ABUJA, Nigeria (VOICE OF NAIJA)-Oil industry operators and petroleum regulators have opposed a proposal seeking to compel oil and gas producing companies to contribute three per cent of their annual budgets to the South-South Development Commission, warning that the move could discourage investment and reduce the competitiveness of Nigeria’s petroleum industry.
The objections were raised on Wednesday during a resumed public hearing organised by the House of Representatives Committee on the South-South Development Commission on a bill seeking to amend the South-South Development Commission (Establishment) Act, 2025, to strengthen the commission’s funding framework.
The hearing brought together petroleum regulators, oil producers, government agencies and other stakeholders to examine the proposed amendment before it proceeds to the next stage of legislative consideration.
Chairman of the committee, Julius Pondi, said the hearing was reconvened to allow key stakeholders who missed the initial session on July 8 due to their participation in the Nigerian Oil and Gas Conference to make their submissions.
He explained that the committee considered it important to hear from all relevant stakeholders because of the petroleum sector’s strategic role in the proposed amendment.
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According to the Delta lawmaker, the amendment seeks to expand the commission’s funding sources to enable it to effectively carry out its mandate of driving sustainable development across the South-South region.
Pondi noted that despite serving as the backbone of Nigeria’s economy through crude oil production, maritime activities and industrial operations, the South-South region continues to face poor infrastructure, environmental degradation and other developmental challenges.
“We are particularly interested in receiving constructive contributions on the proposed funding framework, its sustainability, its implications for government and industry, as well as alternative proposals that can further strengthen the objectives of the legislation,” he said.
However, regulators and industry operators expressed strong reservations about the proposed funding model.
Presenting the position of the Nigerian Upstream Petroleum Regulatory Commission, the Commission Chief Executive, Mrs Oritsemeyiwa Eyesan, represented by the Head of Regulations and Statutory Compliance, Kingsley Chikwendu, said the commission supports a predictable and sustainable funding structure for the South-South Development Commission.
He, however, opposed the provision requiring oil-producing companies operating in the region to contribute three per cent of their total annual budgets to the commission.
Chikwendu argued that the term “total annual budget” was not defined in the bill, creating uncertainty over how the proposed contributions would be calculated and implemented.
He added that the proposal failed to address key issues, “including the basis for assessment, deductibility of payments, timelines for remittance, treatment of joint venture operations and companies with operations spanning multiple regions.”
According to him, the provision would amount to another expenditure-based levy payable irrespective of a company’s profitability or production levels.
The NUPRC further reminded lawmakers that upstream operators “are already subject to numerous statutory financial obligations, including petroleum taxes, royalties, the Niger Delta Development Commission levy, Host Community Development Trust Fund contributions under the Petroleum Industry Act, Nigerian Content Development Fund payments, environmental remediation obligations and abandonment fund contributions.”
The commission urged lawmakers to carefully “evaluate the likely impact of the proposed levy on investment decisions, production costs and the competitiveness of Nigeria’s upstream petroleum sector.”
The Nigerian Midstream and Downstream Petroleum Regulatory Authority also raised similar concerns.
Representing the authority, Senior Manager Ahmed Laido advised lawmakers to ensure any additional funding mechanism aligns with the fiscal principles of the Petroleum Industry Act, 2021.
He said any new financial obligation “should strengthen investor confidence, promote regulatory certainty and support the Federal Government’s ease-of-doing-business agenda.”
Laido urged the committee to strike a balance between providing adequate funding for the commission and maintaining a competitive investment climate.
The strongest opposition came from the Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry.
Its Chairman, Bala Wudiri, maintained that “oil companies are already making substantial statutory contributions under existing laws” and cautioned against introducing another mandatory levy.
He warned that imposing an additional three per cent contribution would “increase the financial burden on operators, duplicate existing obligations and weaken Nigeria’s attractiveness as an investment destination.”
Wudiri urged lawmakers to adopt a funding model that would strengthen the South-South Development Commission without discouraging investment in the oil and gas sector.
Despite their reservations, stakeholders unanimously supported efforts to accelerate development in the South-South region.
Most participants agreed that the commission requires adequate funding to deliver critical infrastructure and development projects but advised lawmakers to adopt a financing framework that would not discourage investment or increase the cost of doing business.
The South-South Development Commission was established to coordinate and fast-track development across the six states of the South-South geopolitical zone by addressing longstanding issues such as poor infrastructure, environmental degradation, unemployment and the socio-economic effects of decades of oil exploration.
The amendment before the House of Representatives seeks to strengthen the commission’s financial base by expanding its funding sources.
However, the proposal requiring oil-producing companies to contribute three per cent of their annual budgets has emerged as the most contentious aspect of the bill, with regulators and industry operators warning that it could duplicate existing statutory obligations under the Petroleum Industry Act and other extant laws.
The House Committee is expected to review memoranda and submissions from stakeholders before presenting its report and recommendations to the House of Representatives.