Issues is a new NT series in which academics and policy experts write on their areas of expertise. If you would like to contribute to the series send an email to Olumide (his email address is on the page under the link).
The columnist this week is extractive industry expert Jeremy Weate
It is a well-known aspect of good law that, just as with procurement, the granting of licences should be a purely technical matter. Principles of statutory licensing remain the same, regardless of what is being licenced. Whether its cocoa, diamonds or oil, the company applying for the licence should have the financial wherewithal and the technical competence to do the job. The assessment of the applicant’s suitability should therefore rest with technocrats, in the form of a committee and in the context of rules that include checks and balances to ensure transparency and accountability.
It is also well-known that a purely technocratic approach to licensing is a struggle in emerging economies with a history of weak governance. In countries where natural resource bounty is the dominant source of public revenue, the pressure is always on to interrupt technical decision making for the private benefit of vested interests and a small group within the political class. These pressures to introduce discretionary processes and override the technocrats can be intense.
Unfortunately, the current version of the PIB falls foul of just this sort of discretionary decision-making, in two specific places. Article 6 (h) states that the Minister shall, “upon the advice of the Agency, grant, amend, renew, extend or revoke downstream petroleum licences for gas transportation pipeline, gas distribution networks, refineries, LNG and GTL plants, petrochemical plants and gas exports.” The upshot of this clause is that whatever technical competencies are brought to bear on licence applications during bid rounds, the decision to award licences goes upstairs and enters the opaque realm of discretion.
Later on, Article 191 states, “notwithstanding the provisions of subsection (3) of section 190 or any other provision of this Act, the President shall have the power to grant a licence or lease under this Act.”
In this clause, the process referred to in Article 6 – of the Ministry of Petroleum offering advice to the minister regarding licence decisions – is itself short-circuited. Discretionary processes can be escalated to the President and take place entirely outside of the Ministry of Petroleum. In many countries, when the minister is involved in extractive licencing decisions, higher circles still are involved behind the scenes. Indeed, under Obasanjo, the President was the de facto minister. However, it is surprising to find those higher circles inscribed into law.
What we see in this article is an articulation and sanctioning of the political economy realities of Nigeria, with no attempt at a clean up. The draft law effectively converts de facto processes into de jure principles of law. Despite transparency provisions elsewhere in the bill, the discretionary powers defined in these two articles would ensure that Nigeria does not and cannot move to a more open and accountable industry that benefits all Nigerians. The murkiness of previous bid rounds, which increasingly put off the IOCs, would be doomed to repetition.
The lessons of the past have, on the basis of the current draft of the PIB, yet to be learned.
Dr Jeremy Weate is an extractive industry consultant and writer, currently based in Abuja.