Big Wins! – Nigeria’s Oil and Gas Sector in Review – 2017

With crude oil prices remaining robust throughout 2017 and now reaching trading highs of $ 64-$65 per barrel, the international Oil Companies (IOCs) namely ExxonMobil and Royal Dutch Shell Plc (the latter being slightly ahead of the former) are leading other IOCs in global operational profitability and flourishing under current global oil prices.
In the same vein, the Nigerian oil industry seeks to re-position itself, having recovered from the low crude oil price volatility in 2016 punctuated by interruptions to key production sources arising from militant activity in the Niger Delta. The Nigerian government now seeks to attract more investment in the oil & gas sector, improve production activity, currently 1.85 million barrels per day (mbpd) and ensure that the oil sector continues to perform its traditional role of supporting the Nigerian economy.

The 2018 budget was presented to the Nigerian federal legislature on 7 November 2017. The budget proposal presented by the Minister of Budget and National Planning Mr. Udoma Udo Udoma provides that the government plans to fund the budget with N6.6 trillion (approx. $ 18.3 billion) in revenues from various sources particularly the oil and gas sector amongst which signature bonuses (funds paid by oil companies to the Federal Government upon their successful bid for oil blocks in the oil sector) will contribute 1.7% amounting to N112 billion (approx. $ 311m). Such signature bonuses arise from the planned marginal field bid round, in respect of which guidelines were released in September 2017. With 46 acreages on offer. No specific date has yet been fixed for this bid round and it is hoped that a process which has suffered several setbacks in recent years will finally be concluded in late 2017 or early 2018. The outcome of this bid round shall be an important litmus test of the current indigenous appetite for investment in the upstream oil and gas sector.

Further encouraging signs have come from the Nigerian National Petroleum Corporation (NNPC). The NNPC has stated, in endorsement of the 2018 budgetary projection, that the 2018 crude oil national production projection (for Joint Ventures, Modified Carry Arrangement or External Financing, Production Sharing Contracts, Independents, Marginal Fields and Service Contracts) that about 2,298,000 barrels per day is achievable and realistic in view of the renewed security in the Niger Delta. Such projections are based on price scenarios of $35 (low), $45 (medium – the benchmark used for the 2018 budget) and $55 (high)

This outlook is reassuring given the positive global economic growth and the improved compliance with the Organization of the Petroleum Exporting Countries’ (OPEC) current production cuts for 2017, which cap Nigeria’s crude oil production (excluding condensates) to 1.8mbpd. It however remains to be seen, how much of an impact, OPEC’s production caps on Nigeria will have on Nigeria’s 2018 budget projections.

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has on the back of the budgetary projections and highlighted key aspects of the roadmap policy unveiled in 2016 by President Muhammadu Buhari titled ‘7 Big Wins’ in the oil and gas sector said that the government would begin the implementation of some fiscal policies to generate about $2 billion yearly in the short term and $9 billion in the long term.

The other big wins have been the delivery of zero fuel availability since 2015/2016; exiting the cash call system giving the multinational oil firms more belief in the need to invest in the country (investments which could be in excess of $ 15 billion). Examples of such investments are Agip and Shell’s Zabazaba Deepwater project and Shell’s Bonga extension project. Other big wins are the improved transparency in NNPC’s operations and deeper engagement and resultant stability in the Niger Delta region through the office of the Vice President, the Niger Delta Ministry, the security forces and the Presidency.

In 2018/2019, the government plans to rehabilitate the refineries and end or severely diminish the importation of refined petroleum products and reveal a package of fiscal policies, which will be subject to the Federal Executive Council approval and thereafter transmitted to the federal legislature for requisite legislative backing. The Minister of State for Petroleum Resources has predicted that this will expand federal government income in the short-term by over $2 billion a year and then on to over $9 billion in the long-term.

The federal legislature continues its work, commenced at the beginning of this year (2017) as regards ensure the passage into law of the entire aspects of the Petroleum Industry Governance Bill PIGB (a bill for the establishment of the institutions that will govern the Nigerian oil and gas sector). It is widely understood that the PIGB will need the strong support of the executive arm of the federal government to make it functional for the long-term stability of the oil industry.

To Appeal or Not to Appeal: That is the question

Appealability of National Industrial Court decisions on civil matters: the case of Skye bank Plc v. Victor Anaemem Iwu

Before the recent Supreme Court decision in Skye Bank Plc v. Victor Anaemem Iwu (2017) 16 NWLR (Pt. 24) 1, the issue of whether the decision of the National Industrial Court (NIC) on civil matters outside fundamental rights was appealable or not was sharply divided between two divergent decisions of the Court of Appeal. The two Divisions of the Court of Appeal interpreted the provisions of Sections 240, 241, 242, 243(2)- (4); 254C(5) and 254C(6) of the 1999 Constitution as amended.

