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Editorial

EVALUATING THE PETROLEUM INDUSTRY ACT 2021

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By Matthew Eloyi

The Petroleum Industry Act (PIA) 2021 which was signed by President Muhammadu Buhari on the 16th of August 2021 to veto the extant Petroleum Act 2004, has created a lot of provisions and innovations that will affect both private and public sectors, as well as stakeholders in the oil and gas industry.

The PIA was assented to by the President to provide for the legal, governance, regulatory, and fiscal framework for the Nigerian Petroleum Industry, the establishment, and development of host communities and other related matters in the upstream, midstream and downstream sectors of the industry.

The Act is categorized into 5 Chapters, 319 Sections, and 8 Schedules. Chapter 1 of the Act makes provision for the governance and institution of the petroleum industry. It emphasizes the fact that the ownership and control of petroleum within Nigeria and its territorial waters are vested in the Federal Government. It states that the Minister of Petroleum Resources who heads the Petroleum Industry has the powers as vested on him by Section 3(1) to formulate, monitor, and administer government policy in the industry.

The PIA also makes provision for dual regulators for the petroleum industry called The Nigerian Upstream Petroleum Regulatory Commission. The Commission is a corporate body with perpetual successions whose functions are limited to only the upstream petroleum activities as provided for in Section 4 of the Act, which provides that “the Commission is responsible for the technical and commercial regulation of the upstream petroleum operations”. One of the many other functions of the Commission is that it ensures compliance with all applicable laws and regulations governing upstream petroleum operations.

Another regulatory agency under Section 29 of the Act is the Nigerian Midstream and Downstream Petroleum Authority. This regulatory agency is responsible for the technical and commercial regulation of the midstream and downstream petroleum operations in the petroleum industry as provided under Section 29(3) of the PIA.

The Act also makes provision for the establishment of the Nigerian National Petroleum Company Limited (NNPC Limited) under Section 53. The NNPC Limited is created to be an agent of the Nigerian National Petroleum Corporation (NNPC) to manage the winding down of assets, interest, and liabilities of the NNPC.

The ownership of NNPC Limited is vested in the Government of the Federation of Nigeria at incorporation and held by the Minister of Finance and the Ministry of Petroleum incorporated in equivalent portions on behalf of the Federal Government and the Ministry of Petroleum as stated in Section 53(3) of the Act.

The PIA also establishes incorporated joint companies under Section 65 of the Act. The NNPC Limited is meant to conduct its affairs on a commercial basis in a profitable manner without recourse to government funds and their memorandum and articles of association shall state these restrictions. The NNPC is also required to declare dividends to its shareholders and retain 20% of profit as retained earnings to grow its business like any other incorporated entity incorporated under the Companies and Allied Matters Act, as provided under Section 53(7) of the PIA.

Chapter 2 of the PIA 2021 makes provision for the general administration, with its objectives to promote the exploration and exploitation of petroleum resources in Nigeria for the benefit of the citizens, to promote the efficient and effective development of the petroleum industry, amongst others. Section 67 of the Act provides that the administration and management of petroleum resources are to be conducted under the Act and principles of good governance, transparency, and sustainable development in Nigeria.

Under Section 68 of the Act, title to any data and its interpretation relating to upstream, petroleum operations are vested in the Government and shall be administered by the Nigerian Upstream Petroleum Regulatory Commission. Where petroleum discovery is made in a frontier basin, the Minister on the recommendation of the Commissioner will reclassify all or part of the basin from frontier acreages to a general onshore area and the fiscal terms applicable to onshore shall apply to new licenses and leases in the basin after classification and any existing lease upon renewal, provided it is not applied to licenses and leases existing at the moment of reclassification.

The Act also provides for environmental management by the Commission in compliance with the Act in respect to environmental sustainability. Section 102 of the Act provides that a licensee or lessee who engages in upstream or midstream petroleum operations is required to within one year or six months of the effective date or after the grant of the applicable license or lease, submit for approval an environmental management plan in respect of projects which require environmental impact assessment to the Commission or Authority as the case may be. The plan shall be approved where it complies with relevant Environmental Acts and the applicant has the capacity to rehabilitate and manage negative impacts on the environment.

Under Section 111 of the Act, the Nigerian Midstream and Downstream Petroleum Authority may grant, renew, modify or extend individual licenses or permits, provided that where it relates to the establishment of refineries shall be issued by the Minister on the recommendation of the Authority.

Under Section 125 of the PIA, the activities requiring a license for midstream and downstream gas operations involves establishing, constructing, or operating a facility for the processing of gas; engaging in bulk transportation of natural gas by rail, barge, or other means of transportation, operating gas transportation network, engaging in wholesale gas supply, engaging in the construction or operation of petrochemical or fertilizer plants, etc.

