New Oil Licensing Round, Due Process and Influence of Corruption By Mohammed Bougei Attah


Last two weeks, the Federal Government, through the Director, Department of Petroleum Resources (DPR), Mr. Osten Olorunsola gave a hint over the weekend about plans to commence the bid for the downstream oil sector this year. The story published on the front page of This Day newspaper of March 5 quoted Mr. Olorunsola as saying that “details of the bid round and the exact date for the exercise would be announced later” Similar news items were found in Daily Trust, The Guardian and others of same day.

In a similar development, the Federal Government vowed the following Tuesday ‘that it is no more business as usual in the next oil licensing rounds’, This statement was credited to the Minister of Petroleum Resources, Diezani Alison-Madueke, who pointed out that the licensing round would be conducted “in strict compliance with due process and transparency.” The Minister made this declaration during the 41st Offshore Technology Conference (OTC) in Houston Texas. The next licensing round, she said, is coming on the hills of the signing of the Nigerian Content Development law and the anticipated coming of the Petroleum Industry Bill (PIB).

Given that this is the first time oil licensing bid will be conducted under President Goodluck Jonathan, it will do the government good and indeed Nigerians to evaluate these promises against the backdrop of myriad of exposition on the rot in the sector. In essence it is significant to sound a note of warning as we venture into this new attempt, especially as it has become more of a routine to ignore the extant laws guiding public operations.

Oil licensing in any economic discourse is a disposal process, thus disposal of public property. And this falls under Section 55 of the Public Procurement Act (PPA) 2007. The statement of Mrs. Alison-Madueke that “The $1.5 billion generated from the open and competitive bid process is a huge departure from the less than $600 million earned when the blocks were allocated on a discretionary basis, prior to 1999” is not only a confirmation of the above fact, it underscores the fact that all is not well with the sector.

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Ifeanyi Izeze, an Abuja-based consultant on strategy and communication’s article, ‘2012 oil Bloc Sale: before the Market Day’ published in Sahara Reporters (online) of March 13 is very informative when he jogged our memory to the past. “It would be recalled that the 2005, 2006 and 2007 licensing rounds were marred by series of allegations ranging from outright fraud to voodoo award of licenses to traders and housewives. We were told then that only companies willing to invest significantly in the country’s infrastructure development projects and the power sector were pre-qualified to participate. But this turned out to be a big lie.

As observed gap before the Fiscal Responsibility Act (FRA) was enacted, corruption in the oil sector remains a huge challenge. Though several legislations were put in place to curb these excesses, it is still a vogue for Ministers and accounting officers to disobey these laws, thereby mismanaging public resources entrusted in their care. The Independent Corrupt Practices and Other Related Offences Commission (ICPC) and the Economic and Financial Crimes Commission (EFCC) are rendered toothless due to official handedness.


Section 55 of the PPA mentioned above clearly defines the term ‘public property’ as ‘resources in form of tangible and non-tangible assets (ranging from serviceable to unserviceable)’ What is more significant is Part IV Section 16 of the PPA, under ‘Fundamental Principle for Procurement’ where it states that “subject to any exemption allowed by this Act, all public procurement shall be conducted … subject to prior review threshold as may from time to time be set by the Bureau pursuant to Section 7 (1) (a) (b). In other words, public procurement should commence only when there is in place, a Director General of the Bureau of Public Procurement appointed according to Section 7 (1) read together with Section 7 (2) of the PPA and Section 16 of the Chartered Institute of Purchasing and Supply Management (CIPSM) Act of Nigeria.


The potency of Section 55 is very clear on the role of Ministries, Departments and Agencies (MDAs) of government. This section provides further that only the National Council on Public Procurement (NCPP) has the powers to approve the Guidelines for the Disposal of Public Assets. Additionally, Section 16 (3) gives the Bureau of Public Procurement (BPP) the powers to issue ‘No Objection Certificate’ before any such transactions is carried out.


