An economic think tank, Agora Policy, has demanded a review of the Petroleum Industry Act (PIA) following the decline in the dividend by the Nigerian National Petroleum Company (NNPC) Limited to the federation account.
The company’s dividend to the federation account dropped from $11.9 billion to $1.83 billion in just over two years.
In a report titled: “Urgent Need to Amend the PIA to Boost Federation’s Petroleum Revenue,” released on Sunday, the think tank called for a review of the PIA, saying it reduces government revenue while NNPC takes the largest chunk of profit.
Former President Muhammadu Buhari signed the Petroleum Industry Bill (PIB) into law on August 16, 2021.
This brought an end to a 21-year process to reform the country’s petroleum sector.
Examining the impact of the act, the report revealed that dividends from NNPC derived from sales of crude oil and gas through joint venture assets dropped sharply from $11.9 billion to $1.83 billion after the full implementation of the PIA.
“This downturn is mainly due to how certain sections of the PIA have been interpreted, giving NNPCL a larger slice of the oil and gas revenue pie, and leaving the Federation with a smaller share.
“As a result, the promise of greater benefits from the petroleum sector has fallen short. To turn this around, the publication suggests revisiting two critical aspects of the PIA,” it added.
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The report highlighted that Sub-section 54 (1) of the PIA not only grants the NNPC a greater managerial role over the country’s JV oil and gas assets but also gives it sole ownership of these assets.
“In reality, the Federation has received less oil and gas revenue after the PIA.
“The two situations highlighted above arising from the implementation of the PIA have affected government revenue from both JVs and PSCs and have, on one hand, reduced government revenue from the petroleum sector, while on the other hand, increased revenue to the NNPCL.
“Specifically, the revenue streams affected are crude oil and gas sales through the NNPCL.
“In 2021, before the PIA, the total value of the Federation’s entitlement from crude oil sales through NNPC was $11.308 billion, or 74.43% of the total sales value of $15.192 billion.
“In 2023, after the PIA, the total value of the Federation’s entitlement from crude oil sales through the NNPCL was $2.328 billion, or 14.14% of the total sales value of $16.467 billion.
“Following the implementation of the PIA, in 2023, the largest entitlement of crude oil sales of $11.348 billion (68.91%) went to NNPCL.
“Thus, even though the value of crude oil sold by NNPCL in 2023 ($16.467 billion) was 8.39% higher than the value of crude oil sold in 2021 ($15.192 billion), the Federation’s entitlement in 2023 ($2.328) fell by 79% from its entitlement in 2021 ($11.308 billion).
“Since the largest proportion of petroleum revenue inflows to the Federation come through the NNPCL, the Federation cannot afford to have NNPCL retain most of the revenue it collects, which is what has happened after the implementation of the PIA.
“Thus, it is imperative that the PIA is revisited and necessary actions taken to address these issues and increase the flow of petroleum revenue to the Federation,” the report stated.
By: Babajide Okeowo
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