March 8 (Bloomberg) -- Nigerian lawmakers split along regional lines as they began debating a proposed law to reform regulation and funding of Africa’s biggest oil industry.
A plan in the bill to set aside 10 percent of profits from oil companies’ operations in Nigeria for communities in the southern Niger River delta, home to the country’s oil industry, was opposed by senators from the north, who argued that oil-rich states were already getting too much federal revenue. Southern senators backed the plan.
Nigeria, Africa’s most populous nation with more than 160 million people, relies on oil for 80 percent of government revenue and 95 percent of foreign income. The West African country is almost evenly split between a largely Muslim north and a predominantly Christian south.
“If you take Bayelsa state, its oil revenue is equivalent to the whole of the northeast and you’re now asking for an additional 10 percent,” Kabiru Gaya, a senator of the ruling People’s Democratic Party from northern Kano state said during the debate yesterday. “That is too much.” Bayelsa is one of nine states in the oil-rich delta. Gaya was supported by 10 other lawmakers from the north.
Senator Ita Enang, representing the PDP from southeastern Akwa Ibom state, countered that 83 percent of oil licenses in the country are held by northerners, saying that one licensee from the northeast is richer than the entire region.
“The holders of these oil blocks have become so rich and the whole country is poorer for it. We should revoke them and reallocate them because it’s the wealth of the nation,” Enang said to cheers from southern lawmakers. Nine other senators from the south spoke in his support.
The Petroleum Industry Bill, first sent to the National Assembly in 2008, didn’t become law during the tenure of a previous legislature and was reintroduced by President Goodluck Jonathan in July. Fiscal provisions in the bill seek to raise Nigeria’s share of revenue to 73 percent from 61 percent, Petroleum Minister Diezani Alison-Madueke said on Sept. 28.
The debate is being “politicized” while the “economics are subtly being overlooked,” Dolapo Oni, a Lagos-based oil and gas analyst at Ecobank Research, said today in an e-mailed response to questions. Lawmakers should focus more attention on the concerns expressed by oil companies about taxes and the profitability of investments in Nigeria, he said.
Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA run joint ventures with the state-owned Nigerian National Petroleum Corp. that pump more than 90 percent of the country’s oil.
Companies including Shell and Exxon Mobil have criticized the fiscal terms, including tax and royalties, as likely to make investment in offshore oil fields unprofitable. Most have held back on funding more exploration, while Shell and ConocoPhillips have sold some of their onshore assets to Nigerian companies.
At the end of three days of debate yesterday, the lawmakers referred the bill to five committees including those for oil, gas, judiciary and petroleum upstream and downstream for their input. After that a public hearing is to follow.
Under the 1999 constitution that ended more than 15 years of military rule, oil states receive 13 percent of revenue from crude exports before the remainder is shared among Nigeria’s 36 states.
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