Nigeria is considering giving control of oil contracts to regulator

According to a draft of a legislative amendment, Nigeria may decide to have the state oil company take over the control of existing oil contracts in the country, instead.

Why it's important

The regulator could become both an umpire as well as a participant, blurring the line between participation and regulation, and raising concerns about potential conflicts of interests.

This also raises concerns about corporate governance, as it takes away the power from NNPC's state-owned company board to approve budgets and formulate strategies.

CONTEXT

The 2021 Petroleum Industry Act would be amended. This law empowered NNPC in a number of commercial oil contracts to represent Nigerian interests. This role would be transferred to the Nigeria Upstream Petroleum Regulatory Commission.

In a letter to the Minister in charge of Gas, the Attorney General said that the amendments were necessary because "some provisions" of the PIA had created structural and legal channels by which substantial revenue of the Federation was being diverted from the Federation's account.

KEY QUOTE

The decline in oil revenues is largely due to leakages under the current PIA structure and opaque deductions.

(source: Reuters)