Oil industry operators and petroleum regulators have opposed a proposal seeking to compel oil and gas companies operating in the South-South region to contribute three per cent of their annual budgets to the South-South Development Commission.
They warned that the proposed levy could discourage investment, increase operating costs and undermine the competitiveness of Nigeria’s petroleum industry.
The concerns were raised on Wednesday at a resumed public hearing organised by the House of Representatives Committee on the South-South Development Commission.
The hearing focused on a bill seeking to amend the South-South Development Commission (Establishment) Act, 2025, to strengthen the commission’s funding framework.
The session brought together petroleum regulators, oil producers, government agencies and other stakeholders to scrutinise the proposed legislation before it proceeds for further legislative consideration.
The Chairman of the committee, Julius Pondi, said the hearing was reconvened to accommodate critical stakeholders who were unable to attend the initial session on July 8 due to their participation in the Nigerian Oil and Gas Conference.
Pondi said the committee considered it necessary to obtain the views of all relevant stakeholders because of the strategic role of the petroleum sector in the proposed amendment.
According to the Delta lawmaker, the amendment is intended to broaden the commission’s funding base and enable it to effectively fulfil its mandate of promoting sustainable development across the South-South region.
He noted that despite the region’s contribution to the national economy through crude oil production, maritime activities and industrial operations, the South-South 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,” Pondi said.
However, the proposed funding model attracted strong reservations from regulators and industry operators.
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, supported the need for a predictable and sustainable funding structure for the commission.
He, however, opposed the provision requiring oil-producing companies operating within the region to contribute three per cent of their total annual budgets.
Chikwendu argued that the bill did not define the phrase “total annual budget”, creating uncertainty over how the proposed contributions would be calculated and enforced.
He said the provision failed to clarify critical issues, including the basis for assessment, deductibility of payments, remittance timelines, treatment of joint venture operations and companies with operations spanning multiple regions.
According to him, the proposal could effectively introduce another expenditure-based levy that companies would be required to pay regardless of profitability or production levels.
The NUPRC also reminded lawmakers that upstream operators already face 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 potential 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.
Speaking on behalf of the authority, Senior Manager Ahmed Laido advised lawmakers to ensure that 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 preserving a competitive environment for investment.
The strongest opposition came from the Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry.
Its Chairman, Bala Wudiri, argued that oil companies were already making substantial statutory contributions under existing laws and warned against introducing another compulsory levy.
He cautioned that 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 balanced funding model that would strengthen the South-South Development Commission without discouraging investment in the oil and gas industry.
Despite the reservations over the proposed levy, stakeholders broadly supported the objective of accelerating development across the South-South region.
Participants agreed that the commission requires adequate funding to deliver critical infrastructure and development projects but urged lawmakers to adopt a financing framework that would not undermine investment or increase the cost of doing business.
The South-South Development Commission was established to coordinate and accelerate development across the six states of the South-South geopolitical zone, addressing long-standing challenges including inadequate infrastructure, environmental degradation, unemployment and the socio-economic impact of decades of oil exploration.
The amendment before the House of Representatives seeks to strengthen the commission’s financial capacity by expanding its sources of funding.
However, the proposal requiring oil-producing companies to contribute three per cent of their annual budgets has emerged as the most contentious provision, with regulators and industry operators warning that it could overlap with 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 for consideration.
