By Samuel Ibiyemi
President Elect of the Nigerian Association of Petroleum Explorationists ( NAPE) Andrew Ejariese said there is no fiscal policy and stable environment for investors to participate in oil bid round to generate revenue for the federal government. The response is a follow up to calls by stakeholders particularly opposition parties led by the Labour Party that additional loans at this time will amount to mortgage of the unborn generation.
The Federal government had announced last year plans to raise revenue from new oil licences as part of efforts to explore new streams of revenues to fund the 2017 budget.
The Minister of Budget and National Planning, Udoma Udoma, stated this when he appeared before the Senate Joint Committee on Appropriation and Finance to defend the revised Medium Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP).
He said the Federal Government would also review the current joint venture arrangements with oil companies, marginal oil fields as well as mount pressure on revenue generating agencies to surpass expected targets.
Ejariese who spoke on the sideline of the 2017 NAPE International Conference & Exhibition in response to question by Nigerian NewsDirect on licensing round said that the delay in the passage of the Petroleum Industry Bill ( PIB) for over 10 years is a disincentive for investors to participate in oil bid round needed for the government to mobilize revenue in the country. According to him, at a time of $10 per barrel oil, Nigeria did not go down as a focus for investment by International Oil Companies ( IOCs) because of the Memorandum of Understanding ( MOU) and creation of certain special incentives under the regime to enable oil companies to sustain investment on exploration and grow oil reserves. “ Today, we don’t have such incentives and MOU which is a major challenge for Nigeria to attract genuine foreign investors into oil exploration,” he said.
The President Elect lamented that there is nothing that should stop the Federal Government now to put incentives in place to attract investors. He recalled that oil price had gone worse like this before than what it is today but the government at that time was able to manage it effectively.” I don’t know what is stopping the federal government from doing the same thing today. I know the government will always drag every issue and therefore need to step up action by removing obstacles to investment and then provide incentives for explorers. If not, the money will go elsewhere where there are incentives for investors to recover investment,” he pointed out .
He argued: “ Whether there is cut in production quota by the Organisation of Petroleum Exporting Countries ( OPEC) or not, what is the action of our political leaders internally to be able to drive the local economy to generate revenue? If Nigeria is to diversify the economy, there is need for huge resources,investors will not bring the money for diversification but the money will be raised from oil sector activities.Hence, there is need for the government to continue to encourage investment through special incentives.
“To make the bid round work, there is need for fiscal policy. If you invite a company to participate in a bid round and you have the fiscal policy hanging at the National Assembly, under which framework and fiscal term will the company bid for the oil block? .
“We don’t have a stable fiscal framework and fiscal terms,there is so much uncertainty in the oil and gas industry. If there is no stable fiscal terms, what is the government going to use for the licensing round?
If the government should call for oil bid round now, I don’t know how many foreign investors will participate except for indigenous firms.” It is clear that some of the terms of the indigenous firms are not going to change but for the bigger and IOCs, the terms will change. Hence, PIB is critical to the conduct of new oil bid round in Nigeria because there is need to have fiscal term that will guide,” he added.