The oil sector, a key driver of the economic system, continues to grapple with governance challenges regardless of the enactment of the Petroleum Trade Act (PIA). Points corresponding to political interference, corruption and coverage inconsistencies have hindered the sector’s full potential, elevating considerations about transparency, regulatory effectivity and investor confidence, WALIAT MUSA and SILVER NWOKORO report.
Through the years, politics and corruption have considerably influenced Nigeria’s oil laws and regulatory frameworks, shaping the sector’s trajectory and effectivity. Regardless of being one of many largest oil producers in Africa, Nigeria has struggled with inconsistencies in coverage implementation, authorized uncertainties, and regulatory inefficiencies, primarily because of political interference and corrupt practices.
The 1956 discovery of oil by Shell-BP in Oloibiri in present-day Bayelsa State units the stage for subsequent extractive actions on business scales throughout the oil-rich Niger Delta area. The historical past of oil exploration and administration of petroleum sources in Nigeria resonates with the challenges throughout sectors of the economic system in addition to the social and political landscapes.
The elite, nonetheless, exploited the gaps in regulatory frameworks and the failure of insurance policies within the sector to covet financial benefit; resulting in a tradition of corruption that has turn into intensely entrenched within the society. Ingrained within the self-serving intra-class politics of the elite is the divisive agenda of prioritising the curiosity of multi-national oil corporations and their native companions over and above the curiosity of the host communities.
Regardless of the multi-billion greenback revenues generated over 5 a long time of a booming petrodollar economic system accounting for over 85 per cent of export earnings and contributing at least 60 per cent of annual price range income, host communities stay marginalised and impoverished. The 2020/2021 marginal fields bid spherical was no exception to the longstanding sample of opacity and political manoeuvring that has traditionally outlined the allocation of oil licenses to helpful homeowners and contracts to key gamers throughout the upstream, midstream, and downstream sectors of Nigeria’s oil and gasoline business.
This situation aligns with the longstanding points which have plagued the allocation of oil wells and contracts by successive governments, primarily because of a scarcity of transparency and accountability within the regulatory framework. The irregularities in contract awards and concessioning are additional exacerbated by the failure of regulatory oversight from key establishments such because the Nigerian Nationwide Petroleum Company (NNPC), now the Nigerian Nationwide Petroleum Firm Restricted (NNPCL), the defunct Division of Petroleum Sources (DPR), now the Nigerian Upstream Petroleum Regulatory Fee (NUPRC), and different related companies.
Consequently, the procedural abuses attribute of Nigeria’s oil and gasoline sector had been evident within the 2020/2021 marginal area bid spherical, finally undermining the core targets of the Petroleum Trade Act (PIA) and elevating considerations in regards to the company integrity of the nation’s oil sector.
Shell’s determination to divest from its Nigerian onshore subsidiary, Shell Petroleum Growth Firm (SPDC), to Renaissance Africa Vitality Firm Restricted for $1.3 billion raised considerations amongst stakeholders, notably relating to environmental accountability. Regardless of these considerations, the Nigerian authorities authorised the deal in December 2024.
Issues over divestment amid unresolved issuesThe divestment has fueled apprehensions that Shell may exit with out totally addressing the long-standing environmental injury attributable to its operations, particularly oil spills which have severely impacted farmlands and livelihoods within the Niger Delta. Whereas remediation efforts have commenced in some affected communities, corresponding to Ogoni in Rivers State, many stakeholders fear in regards to the adequacy and sustainability of those interventions.
In the meantime, the 2020/2021 marginal fields bid spherical, targeted on oil mining lease allocations by concessioning, unincorporated joint ventures, and production-sharing contracts has been marred by considerations over transparency. This course of is emblematic of the persistent governance challenges in Nigeria’s oil sector, the place problems with regulatory oversight, procedural abuse, and company accountability proceed to undermine reforms meant by the Petroleum Trade Act (PIA).
The Human and Environmental Growth Agenda (HEDA Useful resource Centre), in its public presentation of the publication “Marginal Fields’ Awards, Regulators’ Independence, and Environmental Injustice: Paradox of Helpful Possession and the Host Communities,”highlighted the evolution of Nigeria’s oil and gasoline regulatory framework. Earlier than the enactment of PIA in 2021, the sector was ruled by the Petroleum Act of 1969 and the Oil Pipeline Act of 1956, together with later amendments, together with the Oil and Fuel Pipeline Laws of 1995. Nonetheless, these legal guidelines lacked complete provisions on transparency and accountability gaps that the PIA goals to handle.
What does the PIA say?The PIA introduces stringent laws to make sure due course of and transparency within the bidding course of for oil blocks, notably marginal fields (MFs). It mandates detailed necessities for his or her growth by helpful homeowners. The Act, as amended by the Nationwide Meeting, supplies a transparent authorized framework for the acquisition of mining licenses and defines the function of regulatory our bodies such because the now-defunct Division of Petroleum Sources (DPR), which was changed by the Nigerian Upstream Petroleum Regulatory Fee (NUPRC).
HEDA’s publication references Paragraph 17 (4) of the First Schedule to the Petroleum Act, which conceptualised the marginal fields programme as an initiative to boost indigenous participation within the oil and gasoline sector. Nonetheless, considerations persist over how the implementation of the PIA and the marginal fields bid rounds align with its core targets, notably in guaranteeing fairness, transparency, and advantages for host communities.