The Authority is further required under Section 126 of the Act to issue regulations concerning midstream and downstream gas operations which includes the establishment and operation of a wholesale natural gas market scheme to ensure continuity of supply of natural gas to customers which apply to owners and operators of gas transportation pipelines, shippers of natural gas, holders of natural gas storage and distribution licenses and gas retailers and other matters consequential or ancillary to the activities stated above.

Chapter 3 of the PIA makes provision for another salient introduction which is the Petroleum Host Community Development (PHCD) under Section 234 of the Act. The objectives of the PHCD include fostering sustainable prosperity within host communities; providing direct social and economic benefits from petroleum operations to host communities; creating a framework to support the development of host communities, etc.

The Act further makes provision for the incorporation of host communities development trusts under Section 235 as the settler is required to incorporate Host Communities Development Trust for the benefit of host communities which the settler is responsible for and the Act provides for the timeline within which to incorporate the Trust. The sources and allocation of the host communities’ development trust are also provided under Sections 240 and 244 of the Act. The funds are meant to be distributed by the Board of Trustees to host communities using a matrix as provided by the settler.

Chapter 4 of the PIA introduces the Petroleum Fiscal Industry Framework (PIFF). The objectives of PIFF include establishing a progressive fiscal framework that encourages investment in the Nigerian petroleum industry, balancing rewards with risk and enhancing revenues to the Federal Government of Nigeria; providing a forward-looking fiscal framework that is based on core principles of clarity, dynamism, and fiscal rules of general application, etc. The Act states that all money collected from the petroleum industry that is due to the government are to be transferred to a federal account and such collection of the government revenue in the petroleum industry shall be the function of the Federal Inland Revenue Service (FIRS).

The PIA also introduces the Hydrocarbon Tax under Section 260 of the Act which shall be applicable and levied upon the profits of companies engaged in the upstream petroleum operations in the onshore, shallow water, and deep offshore, payable during each accounting period. Subject to Section 262 of the Act, the crude oil revenue of the company shall be the value of any chargeable oil adjusted to the measuring points based on the proceeds of the chargeable oil sold by the company and the value of all chargeable oil disposed of by the company.

According to the provision of the Act, the chargeable tax for any accounting period shall be 30% of the profit from crude oil for petroleum mining leases concerning offshore and shallow water areas and 15% of the profit from crude oil for onshore and shallow water for petroleum prospecting license. Also, the Company Income Tax (CIT) is now applicable to companies, licensees, concessionaire, lessees, contractors, or subcontractors engaged in the upstream, midstream, or downstream petroleum operations in addition to the hydrocarbon tax as provided in Section 302 of the PIA, subject to the Companies and Allied Matters Act. Refusal to comply with this attracts the administrative penalty of N10,000 only, and where no other penalty is specifically provided for, a person found guilty is liable to a fine of N20 Million Naira or any amount prescribed by the Minister of Finance, as provided under Section 297 of the Act.

Conclusively, chapter 5 of the Act provides for miscellaneous provisions which deal with legal proceedings with any suit instituted by the Commission or Authority or any of its employees. As earlier stated, the PIA 2021 provides the legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry and also the development of host communities.

Despite mixed reactions from the public and industry players, the Petroleum Industry Act (PIA) 2021 is a welcome development for the Nigerian oil and gas industry as it is a progressive step for achieving a robust and well-regulated industry.

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Africa

Customs hands over illicit drugs worth N117.59m to NDLEA

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Customs hands over illicit drugs worth N117.59m to NDLEA

The Nigeria Customs Service (NCS), Ogun Area 1 Command, has handed over illicit drugs worth N117.59 million to the National Drug Law Enforcement Agency (NDLEA).

The Comptroller of the command, Mr James Ojo, disclosed this during the handing over of the drugs to Mr Olusegun Adeyeye, the Commander of NDLEA, Idiroko Special Area Command, in Abeokuta, Ogun, on Friday.

Ojo said the customs handed over the seized cannabis and tramadol tablets to the Idiroko Special Command for further investigation in line with the standard operating procedures and inter-agency collaboration.

He said the illicit drugs were seized  in various strategic locations between January and November 21, 2024, in Ogun State.

He added that the illicit drugs were abandoned at various locations, including the Abeokuta axis, the Agbawo/Igankoto area of Yewa North Local Government Area, and Imeko Afton axis.

Ojo said that the seizure of the cannabis sativa and tramaling tablets, another brand of tramadol, was made possible through credible intelligence and strategic operations of the customs personnel.