The Ekiti Division of the Court of Appeal in four judgments: Local Government Service Commission, Ekiti State & Anor. v. Jegede (2013) LPELR – 21131 (CA); Local Government Service Commission, Ekiti State & Anor. v. Bamisaye (2013) LPELR – 20407(CA); Local Government Service Commission, Ekiti State & Anor. v. Olamiju (2-013) LPELR- 20409 (CA) and Local Government Service Commission, Ekiti State & Anor. v. Asubiojo (20130 LPELR – 20403 (CA), held that the decision of the NIC are appealable while the Lagos division of the Court of Appeal in Coca-Cola Nigeria Ltd v. Akinsanya (2013) 18 NWLR (1386) 225 and Lagos Sheraton Hotel & Towers v. HPSSA (2014) 14 NWLR (Pt. 1426) 45, held that the decisions of the NIC are not appealable, other than decisions on fundamental rights and criminal matters.

The Appellant in Skye Bank Plc v. Victor Anaemem Iwu (supra) at the Court of Appeal faced the quagmire that the panel of Justices constituted to hear the appeal may concur with either the views of the Lagos Division or the Ekiti Division of the Court of Appeal and still leaves the issue not fully settled. It was therefore apposite and commendable that Appellant’s counsel filed an application seeking the Court of Appeal to state a case on the appealability or otherwise of the judgment of the NIC to the Supreme Court in view of the constitutional issues and substantial points of law involved.

The Court of Appeal granted the application and formulated three issues for determination by the Supreme Court namely:

The Court of Appeal granted the application and formulated three issues for determination by the Supreme Court namely:

“(1) Whether the Court of Appeal as an appellate court created by the Constitution of the Federal Republic of Nigeria, 1999 (as amended) has the jurisdiction to the exclusion of any other court of law in Nigeria to hear and determine all appeals arising from the decisions of the National Industrial Court of Nigeria?

(2) Whether there exists any constitutional provision which expressly divested the Court of Appeal of its appellate jurisdiction over all decisions on civil matters emanating from the National Industrial Court of Nigeria?

(3) Whether the Court of Appeal’s jurisdiction to hear civil appeals from the decisions of the National Industrial Court of Nigeria is limited to only questions of Fundamental rights.

The Supreme Court in a full panel of seven Justices out of which only one Justice gave a dissenting judgment, and after considering all the relevant laws including the organic law and the Third Alteration to the Constitution 2010, the Court of Appeal Act and Rules s establishing the Court of Appeal and the National Industrial Court as well as the various decided cases, led to rest the divergent views that held sway prior to 30 June 2017. The Supreme Court in an illuminating judgment held as follows:

“In all, then, on a holistic interpretation of sections 240 and 243(1) of the 1999, appeals lie from the National Industrial Court to the Court of Appeal, that is, all decisions of the trial court are appealable to the Court of Appeal: as of right in criminal cases – Section 254C (5) and (6) and fundamental rights cases –section 243(2); and with the leave of the Court of Appeal, in all other civil matters where the National Industrial Court has exercised its jurisdiction, section 240 read conjunctively with section 243(1) and (4).

The apex court therefore answered the questions posed above as follows:

(a) The Court of Appeal has the jurisdiction, to the exclusion of any other court in Nigeria, to hear and determine all appeals arising from the decisions of the National Industrial Court;
(b) no constitutional provisions, expressly, divested the said Court of Appeal of its appellate jurisdiction over all decisions on civil matters emanating from the National Industrial Court, and
(c) as a corollary, the jurisdiction of the Court of Appeal to hear and determine civil appeals from the decision of the National Industrial Court is not limited, only to fundamental rights matters.”

We opine that the above decision of the Supreme Court has removed all barriers and assumptions that shrouded the issue of whether the judgment of the National Industrial Court is appealable or not and has stated in unequivocal terms that the decisions of the National Industrial Court on civil matters apart from fundamental rights are appealable but only with the leave of the Court of Appeal.

Review of Government Policy- Anti- Corruption and Financial Cases: Curbing inordinate delays and lawyers’ dilatoriness

President Muhammadu Buhari in his electioneering campaigns promised to stamp out graft in Nigeria and to this end, will set up special courts to speed up the trial of corruption cases. The President then sought the co-operation of the Judiciary in his administration’s fight against corruption and financial crimes in Nigeria.To redeem the battered image of the judiciary before the Nigerian public, the Chief Justice of Nigeria (CJN), Justice Walter Onnoghen, GCON in his speech at the Special Session of the Supreme Court of Nigeria to mark the commencement of the 2017/2018 Legal Year, emphasised the need to avoid all forms of dilatoriness by lawyers in prosecution of corruption and financial crimes cases and/or determination by the Court.

Consequently, on 27 September 2017, the CJN directed the Heads of Courts in Nigeria to set up Special Courts to speedily hear and determine corruption and financial crimes cases and forward the comprehensive list to the Nigerian Judicial Council. The Heads of Courts are to designate one or two courts in their jurisdiction as Special Courts for the hearing and speedy determination of corruption and financial crimes cases and pegged the number of legal appearances for each party to five.

