Nigerian Legal Luminary Advocates for Development Oil Model Over Contract Oil Approach

In a significant critique of Nigeria’s oil governance, Senior Advocate of Nigeria Dr. Olisa Agbakoba has urged the Federal Government to shift from the current contract oil model to a development oil model. Speaking at a press briefing in Lagos on Wednesday, Agbakoba emphasized the need for active state participation and control over the nation’s oil resources to foster national development.

In his policy paper, Rethinking Nigeria’s Oil and Gas Governance, Agbakoba outlined the stark differences between the development oil model and the traditional contract oil approach. He criticized the current model, which grants substantial control to international oil companies (IOCs), allowing them to co-own joint ventures, manage extraction, and share profits with the government. According to Agbakoba, this arrangement leads to significant capital flight through payments to foreign contractors, the use of foreign banks, and profit repatriation to IOC home countries.

“The current model allows IOCs too much control over operations,” Agbakoba stated, noting that the Nigerian National Petroleum Company Limited plays no active role in key operational decisions. He called for a governance framework that prioritizes local refining capacity, the establishment of petrochemical industries, and the creation of downstream industries utilizing oil and gas as raw materials.

Under the development oil model, Agbakoba argued, a larger portion of oil revenue would remain within Nigeria, strategically reinvested into infrastructure, education, healthcare, economic diversification, and research and development in energy-related fields. He suggested a single, strong regulatory body to ensure transparency and efficiency, akin to the model employed in Saudi Arabia.

Agbakoba also addressed the legal standing of the Petroleum Industry Act (PIA), calling for its repeal or amendment due to conflicts with the Nigerian Constitution. He highlighted Section 64(c) of the PIA, which contradicts Section 162(1) of the Constitution. He proposed drafting new legislation aligned with the development oil approach to maximize the use of oil and gas resources for national development.

In response, George Ene-Ita, spokesperson for the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), disagreed with Agbakoba’s call for repeal. “The PIA has not been in effect for even three years,” Ene-Ita said, suggesting a review rather than an outright repeal.

Olaide Shonola, spokesperson for the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), also defended the PIA, describing it as the best recent development for the oil industry. “The PIA is a plus. It should not be repealed because it is useful,” Shonola asserted.

This debate underscores the ongoing challenges and divergent perspectives in reforming Nigeria’s vital oil sector, with significant implications for its economic future and governance structures.