF raised before the bill was passed into law were not addressed.
He said, “As a matter of fact, we have commended these major developments in our country because it is something that has been on the cards for us.
“So, kudos to the president for finally working with the National Assembly to get the PIA in place.
“However, we also believe that whatever we are doing should be done in accordance with the constitution so that we do not have to blame ourselves.
“The issues that governors are concerned about, and which we made clear to the National Assembly when this bill was in the process of becoming an Act, relate to ownership structure and questions of accountability and transparency so that at the end of the day, we don’t subvert the original intention behind the petroleum industries act.”
On the issue of repatriated loots domiciled with the federal government, Fayemi said, “We believe that our president is a stickler to the rule of law and due process and sometimes he doesn’t get a comprehensive advice from those who are the technical people in charge of some of these issues.
“When the matter around recovered loots came up, we communicated with the Attorney General of the Federation and raised our concerns about the source of the money that was allegedly looted anyway, which in our view, was from the federation account. It wasn’t federal government money.
“So when you want to return the loots, you cannot just say you are returning to the federal government and the federal government decides to do whatever it chooses to do with it. We would have preferred a situation in which the funds are returned to the federation account.
“Whatever the government chooses to do with it, there are mechanisms in government that would allow governors to also partake in that discussion. That is why we have the National Economic Council, where we are members and the Vice President is the chair, where we take collective decisions on issues that are germane to both the federal and sub-nationals, and that’s all we were pleading for. It wasn’t a case of being averse to whatever the government has chosen to do with the recovered loot, what we felt is, you cannot take a decision without our input as critical actors in the federation.”
The federal government has said the proposed NURC, not NNPC Limited, will handle proceeds from the sale of crude oil accruing to the three tiers of government when the PIA becomes fully operational. Briefing journalists after the inauguration of the steering committee as well as the implementation working group of the PIA, Sylva said being a Companies and Allied Matters (CAMA) entity, NNPC Limited may no longer be in a position to function in that role.
The minister said although the upstream regulator might not be directly involved in lifting federation crude oil, all the monies accruing from sales of the commodity would be handled by the commission, while NNPC would only get a percentage for carrying out the lifting.
However, the minister added that the committee, which he inaugurated, would thrash out areas of disagreement.
Sylva stated, “The next question is whether the commission, as a regulatory agency, can be involved in commercial activities? Yes, when I gave that answer yesterday, I didn’t have the opportunity to say everything.
“The other question should be whether NNPC, as a commercial body, registered under CAMA, can be in charge of federation crude? We have to find a way out of this. That crude belongs to the federation of Nigeria and when it is sold, it has to go to the federation account.
“So, the commission is not necessarily going to sell the crude, but will handle the crude. If NNPC sells the crude on a commercial basis, the revenues accruing from the sales of the crude will now go through the commission to the federation account and NNPC will charge commission for that role.
“As a commercial activity, it will just sell and it is doing that as a commercial entity and the fund will be moved into the federation account. Those are all part of the issues that we will be discussing at the implementation level so that we have a seamless way of doing things.”
Sylva also spoke on the ownership structure of the proposed NNPC Limited, which the governors had alleged did not incorporate the states and local governments. He said, like other entities, the federal government would hold the equity in trust for all the other tiers of government.
But he revealed that negotiation was on with the state governors on the issues.
According to him, “The other issue is the ownership of the NNPC, which has been raised variously by governors and we have also responded. I think we are having an understanding, that is all I can say. I do not want to pre-empt that discussion. But, we are having an understanding. In this country there is the federal government of Nigeria and then there is the federation.
“The federal government of Nigeria can always hold something in trust for the federation. I can assure you that we are already discussing, and we are clarifying some of these issues. In this case, what the federal government is doing is to hold this equity in trust for the federation.”
The minister stated that this was not the first time that would be happening, explaining that the federal government is currently holding the equity in LNG Bonny in trust for the federation.
He stated, “If the federal government holds the equity in trust for the federation, it means it is holding it in trust for the states, for the local governments and by extension, also the communities.
“We are one country, everything flows out from this country, let’s not make it look like we are not one country. The federal government of Nigeria is the preeminent government among the tiers, the levels of government.
“So now, the federal government of Nigeria is in a position to hold equity in trust for the rest of Nigerians. And this is what we are doing in this case, and this is what federal government has also done in other cases.”
The minister also said while Nigeria was interested in more foreign investments, its focus now was on the IOCs in the country, stressing that a lot of projects on the verge of crystallising would now be fast-tracked since the new legislation has been signed.
He disclosed that a number of investors had reached out to the ministry post-PIA, maintaining that the oil companies, which the federal government has had a long relationship with, would be the first priority.
Sylva noted that while a number of IOCs had indicated interest in divesting their onshore assets, there were still a lot of prospects offshore, including the ultra-deep offshore, beyond the current 2,000 metres.
