PIB: 3% host Communities fund, beyond the rhetoric of figures

EnergyDay Editorial Board

The media space has been agog since Thursday, July 1, 2021, when the National Assembly finally passed the Petroleum Industry Bill, PIB.

Every stakeholder especially those from the Niger Delta region where the commodity is currently extracted has had reasons to rise in condemnation of the portion appropriated to them in terms of reward.

The Bill which managed to scale through the jinx of two decades of persistent failure to see the light of the day despite the obvious negative economic implications of refusal to pass it, is once again confronted with the intrigues and interests that hindered its passage for so long in the first instance.

Before diving into the nitty-gritty of this editorial, we can’t but first commend the National Assembly for the passage of the bill, at least for us to have updated laws guiding the operation of the nation’s oil and gas industry.

It’s important to state that up until when the PIB is assented by the President, the Petroleum Industry Act of 1969, remains the only document guiding activities of operators in the industry. The negative implications of running the sector which is undergoing a global transformation with such outdated laws is better imagined.

But that is the reality. Little wonder the sector has continued to witness investment drought in the past decade.

While we at EnergyDay, agree that the PIB as passed by the National Assembly, left much room for concern, we see the move as a new dawn in nation’s oil and gas business regime given the opportunity it offers in terms of regulatory framework.

But beyond the hoopla and frenzy of celebration over the passage of the bill, is the dire need to address the communities trust fund, a section of the bill that aims at resolving the fears and concerns of the host communities.

It is therefore not surprising that the debate currently at the centre stage of the PIB is the appropriateness or otherwise of the 3% of profit after tax of companies operating in the country said to have been approved.

While, it is yet uncertain the percentage of the equity holding that will be finally adopted, given that the Senate recommends 3%, and the House of Representatives gives 5%, even as leaders of the host communities are insisting on 10%.

It’s however interesting to note that explanation by Senate that the proposed 3% will amount to$500 million accruable to the trust fund annually.


Come to think of it, the judicious utilisation of the fund in terms of investment should be of serious concern. That way the much talked about development of the region will be the focus.

The key issues that should be of concern now may include, who will manage the fund? Going by its name, we do hope that politicians and rent-seekers will have no space in the management of the fund, rather competent fund managers with track record would be invited to handle it .

EnergyDay recommend the adoption of Norwegian Trust Fund model, widely considered the most successful of such in the world.

No one is in doubts, that the region has suffered tremendously in spite of being the economic powerhouse of the country.

The various intervention programmes such as Niger Delta Development Commission, Ministry of Niger Delta and others have not positively impacted on the lives of ordinary men and women on the streets of the beleaguered region despite its immense wealth.

The reasons for this may not be far from corruption of the region’s political elite and all forms of sleaze and lack of openness and transparency in the management of these processes.

There is a need for integrity in the whole process. We can not but emphasize that the host communities want to directly benefit from the oil resources coming out of their areas. It is clear they are tired of business as usual approach that only benefits few elite, while the people wallow in neglect.

This medium is aware of a 13% derivative from that which goes to the state. Over the years what benefits from this has accrued to the communities?

These communities in neglect are now saying they don’t feel the impact, so much. And then there’s a Ministry of Niger Delta for the entire region. There’s also the Niger Delta Development Commission, which they say they have not been feeling the impact, so much.
There is more argument in favour of paradigm shift away from sharing of money into investing the funds to generate wealth that can be used to massively develop Niger Delta communities.

At EnergyDay, we recommend that the executors of the Communities Fund in the PIB should take a comprehensive look at the Norwegian Trust Fund with a view to adopting the model when it comes to investing the funds.

The Norwegian oil fund is aimed at ensuring responsible and long-term management of revenue from country’s oil and gas resources, it’s designed in such a way that the wealth accruing from it benefits both current and future generations. The fund’s formal name is the Government Pension Fund Global.

This can be domesticated to suit our environment in ways that will turn around the Niger Delta.

For those clamouring for increase in percentage, we understand that apart from the provision for Communities’ equity holding, the bill has several proposals which could alter Nigeria’s straggly oil and gas industry. A large part of the new regulation would be borne by the Midstream and Downstream Regulatory Authority which would be created by Section 52 of the Bill.

The responsibility of the new regulator would be to provide oversight over technical, operational, and commercial activities and ensure the safe, efficient, and sustainable infrastructural development of midstream and downstream businesses.

The proposed body would also implement the Nigerian Gas Transportation Network Code by developing open-access rules for the transportation of petroleum liquids and natural gas. The Bill additionally authorizes the Authority to create a Midstream Gas Infrastructure Fund for making equity investments of Government-owned participating or shareholder interests in infrastructure related to midstream gas operations.

Industry professionals hope that the activities of the Fund would not only increase private investment but also boost domestic consumption of natural gas in Nigeria in projects partly financed by private investments. Section 52 (16) goes further to shield the Fund from the reach of the Fiscal Responsibility Act, Infrastructure Concession Regulatory Commission Act, and the Public Procurement Act.

In all, this medium strongly advocate for judicious management of host communities’ funds, and the only way is to invest it using Norwegian model.

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