The Host Community Provisions in the Petroleum Industry Bill, PIB 2020, is aimed at addressing agitations in the Oil producing areas especially the Niger Delta.
Causes of agitation include structural deficiency of the Nigerian Federation, poverty and deprivation of means of livelihood, environmental damage accessioned by oil spillage, gas flaring, and Oil and pipeline explosions.
Others are lack of development and unemployment, distortion in the social and economic fabric of the local society, bad government/corruption, alleged insensitiveness of the federal government of Nigeria and divide and rule tactics of the oil companies.
The Host Community provisions in the PIB 2020 is a noble agenda which is set to address the above mentioned causes of agitation but there are areas that should be looked into in the Bill.
Expert suggests strongly the areas that should be looked into in the Host Community Provisions so as achieve the planned goal.
Speaking with the theme: Nigeria Petroleum Industry Bill 2020 : Analytical Perspectives on the Host Community Provisions at Stakeholders Forum recently in Lagos, Omowumi Iledare, a Professor of Petroleum Economics, who is also Professor Emeritus, LSU Energy Studies, Baton Rouge, Louisiana, USA; so also the Executive Director, Emmanuel Egbogah Foundation Abuja, Nigeria and Director, Africa Region and Society of Petroleum Engineers International, Dallas, identified potentially over-bearing role of settlor, adding that corporates and sets-up fund need to ensure this does not become a settlor affiliate.
He also maintained that tax deductibility places additional fiscal burden on operators that needs to be captured in Fiscal design, this according to him increases unit technical costs and reduces government take and investor returns.
“Is a holistic, streamlined approach not better for development? or is it too late? Derivation, NDDC and Niger Delta Ministry”, he asked.
The Professor Emeritus maintained that the proposed legislation did not quite address the “ownership and participation” question and use of royalties is global best practice –another “palliative”?
He said that equity participation is also a viable option i.e, Indorama Eleme Petrochemicals. There should be less external involvement in management and control of trust fund. “Streamline all other interventions (State, MNDA and NNDC, ) to ensure clarity of focus and integrated/sustainable development. Funding provisions should ensure materiality for impact and standardize treatment of host communities for all mineral resources to ensure sustainable development of all other minerals”, he opined.
The Executive Director, stated that the issue is unnecessary trouble but good trouble with tangible benefits.
He observed blurred and contentious Deepwater HC designations, so also volatility and insufficiency because of heterogeneity of funding sources, unlimited wants in the face of limited resources, prebendalism and institutional ineptitude more likely than not in the management committees as common in the LGA, overcoming elite capture and Esau’s syndrome of the society, perhaps a wishful thinking but I wish the doctrine of necessity can be invoked to use a fraction of royalty revenue to fund the Host Community Trust Fund, HCTF, instead of a fraction of Operating Expenses, OPEX.
He listed the stated objectives of the provisions in PIB 2020 to include fostering sustainable prosperity with the host community, provision of direct social and economic benefits from petroleum operations to host community, enhance harmonious and peaceful coexistence between licensees or lessees, and host community and create a framework to support the development of the host communities.
Iledare further listed sources of Host Community Trust fund to include 2.5% of actual operating expenditures in the immediately preceding years, tax deductible for preceding year? Less likely than not to be a net loss to government or companies, grants, Interests and donations.
“Estimated fund is about N10 -14b (upstream only) going into the funds annually. This will be grossly inadequate given the number of communities, terrain and development deficit. Funding provision should ensure materiality of funds for impact especially for communities with midstream assets”, he stressed.
Speaking on utilisation of Host Community Trust Fund, he said, “undertake infrastructural development of the Host Community, facilitate employment opportunities, advance and propagate education and learning, provide medical facilities and personnel, undertake training, skill acquisition& other empowerment programmes”.
“Support local initiatives on environmental protection, support local initiatives on enhancement of security, invest certain part of available fund for future generations, secure funds and loans for specific projects and any other project for benefit of the Host Communities”, stated Iledare.
He stated that specific criteria for determination of root cause needs to be provided to reduce disputes and contestation egusing regulation.
In proffering lasting solution to agitations, he listed amendment of the Constitution to confer ownership of petroleum resources on host communities, conferment of all or part of concession rentals and royalties, direct participation / equity ownership of petroleum licences and leases, carried equity participation and share of profits and dividends, conferment of funds otherwise meant for Derivation and NNDC directly on host communities and 10 per cent (or more) of net profit of oil & gas companies.