Nigeria is considering appointing the state regulator to take control of the country's existing oil contracts, rather than the state oil company, according to a draft legislative amendment seen by Reuters.

WHY IT'S IMPORTANT

This could reshape how Africa’s top oil producer governs its petroleum sector, making the regulator both an umpire and a player, blurring the lines between regulation and participation and raising concern over potential conflicts of interest.

It also raises corporate governance concerns because it removes the power of state company NNPC's board to approve its budget and formulate strategy.

CONTEXT

The law that would be amended is the 2021 Petroleum Industry Act (PIA), which empowered NNPC to represent Nigeria's interests in a variety of commercial oil contracts. The amendment would transfer that role to the Nigeria Upstream Petroleum Regulatory Commission (NUPRC).

A letter from the Attorney General to the minister in charge of gas, seen by Reuters, said the amendment was necessary because "some provisions of the PIA have created structural and legal channels through which substantial revenues of the Federation are being diverted away from the Federation account".

KEY QUOTE

"The observed decline in net oil revenue inflows is largely attributable to statutory leakages and opaque deductions under the current PIA architecture," said Lateef Fagbemi, Nigeria's attorney general and minister of justice.