The bid spherical for the 57 marginal fields spanning land, swamp, and shallow offshore terrains was declared open by the Division of Petroleum Sources (DPR) on June 1, 2020. Notably, participation was restricted to Nigerian corporations with 100 per cent indigenous shareholding, aligning with the federal government’s goal of enhancing native participation within the oil and gasoline sector.
Following the award, HEDA stated the re-qualified bidders had been left with the choice of forming a Particular Objective Car (SPV) to function the sector. The SPV might mobilise financing on phrases thought of applicable and appropriate for the monetary obligations of the awardees with the idea that the awardees within the SPV will maintain shares proportionate to the curiosity awarded.
To deal with these challenges, consultants have repeatedly known as for stronger institutional frameworks, enhanced transparency, and the politicisation of the oil sector. Implementing stringent anti-corruption measures, guaranteeing regulatory independence, and fostering a tradition of accountability might considerably enhance Nigeria’s oil governance.
Whereas the PIA represents a step towards reform, its success largely relies upon on its full and unbiased implementation. With out tackling the deep-rooted political interference and corruption points, Nigeria’s oil sector will proceed to wrestle regardless of its huge potential.
HEDA’s publication addressed allegations relating to manipulation of the bidding course of in favour of corporations with restricted or no expertise or monetary capability however which supplied kickbacks to authorities officers. Public belief within the bidding course of was undermined to the detriment of the beliefs of transparency that the PIA prioritises.
It added that political connections reasonably than benefit play an important function within the bid course of resulting in the award of oil licenses to personal corporations. It famous that authorities officers manipulate the bidding course of in favour of most well-liked corporations that usually provide bribes in return.
Specialists specific reservationsChairman of HEDA Useful resource Centre, Olanrewaju Suraju, condemned the awarding of contracts to unregistered corporations, questioning the credibility of Nigeria’s oil sector laws. “Of roughly 38 corporations, 18 are usually not registered, and plenty of have did not file their annual returns. This isn’t in regards to the provide of products and companies; we’re speaking about Nigeria’s fundamental financial sector,” he stated
He confused that the failure to implement due diligence had led to large income losses for the nation and known as for collaboration between regulatory companies such because the Company Affairs Fee (CAC), the NUPRC, and the Nigeria Extractive Industries Transparency Initiative (NEITI).
Past monetary misconduct, Suraju warned that environmental air pollution within the Niger Delta stays a urgent concern. He urged civil society, the diplomatic group, and worldwide organisations to intervene, notably as oil corporations try to divest from Nigeria with out fulfilling their environmental obligations.
Govt Secretary of NEITI, Dr Orji Ogbonnaya Orji, confused that transparency should be accompanied by social and environmental justice.
Orji reaffirmed NEITI’s dedication to making sure that Nigeria’s extractive sector stays a drive for good, including that NEITI would proceed to advocate, monitor, and interact with stakeholders to advertise transparency and accountability.
“Host communities should be protected, compensated, and empowered to learn from the sources extracted from their land. Something much less is a betrayal of their rights and dignity,” he stated.
Govt Director of CISLAC and Head of Transparency Worldwide-Nigeria (TI-Nigeria), Auwal Musa Rafsanjani, instructed The Guardian that politicians have undermined the implementation of an efficient authorized framework wanted to boost productiveness and accountability within the survival of Nigeria’s oil and gasoline sector.
He confused that CISLAC, dedicated to selling transparency and accountability, supported the Nigerian authorities in enacting authorized frameworks for EITI and the PIA, which goals to boost transparency, increase productiveness, and curb corruption within the oil and gasoline sector, if not remove it.
“Oil theft has continued to undermine the effectiveness of Nigeria’s oil and gasoline sector. There’s no method the nation could make progress when the state establishments and state officers look like conniving and collaborating with the saboteurs mining Nigeria’s oil and gasoline sector. There’s no correct regulation relating to how productive and environment friendly the oil and gasoline sector is in Nigeria, regardless of spending greater than 50 years within the oil and gasoline sector operation,” he stated.
He added that regardless of the persistent efforts of Nigerian civil society, notably CISLAC, in advocating for PIA, which took years earlier than being handed and signed into regulation, its implementation stays ineffective. This, he famous, continues to gasoline corruption inside the subsidy regime, as the federal government retains allocating funds for petroleum imports whereas intentionally neglecting the nation’s refineries, creating an excuse to maintain import dependency.
Vitality skilled, Prof. Dayo Ayoade, emphasised that the true effectiveness of any regulation lies in its implementation. Whereas transparency and regulatory oversight are progressively bettering, he famous that their precise influence stays unsure. He identified ongoing conflicts between the 2 regulatory our bodies, as they wrestle for dominance, which continues to hinder oversight efforts. Because of this, problems with transparency and corruption persist, and it might take time for regulators to determine stability.
“Effectively, NUPRC has solely performed one allocation in 2024, and in 2025 they need to do oil block allocation however these oil block allocations have been principally directed at native corporations, so, from that standpoint, you could possibly say it’s profitable. However how efficient has it been if you wish to have a look at it from some extent of transparency? There have all the time been complaints that it might be extra clear however perhaps the criticism has not been as huge as in earlier years, perhaps there’s a slight enchancment in transparency, so by the point they do the one in 2025, then perhaps one can evaluate to see whether or not we’re in an upward trajectory about efficient regulatory oversight and transparency and anti-corruption,” he stated.
Vitality Associate at Bloomfield, Dr Ayodele Oni, instructed The Guardian that the general success of the Petroleum Trade Act (PIA) would largely rely upon the rigour of its implementation. He famous that whereas the Act has the potential to handle key business challenges, its true effectiveness can solely be decided by long-term analysis.