“The successful interception of these dangerous substances would not have been possible without the robust collaboration and support from our intelligence units, local informants and sister agencies.

“These landmark operations are testament to the unwavering dedication of the NCS to safeguard the health and well-being of our citizens and uphold the rule of law,” he said.

He said the seizures comprised 403 sacks and 6,504 parcels, weighing 7,217.7 kg and 362 packs of tramaling tablets of 225mg each, with a total Duty Paid Value of N117,587,405,00.

He described the height of illicit drugs smuggling in the recent time as worrisome.

This, he said, underscores the severity of drug trafficking within the borders.

“Between Oct. 13 and Nov. 12 alone, operatives intercepted a total of 1,373 parcels of cannabis sativa, weighing 1,337kg and 362 packs of tramaling tablets of 225mg each,” he said.

Ojo said the seizures had  disrupted the supply chain of illicit drugs, thereby mitigating the risks those substances posed to the youth, families and communities.

He lauded the synergy between its command, security agencies and other stakeholders that led to the remarkable achievements.

Ojo also commended the Comptroller General of NCS for creating an enabling environment for the command to achieve the success.

Responding, Adeyeye, applauded the customs for achieving the feat.

Adeyeye pledged to continue to collaborate with the customs to fight against illicit trade and drug trafficking in the state.

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Africa

Ann-Kio Briggs Faults Tinubu for Scrapping Niger Delta Ministry

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Prominent Niger Delta human rights activist and environmentalist, Ann-Kio Briggs, has criticised President Bola Tinubu’s decision to scrap the Ministry of Niger Delta, describing it as ill-advised and detrimental to the oil-rich region.

Briggs expressed her concerns during an appearance on Inside Sources with Laolu Akande, a socio-political programme aired on Channels Television.

“The Ministry of Niger Delta was created by the late (President Umaru) Yar’Adua. There was a reason for the creation. So, just removing it because the president was advised. I want to believe that he was advised because if he did it by himself, that would be terribly wrong,” she stated.

President Tinubu, in October, dissolved the Ministry of Niger Delta and replaced it with the Ministry of Regional Development, which is tasked with overseeing all regional development commissions, including the Niger Delta Development Commission (NDDC), North-West Development Commission, and North-East Development Commission.

Briggs questioned the rationale behind the restructuring, expressing concerns about its feasibility and implications. “But that’s not going to be the solution because who is going to fund the commissions? Is it the regions because it is called the Regional Development Ministry? Is it the states in the regions? What are the regions because we don’t work with regions right now; we are working with geopolitical zones,” she remarked.

She added, “Are we going back to regionalism? If we are, we have to discuss it. The president can’t decide on his own to restructure Nigeria. If we are restructuring Nigeria, the president alone can’t restructure Nigeria, he has to take my opinion and your opinion into consideration.”

Briggs also decried the longstanding neglect of the Niger Delta despite its significant contributions to Nigeria’s economy since 1958. “The Niger Delta has been developing Nigeria since 1958. We want to use our resources to develop our region; let regions use their resources to develop themselves,” she asserted.

Reflecting on the various bodies established to address the region’s development, Briggs lamented their failure to deliver meaningful progress. She highlighted the Niger Delta Basin Authority, the Oil Mineral Producing Areas Development Commission (OMPADEC), and the NDDC as examples of ineffective interventions.

“NDDC was created by Olusegun Obasanjo…There was OMPADEC before NDDC. OMPADEC was an agency. Before OMPADEC, there was the Basin Authority…These authorities were created to help us. Were we helped by those authorities? No, we were not,” she said.

Briggs further described the NDDC as an “ATM for failed politicians, disgruntled politicians, and politicians that have had their electoral wins taken away from them and given to somebody else.”

Her remarks underscore the deep-seated frustrations in the Niger Delta, where residents continue to advocate for greater control over their resources and improved governance.

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Editorial

NITDA Framework on Alternative Dispute Resolution (ADR) for the ICT Sector and the Prospects of Ethical, Time-bound Resolutions

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NITDA

“An ounce of mediation is worth a pound of arbitration and a ton of litigation” __ Joseph
Grynbaum

By Ernest Ogezi

Everyday online transactions within and across international borders continue to
grow in intensity and complexity. The nature of ICT makes the world borderless,
therefore disputes pertaining to trade and Intellectual property rights such as
patents, trademarks, copy-rights – including software – or know-how, can quickly
spiral into complex legal situation. ICT disputes are multifaceted as they are
technical; for this reason, when parties to ICT transactions get involved in
conflicts, the most important thing to do is find a time- and cost-effective manner
to resolve the issues in order to avoid disruption of technology development,
investment and consumer interests. Conventional courts are not often well
equipped to handle the intricacies because conflicts are complex and require
expertise.