Flowing from the above, it is clear that a transparent oil licensing round cannot be complete without the above laws complied with by the government. Any attempt therefore to ignore these provision is a breach. The implication also is that without the National Council on Public Procurement (NCPP) inaugurated and the BPP constituted in accordance with the laws quoted above, any procurement such as the disposal of oil blocks will be null and void ab initio


Given that the government has shelved the idea of licensing round for the year 2009 till date due to the non-passage of the Petroleum Industry Bill (PIB) as disclosed by the Minister, it is therefore worrisome why the government would plan to go ahead at this time that the PIB is still pending and the PPA is yet to be complied with.  For the benefit of the greater Nigerians and reasons adduced above, I am obliged to clear some of the grey areas and deepen the interpretation of Section 16 – Fundamental Principle for Procurement – and its implication on the Nigeria economy.

Section 16(1) of PPA pursuant to section 7(1) states further that “there shall be for the Bureau, a Director-General who shall be appointed by the President  on the recommendation of the Council after competitive selections” And since this provision is under the Fundamental Principles for Procurement, it implies that  no public procurement can legally take place in Nigeria until there is a  DG appointed by the President after the inauguration of the Council and a competitive selection process conducted by the Council. The law envisages that the BPP must have legal jurisdiction to take administrative decisions that will be legally binding on Bidders and MDAs in dispute over contract proceedings. The person that the law envisaged for this position therefore must posses certain qualities and excellence to effectively guide any economic drift.

Thus the minimum qualifications established by law for the post of DG are that the candidate must 1, Hold adequate professional qualification in procurement for a minimum of 15 years (see 7(2) (c) of PPA; 2. Also simultaneously hold relevant professional qualification in procurement for a minimum of 15 years (see 7(2) (C) of PPA;3 Be a member of CIPSMN qualified by examination (see 11(9) of CIPSMN), and 4, the CIPSMN Act also specified in Part IV Section 8 and Part V section 2 (b)(ii)  that foreign trained professionals in Procurement who wish to practice in Nigeria are required to “within 12 months after the commencement of the Act, seek registration with the Institute to become members”

To buttress this guideline, Section 7(1) of PPA states further the procedure for appointment thus: There shall be for the Bureau, a Director-General who shall be appointed by the President on the recommendation of the Council after competitive selections. And Section 11 (9) of the CIPSMN states further that “A person shall not be entitled to be appointed or engaged to head any purchasing and supply chain management of any organization unless he is duly registered as a member of the Institute qualified by examination”


But why is the position of the Director General of the Bureau so important in the determination of the above course of action.  The answer lies in the recommendation of the 2000 World Bank Country Procurement Assessment Report (CPAR). In the Summary of Findings and Recommendations, Section 18 under ‘Human Resource – Strength and Weaknesses reads thus: “The procurement function is not generally performed by professionally qualified staff. Although there is a shortage of such staff in the public service, even the few available are not properly utilized. There is a tendency to believe that the procurement functions can be performed by anybody and hence the procurement profession is held in low esteem

The crafter of the law envisages an economist of repute that has the ability to superintend over procurement and disposal of goods, works and services. The Bureau by virtue of its creation performs quasi-judicial functions. This means that it can adjudicate on procurement disputes, such as may arise from the bidding of oil blocks. If therefore the head of such an agency lacks the ability to see beyond the nose, then the national security, economic and social problems will escalate as currently the case with Nigeria.


Thus the position of the law is that ‘if a person is not competent or has no jurisdiction to do anything, anything that it does, no matter how correct or regular cannot be valid. (See Shell Trustees (Nig.) Ltd v Imani & Sons (2000) CLR 6(b) (CA). In other words, when a person lacks competence or jurisdiction to do anything, whatever he or she does, no matter how correct or regular cannot be valid’.


* Mohammed Attah is a professional procurer and National Coordinator of Procurement Observation and Advocacy Initiative – Nigeria



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