PIB and 3% Fund for Host Communities?

PIB and 3% Fund for Host Communities?

Friday, July 16, 2021 3:00 pm


Temitope Ajayi

By Temitope Ajayi

A major reason why identified problems don’t ever get solution in Nigeria is because we have elites who prefer to always talk about the problems more than seeking actual solutions.

In our country, once ethnicity and divisive politics are thrown into a debate everyone loses sense of direction and reasoning. The political elites and their intellectual wing in the civil society and media enjoy the drama they create because that is the way they sustain their social relevance. The sad part of this is that, most of the time, the public is not discerning enough to see through the shenanigans.

Since the National Assembly passed the Petroleum Industry Bill, needless ruckus has been built around proposed fund for host communities. While the Senate proposed 3%, the House of Representatives proposed 5%. Both propositions are not near the 10% the Niger Delta ‘leaders’ want. In the harmonised version of the Bill, the House of Representatives has aligned or about to align with the 3% proposed by the Senate.

Whereever the pendulum swings, I am taking the 3% as what may eventually happen. Any rational mind can conveniently argue that these communities have not got anything in more than 60 years of oil exploration. If the 3% is eventually passed for assent to the President, Nigeria would have taken a giant step towards social justice for the impoverished host communities from from 0% to 3%. It goes without saying that 3% of something is better than 100% of nothing. It should also be stated that no law is ever perfect or can take care of every human desire all at once. It is the reason there is a provision for future amendments and even a re-enactment.

I will say the 3% is a good place to start from. And 3% of operating cost of oil companies in a year is a lot of money.

Meanwhile the Niger Delta Region, apart from the 3% fund for host communities in the PIB still has NDDC, a supra interventionist agency that gets 2% from the oil companies, 13% derivation to oil producing states, Federal Ministry of Niger Delta, Presidential Amnesty Programme all devoted to the development of the region apart from monthly Federal allocation to States and Local Governments like the rest of the country.

For those who may not know, 3% of operating expenses for oil companies can be more than 30% of profit NNPC. We should not allow conflict entrepreneurs to use number or percentages to deceive the unsuspecting public. These crisis merchants will quickly point to 30% of profit that NNPC Limited in the PIB will spend in search for oil in Frontier Basins without breaking it down to the real import. In any case, discovery of more oil fields means possible more money for the entire federation. The 30% profit of NNPC that is earmarked for development of new oil fields is not necessarily bigger than 3% of operating expenses of oil companies in real sense. A point to consider is what happens if NNPC makes no profit. A business may not make profit for years but same business will keep incurring operating expenses every day.

Another look at the 3% fund for host communities means each host community gets 3% of operating expenses of an oil company. We can aggregate that by the number of communities that host an oil exploration asset and see the quantum of money that comes to the Niger Delta in a year apart from NDDC, 13% derivation, Niger Delta Ministry and Amnesty programme that has almost become a full agency of government.

If the PIB is bogged down again this time around after 20 years of failed attempts, the question to ask the Niger Delta people is if they prefer 0% to 3%. If this bill is not presented to the President for his assent, the host communities will get nothing while exploration still goes on. It is better the PIB is signed now and they get 3% while still making demands for higher percentage in future amendment because laws by themselves are not static.

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