The Group Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari, has said that the three per cent host communities funds provided by the new Petroleum Industry Act may be up to $500m yearly.
The disclosure is coming as President Muhammadu Buhari on Monday signed the PIA which was earlier passed by the National Assembly 48 days ago.
This is the first time Africa’s largest oil producer is having petroleum legislation to overhaul its multi billion dollar oil industry.
The legislation has been in the pipeline since President Olusegun Obasanjo’s tenure in 1999.
But despite the landmark achievement by the current administration, the issue of the three per cent host communities benefits provided by the PIA has been largely criticised by producing communities.
The PIA provides a three per cent equity stake in the Host Community Trust which will come from the yearly operating expenses of oil companies.
Kyari said, “Let me say it bluntly. This industry hasn’t done well in operating or having the licence to operate. We haven’t done well in the sense that everything we are doing in our attempt to make sure that we provide for the host communities, we were doing things the communities probably don’t need.
“They don’t want it. They don’t know what they want. But obviously we call it some kind of CSR project where we will go and build a community hall for them. That is not what they want. They have no control over it. They have no say over it.
“So what this bill has done is to return that authority, the choice of what to do to the host communities. And three per cent of the operating expenses is a huge number. Many people are arguing around the three per cent or five per cent and three per cent of what? I think that is what many people don’t understand.
“Today, last year’s operating expenses for the year is about $16bn. 3 per cent of $16bn is a large number somewhere around $500m plus. That in today’s context is probably bigger than the Niger Delta Development Commission (NDDC).
“That’s really what it is. That is what we are providing. And of course let us not also forget the fact that there are several interventions in this country around how we can take care of the host communities or where oil is produced in the Niger Delta or where ever we find oil and many of them have practically not worked and that is reality.”
He also explained that there would be restrictions for what host communities cannot do with the funds provided in the PIA.
“At least 70 per cent of every resource available must be put in physical infrastructure and this is by law now, it is not by choice,” the NNPC boss said.
He maintained that the three per cent fund will be largely invested in things that will have long lasting values for the host communities.
“If this works, ultimately, you are going to see massive development in the host communities,” he added.
The NNPC boss who also spoke on the impact of subsidy removal on average Nigerians said if the process is not properly managed, average Nigerians will suffer.
But he said that the administration is putting in place mechanisms to reduce the shocks of the subsidy removal on the regular Nigerian on the street.
Kyari explained, “I think two things will play out. First of all, timing is everything in this conversation. When will that happen? You know obviously it is not tomorrow and there is an engagement going on.
“As we speak now, there are quite a number of engagements that have been going on and there is one element that is unresolved which is that, would any subsidy removal have an adverse impact on the ordinary person? The answer is correct if you don’t manage it properly.
“And so what can you do about it? First of all, you must have a market that will develop with the passage of the Petroleum Industry Act. You must find how you are going to transit out of this.
“Transition means are there safeguards for market manipulation. Do you have safeguards against the potential transportation cost prices that are going to affect labour issues that you are going to deal with.”
The NNPC GMD said the transition process cannot be achieved in a few months, but he said a process will be put up before the subsidy removal.
“That process is clearly determined by what is really practical today. For instance as an insider, I know for sure that Mr President’s key concern around the pump price of petroleum is that, how is this going to affect the ordinary person?
” How are we going to deal with it? What excuses do we have to make sure that we don’t sell, is it possible that we sell at the price we are seeing today? Of course this is a very obvious and genuine concern, but can you afford it?” said Kyari.
He said in the short term, those engagements must take place to balance the effect of the subsidy removal on Nigerians.
“That includes the stabilisation of how prices are fixed in the market so that you don’t have the exploitation of the ordinary Nigerian and also, even where PMS is the
ultimate for many consumers, particularly automobile transportation, there are alternatives.’