April 21, 2024

NNPC’s contract approval threshold upped above $10m

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Adebayo Obajemu

The Nigerian Government has upped the contract approval threshold for the Nigerian National Petroleum Company (NNPC) Limited to a minimum of $10 million or its equivalent in naira.

Recall that President Bola Tinubu, in an Executive Order signed in Abuja, also directed that the approval period for every of the contract stages should not go beyond 15 days, while the duration for third-party contracts awarded under the production sharing contract (PSC) or Joint Operating Agreement (JOA) was increased to five years from the three years, with the option of additional two years renewal, thereafter.

He lamented that comparative analysis of global oil and gas sector operations showed that the contracting cycle within the Nigeria’s petroleum sector exceeds global industry standards by four to six times and was adversely affecting the country’s and ability to attract potential investors.

He added that the Federal Government was committed to improving the investment climate and positioning Nigeria as the preferred investment destination for the petroleum sector in Africa.

Tinubu explained that the directives were aimed at shortening the procedure for getting approval for contracts, facilitate businesses, enhance the ease of doing business and reform the contracting process in the Nigerian petroleum industry.

He stated that the directives would simplify and compress the contracting cycle to a period of not more than six months, in alignment with global industry practice; raise the contract approval thresholds to account for the rate of inflation among others.

To ensure this is enforced, Tinubu said: “The Ministry of Finance Incorporated (MOFI) and the Ministry of Petroleum Incorporated (MOPI) shall ensure that this threshold will be reviewed and adjusted in line with the rate of consumer inflation as disclosed by the National Bureau of Statistics on a yearly basis.

“NNPCL and Nigerian Upstream Investment Management Services Limited (NUIMS) shall, in collaboration with the Nigerian Content Development Monitoring Board (NCDMB) and industry stakeholders, simplify the contract approval process and adopt a single level of approval by NUIMS and NCDMB at each contract stage including prequalification, technical, commercial and final approval stages.

“The NNPCL and NUIMS shall ensure that all approvals or consents required to be given by it for contracts and procurement for each contract stage pursuant to the terms of PSCs or JOAs are issued within 15 days from the date of submission of application by the relevant party to the PSC or JOA.

“The NNPCL and NUIMS shall communicate its decision to the applicant within the time-frame stipulated under subparagraph (2) of this paragraph. Where the NNPCL and NUIMS fails to communicate its decision within the aforementioned timeline, the approval or consent shall be deemed granted.”

The president also directed the NCDMB to ensure it reviews any Nigerian Content Plan (NCP) submitted to it within the 10 days stipulated in the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, adding that where no response is communicated to the applying company, the NCP shall be deemed approved.

He also stated that any application for expatriate quota in the petroleum industry shall be directed by the NCDMB to the Ministry of Interior or any other relevant Ministry, Department or Agency (MDA) within 10 working days, provided all supporting documents are in place.

“Where any matter requires the approval, satisfaction or consent of the NCDMB and no timeline is provided under the NOGICD Act, the NCDMB shall communicate its decision on such matter within 15 days of receiving a request to that effect, failing which the NCDMB shall be deemed to have approved, satisfied or consented to such matter,” he added

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