Shortcomings of the Petroleum Industry Act 2021

The Petroleum Industry Act 2021 (PIA) has been reported as an audacious development in the petroleum sector of Nigeria. The PIA in Nigeria is indeed designed to provide a comprehensive legal, governance, regulatory, and fiscal framework for the country’s petroleum industry. It aims to address various challenges faced by the sector and foster its development in a sustainable manner. Nigeria’s oil sector has historically been a significant source of revenue for the country. However, its contribution to the overall Gross Domestic Product (GDP) has not been commensurate with its potential. This is partly due to issues such as inadequate regulations, lack of transparency, and
governance challenges, which have hindered the sector’s growth and attractiveness to investors.
In spite of the enactment of the ground-breaking law in the petroleum sector, it is disconcerting that the industry has demonstrated minimal progress. This can be attributed to the delayed implementation of the Petroleum Industry Act (PIA), which has resulted in uncertainty for investors and impeded industry advancement.

It should be noted that for the nation to fully enjoy the benefits of the PIA, it is important to ensure its diligent implementation. It is worth noting that the successful implementation of the PIA relies on factors such as commitment, effective governance, and proactive regulatory oversight.

It is important to remember that the Act alone cannot guarantee Nigeria’s economic development, it must be complemented by well-thought-out policies, infrastructure development, investments in human capital, and endeavours to diversify the economy beyond oil.

Moreover, the refineries continue to remain non-operational, with some undergoing rehabilitation. Consequently, Nigeria has been compelled to rely heavily on imported petroleum products. In 2022, the country’s expenditure on petrol imports reached an unprecedented high, surpassing N5 trillion.
Despite the expenditure of a substantial sum of over N11 trillion on fuel subsidies, the country continued to face persistent fuel scarcity because of challenges related to foreign exchange and distribution issues.

In the last few years, the oil sector has grappled with oil theft which has dipped the country’s oil production to an all-time low, which led to significant revenue losses as its oil GDP hit the lowest since 2015. The PIA represents a significant milestone, having been signed into law in August 2021 after more than two decades of uncertainty. 

However, the government had extended the implementation deadline of the Act by 12 months, and with the onset of a new administration, crucial components of the Act, such as downstream sector deregulation, liberalized gas pricing, and the implementation of fiscal and regulatory guidelines, are
yet to be executed Governments worldwide utilize periods of boom and bust in the global oil
market to implement essential reforms. These fluctuations provide opportunities for governments to enact necessary changes in response to the dynamic nature of the oil industry.

As we anticipate the realization of the objectives of the PIA, it is crucial to prioritize the  unobstructed implementation of the new law. This approach is essential to ensure that the anticipated benefits are attained, particularly for the well-being of individuals residing in local communities who are most affected by the adverse impacts of oil production.