News Oil & Gas

PIB: Oil companies will leave Nigeria if we increase 3% Host Communities Fund – Sylva

The Minister of State for Petroleum, Timipre Sylva, has said that increasing the three per cent host communities fund will affect the profit of oil companies and in turn force them to exit the country.

Sylva said this during a press briefing organised after the signing of the Petroleum Industry Act by President Muhammadu Buhari.

The warning is coming less than 24 hours after the Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari, said the three per cent host community fund may exceed $500m yearly.

But different groups from the region have outrightly rejected the provision of the PIA, while they demand for between five per cent to 10 per cent.

The minister said the country is in its last phase of cashing out from the oil industry and needs an influx of investors.

He said, “As a country, we have a direction that we are going to and so right now, if you talk about the three per cent in the bill, some of us in the Niger Delta are asking for 3 per cent of something. Is it not better than 100 per cent of what you don’t know?

“The philosophy behind this bill is to attract investors to Nigeria to produce as much of this crude in the ground as possible.

“So, we must measure everything against its philosophy. So, as the Niger Delta, if activities are not going on because investors look at the numbers and the numbers don’t add up, because when you say 10 per cent, or you say 5 per cent or you say 100 per cent, where will the investors charge it to? Are they going to charge it to their profit or to their operational cost? These charges all go to the operational cost and today we already have a lot going through there.”

He noted that the operational expenses of the oil companies have been over-burdened, adding that further pressure would impact on their profits.

Sylva said, “We have the three per cent of the Niger Delta Development Commission (NDDC), we have one per cent to Tertiary Education Trust Fund (TETFUND), we have another percentage to the Nigerian Content Development & Monitoring Board (NCDMB). All that goes to the production cost and hikes the production cost.

“So, you have a situation where the production cost is going up. So, you must be very mindful of heaping up more on that operational cost. Now, this 3 per cent will go on top of everything that is being deducted from the operational side. So where do you want to get the benefit from?

“You take it from the operational side, you will see the effect of it from the profit, because you have already taken it from the profit. If the operational cost goes up, your profit will reduce.

“It’s just a matter of cutting your nose to spite your face, so now if because of that the investors say the operational cost in this territory is too high we can’t go there.

“There are too many deductions, so many things to be deducted and we won’t come. So, there will be no investments. Then you can have 100 per cent and there is nothing to get, because there is no investment.”


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