Alternative dispute resolution (ADR) mechanisms, including mediation, arbitration
expedited arbitration and expert determination, offer parties and their lawyers high-
quality, efficient and cost-effective ways to resolve their ICT disputes out of court,
especially contractual disputes involving parties from different jurisdictions. Some
important advantages of ADR are neutrality and expertise. In neutrality, ADR
assumes a neutral law, language and institutional culture of all parties, taking away
the home court advantage that would have been enjoyed by parties in court-based
litigation. Expertise borders on achieving high-quality solutions in ICT disputes
where judges may have the relevant knowledge in key areas. Parties can appoint
arbitrators, mediators or experts with specific proficiency in the relevant legal,
technical or business area.

Delay in the resolution of ICT conflicts has the ability of putting a whole project at
risk. This underpins the importance of economically viable and time-bound
resolution of conflicts. ADR mechanisms provide short and specific timelines
which the parties can further adapt. Mechanisms like the expedited arbitration fast-
track actions to achieve even faster solutions. Alternative dispute resolution (ADR)
helps avoid the expense and complexity of multi-jurisdictional legislation and the
risk of inconsistent result by allowing parties to settle in a single procedure.

According to Statista, the number of internet users in Nigeria as at 2020 had
reached 99.05 million. The business ecosystem within the Nigerian cyberspace is
bolstering and a lot of social entrepreneurs are emerging, offering service and
product transactions to a variety of customers or consumers. International online
transactions are also growing in Nigeria. It is inevitable that conflicts will result as
a result of the use of the internet and, Information and Communication Technology
(ICT). But conflicts occur, it is necessary to follow expert, time- and cost-effective
procedure for resolution.

Nigeria’s judicial system is currently ill-equipped to handle disputes relating to
parties in an ICT setting, litigations can be very expensive while judges and
lawyers lack the requisite technical expertise to litigate ICT-related conflicts. This
is what informed the development of the framework on Alternative Dispute
Resolution (ADR) developed by the National Information Technology
Development Agency (NITDA). The ADR Framework defines “ICT Conflict
Prevention” as a body that ensures that conflicts in an agreement or ongoing ICT
projects are identified at an early stage, resolved and prevented from escalating
further. Within the NITDA ADR framework ICT disputes “refers to disagreements
between parties who agreed concerning hardware (computer components and
peripheral devices), software, IT consultancy, cloud services or internet services.”
The elaborate ADR framework also encapsulates the establishment of Online
Dispute Resolution (ODR) platform. The ODR platform is seen as the most
innovative and interesting aspect of the ADR given that it is an online dispute
resolution platform. The ODR platform allows for resolving of ICT disputes online
from filling, neutral appointment of arbitrators, online discussions and rendering of
binding settlements.

The ADR framework has provision for the establishment of a body specialized in
the field of organization and ICT and made up of experts in IT conflict
management that will offer ADR options to resolve and where necessary settle
disputes in ICT related matters. The objectives of the body are:
i. To inform the respondent party about the complaint with the aim of settling
the dispute between parties. The body shall provide an electronic complaint
form to the parties.
ii. To enhance cross border transactions and market integration online while
providing means of resolving disputes where it arises in the course of a
transaction.

iii. To provide the parties and ADR entity with the translation of information
which is necessary for the resolution of ICT disputes
iv. To make online transactions safer and fairer through access to dispute
resolution tools by providing a feedback system that allows the parties to
express their views on the functioning of the ODR platform.
v. To make publicly available general information on ADR as a means of out-
of-court dispute resolution mechanism and to provide information on how to
submit complaints through the ODR platform.

A complaint is valid to the extent that the ICT agreement initially contained
arbitration clause accepting that all disputes should be resolved by the agency or
parties voluntarily consent to applying ADR to resolve ICT disputes. The
complaining party must fill in the electronic complaint form and ensure that the
there is sufficient information as to the cause of the dispute. Data processed
through the electronic complaint form and its attachment must be accurate,
relevant, and not excessive.

The ADR Framework will also incorporate the Data Protection Regulation 2019 in
the access, collection and processing of users for dispute management and
resolution. Strict confidentiality and appropriate technical and organizational
measures to ensure information security within the ADR body and the online
dispute resolution platform.

Through the scope and applicability of the ADR framework NITDA will be able to
resolve all technical, commercial or legal conflicts and apply to disputes on
contractual obligations stemming from hardware and software transactions,
consultancy, telecommunication the internet, online sales and service contracts
between consumers within Nigeria and a trade established in Nigeria using the internet services.

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