Oil firms keen to know how Nigeria’s president elect Muhammadu Buhari plans to tax them could be waiting a long time as he makes ending corruption and reforming the opaque national oil company his most urgent sector priorities.
Four party sources from Buhari’s All Progressives Congress (APC) told Reuters the issue of fiscal terms, seen as crucial by the industry, will have to wait on current thinking about oil and gas policies for Africa’s leading producer.
Crude output has stagnated close to 2 million barrels per day over the past few years, owing partly to underinvestment.
“We need to address the structural issues and leave the fiscal for now,” Senator Bukola Saraki, whose APC party controls both houses of parliament after a landslide win, told Reuters.
“A more transparent NNPC (Nigeria National Petroleum Corporation) is needed with reasonable accounting,” he said.
Buhari owes his March 28 victory against incumbent Goodluck Jonathan partly to a perception that Jonathan allowed corruption to get out of control — especially in the oil sector.
A string of multibillion dollar oil corruption scandals tainted the NNPC and other bodies that handle energy.
By contrast, Buhari was seen as one of the few Nigerian leaders to have cracked down on corruption during his military rule in 1983-1985. Many Nigerians hope he will again.
“The worry is that there’s going to be a lot of time wasted in witch-hunting…That could take a year in which nothing else will happen,” said a Nigerian investment banker focused on upstream oil and gas projects, who declined to be named.
APC leader Bola Tinubu, whose support was instrumental in Buhari’s victory and wields huge influence, told Reuters a transtional committeee would be set up.
“No way will we discuss that now,” he said.
FAILED OIL BILL
Jonathan’s administration re-drafted a Petroleum Industry Bill (PIB) in 2012 that had been in the works for a decade.
The PIB was meant to change everything from fiscal terms to overhauling the NNPC, environmental rules and revenue sharing, but its comprehensive nature caused disputes between lawmakers.
Yet the main thing the oil companies were worried about was tax. The bill proposes 20 percent tax on offshore projects and 50 percent for onshore. Shell, Exxon and other majors had all complained publicly that the terms are unfair, given the risk associated with operating in Nigeria.
Uncertainty over the fiscal terms of the bill have been holding back billions of dollars of investment, especially into capital-intensive deepwater offshore, leading some to propose the bill be broken up into several pieces debated separately.