The CJN also announced major reforms in the criminal justice system to effectively monitor and enforce the new policy. The National Judicial Council (NJC) approved the setting up of an Anti-Corruption Cases Trial Monitoring Committee with the mandate to among other things ensure that “both Trial and Appellate Courts handling corruption and financial crime cases key into and abide by the renewed efforts at ridding our Country of the canker worm.” The CJN also directed all heads of courts to clamp down on lawyers who deploy delay tactics in criminal matters before them.

The Committee is made up of 16 members and chaired by Hon. Justice Suleiman Galadima, CFR, a retired justice of the Supreme Court. Other members of the Committee include:

1. Hon. Justice Kashim Zannah (OFR), Chief Judge, Borno State
2. Hon. Justice P.O. Nnadi, Chief Judge, Imo State
3. Hon. Justice Marshal Umukoro, Chief Judge Delta State
4. Hon. Justice M. L. Abimbola, Chief Judge, Oyo State
5. Mr. A.B Mahmoud OON, SAN, President, Nigerian Bar Association,
6. Chief Wole Olanipekun OFR SAN, Former NBA President
7. Mr. Olisa Agbakoba OON SAN, Former NBA President
8. Mr. J.B Daudu SAN, Former NBA President
9. Mr. Augustine Alegeh SAN, Former NBA President
10. Dr. Garba Tetengi SAN, Member, NJC
11. Mrs. R.I Inga, Member, NJC
12. Mrs. Hajara Yusuf Representative, Ministry of Justice
13. Alhaji Kabiru Alkali Mohammed, mni Representative, Institute of Chartered Accountants of Nigeria (ICAN).
14 Olanrewaju Suraju Representative, Non-Governmental Organisations
15 Ahmed Gambo Saleh, Esq., Secretary, NJC – Secretary.

The Terms of Reference of the Committee include:

i). To monitor and regularly evaluate the progress and activities of courts designated to try corruption a financial/economic crime cases;
ii). Advise on Practice Directions for approval by the Chief Justice of Nigeria to be applicable in all such courts across the country with a view to eliminating procedural and administrative bottlenecks militating against speedy disposal of such cases;
iii). Advise on the trainings, re-trainings and other refresher programmes for Judges and staff of the designated courts aimed at enhancing their capacities to function effectively;
iv) Come up with an effective feedback mechanism from Heads of Courts to the Council on the activities and progress of cases before designated courts;

We hope that this Committee will swing into action and bring to bear the necessary expeditiousness, such that corruption and financial crimes cases and indeed all cases in court will be heard and determined expeditiously. This will in no small measure redeem the tarnished image and independence of some of our courts.

Unshackling the Power Sector- New Eligible Customer Regulations 2017

The Nigerian Electricity Regulatory Commission (NERC) on Monday 6 November 2017 released the newly-approved eligible customers’ regulations and outlined the terms that would guide the direct purchase of electricity by end-users from power generation companies.

In May 2017, the Minister of Power, Works and Housing, Babatunde Fashola, declared that eligible power consumers would be free to purchase electricity directly from the Generation Companies (GenCos).
These regulations have been opposed by the Distribution Companies (DisCos) however, NERC on Monday 6 November 2017 presented the approved terms to the Honourable Minister in Abuja, and announced that the 11 electricity distribution companies had been designated as suppliers of last resort in the trading framework of the new regulations.

OPEC has sought to address this situation with output cuts but experts predict that this will not be enough. Last week OPEC and its allies agreed to deeper output cuts in a bid to save declining oil prices. Following the deal, Nigeria’s Minister for Petroleum, Timipre Sylva, announced that the country will now be producing 1.412 million barrels per day, as against 1.829 million barrels per day. With this volume, if crude oil is sold at an average price of $25 bpd in April, then the country would be earning N13.41 billion per day as against the N17.29 billion that was earned prior to the cut.
The International Energy Agency’s projection is that global oil demand in April will be 29 million b/d lower than a year ago; down to a level last seen 25 years back (1995). This demonstrates that cuts in output by producers may not fully offset the near-term falls facing the market.

The NERC explained that the regulations were a product of extensive consultations with relevant stakeholders in Lagos, Kano, Yola, Jos, Port Harcourt, Enugu and Abuja. The objective of the regulations was to permit high end-customers the freedom to purchase power directly from the GenCos and as a result, the DisCos may eventually lose a good number of their high demand customers and become standby suppliers of electricity to eligible customers, where such consumers’ contract suppliers fail to meet up with the required supply.

Time will tell the effects that these regulations will have on the industry. What is clear is that the new regulations will break the monopoly DisCos currently have on distribution of Power and this will inevitably create more competition and drive prices down.