He explained that even oil companies that were thinking of leaving onshore operations were still showing interest in the offshore of Nigeria as well as the ultra-deep offshore, which is still in frontier territory.
Answering a question on the alleged skewedness of the steering committee in terms of gender and ethnicity, he stated that members were supposed to represent their offices and not necessarily ethnic groups or a particular gender. But, he said those are some of the issues the PIA would correct.
On possible unrest in the Niger Delta due to the grouse over the three per cent allocated to the oil producing areas, he said the region had no reason to react badly, saying those that have been very vocal from the area were simply politicising the issues.
Sylva said, “I see a lot of politics, a lot of politicking, but I have not really seen very senior Niger Delta people that we all respect, that are apolitical, speak against this. If you look at it very well, you cannot really say it is only three per cent. This per cent is on top of so many other things.”
He listed them as the Niger Delta Development Commission (NDDC), the 13 per cent derivation and others, which he said amounted to a lot of money. But he noted that there were still issues surrounding the implementation of the funds accruing to the region.
According to the former governor of Bayesa State, “I can assure you that well-meaning Niger Deltans are not against this. It is the political Niger Delta that is speaking. And if the political Niger Delta is speaking, I am a part of that political Niger Delta and I will not want to join issues with them yet.”
Sylva stated that there was no role for the government in the administration of the community funds, stressing that it is different from the Frontier Basins Fund, which is an investment in getting more oil off the ground, and not targeted at the communities.
Earlier while inaugurating the committees, the minister said the crystallisation of the 20-year petroleum industry reform journey called for accolades and celebration.
He said there should a deliberate effort by all and sundry to ensure successful implementation of the PIA in order to get the desired result.
Members of the PIA committee include Sylva, who’s the chairman; Permanent Secretary, Ministry of Petroleum Resources, Dr. Sani Gwarzo; Group Managing Director, NNPC, Mallam Mele Kolo Kyari; Executive Chairman, Federal Inland Revenue Service (FIRS), Muhammad Nami; and Senior Special Assistant to the President on Natural Resources, Dr. Nuhu Habib.
In the group also are a representative of the Ministry of Finance, Budget And National Planning, representative of the Ministry of Justice, External Legal Adviser, Olufemi Lijadu, and Executive Secretary, PTDF and Head of the Implementation Working Group/Coordinating Secretariat Dr. Bello Gusau.
Governor of Cross River State, Professor Ben Ayade, said the new law perpetuated injustice against his state. Ayade was quoted as saying this while receiving in audience some members of the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), led by the state’s representative, Ntufam Eyo Nsa Whiley.
Whiley said they were in the state to sensitise the government and the people on the forthcoming stakeholders meeting with the leadership of the commission to collate views on the review of the current revenue formula.
Ayade expressed scepticism about the new attempt to review the revenue formula, saying it may not herald anything positive for the state.
Recalling how the Senate Committee on the Petroleum Industry Bill (PIB) that toured the state failed to mirror the grievances of Cross River in the bill before it was finally signed into law, the governor said the experience was enough “for us to express our deep and sincere distrust in the entire exercise and processes of RMAFC”.
A statement from the governor’s office quoted him as saying, “As I spoke to the Senate Committee on PIB then, I will choose same to communicate the position of Cross River State, which is that we do not have faith in this exercise, neither do we believe that it will end properly.”
With particular reference to the PIB, Ayade said, “As far as we are concerned as a state, we have been reduced to want in body in spirit and in soul,” adding, “There is no indication whatsoever that the review of the revenue allocation will be based on the principle of jurisprudence, equity and fair play.”
He recalled, “When the PIB committee visited, I took my time and articulated in the best of professional grammar to explain to them that producing communities are not as delicate and sensitive as impacted communities. Cross River State bears the brunt of production, but today the PIB is signed into law, insensitive to the oil impacted communities to which Cross River State belongs.
“In the same PIB, 30 per cent of revenue is set aside for frontier exploration, luckily the Calabar basin, which they refused to recognise in that category which stretches from all the mountain basins, cutting across the whole of Bakassi, Biase Odukpani, Okuni, Ogoja, Yala, is heavily impregnated with hydrocarbon. The geo-coordinates have been issued by myself since 2016 to the federal government. Today, we watch and see how the 30 per cent set aside for the frontier exploration will be managed. And we will see what will happen to the Calabar basin.”
Ayade queried a scenario, “where Edo, Delta, Rivers, Bayelsa and Akwa Ibom states; and Cameroon all have oil and Cross River will not have oil? And you sit on this injustice and it goes on year after year after year?” According to the governor, “The principle under which RMAFC is set out and the way they are operating so far is inconsistent with the provisions of the law that established it. I would like to have this on record that you have failed to use your mandate judiciously. You have failed to understand that the law empowers you to review the formula not based on obnoxious principles.”
The governor charged RMAFC to do what is fair, just and right, saying, ”Even as we come to articulate our position, if the majority of the people who are satisfied with the present situation carry the day, we would have spoken in futility and in vain.
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