Despite realizing about $23.04bn in total revenues from oil and gas industry operations in 2021, outstanding liabilities to the Federation stood at about $8.27bn, the Nigeria Extractive Industries Transparency Initiative (NEITI) has said.
At the public presentation of the 2021 Oil and Gas Industry Report in Abuja on Monday, NEITI said 47 covered entities operating in the industry accounted for $1.342bn, or 16.24 percent of the total liabilities, the NNPCL alone accounted for $6.923bn or 83.8 percent.
Key highlights of the report presented by the Executive Secretary of NEITI, Orji Ogbonnaya Orji, showed that the liabilities consisted of revenues collectible from the NNPCL and the 47 companies by the upstream petroleum industry regulator, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) as of December 31, 2022 and the Federal Inland Revenue Service (FIRS) as of July 31, 2023.
Orji said the liabilities due for NUPRC came from the payment for Oil Royalty ($6.86bn), Gas Royalty ($559.78mn), Gas Flare Payment ($828.83mn), and Concession Rental ($3,051mn), while FIRS resulted from Petroleum Profit Tax (PPT) $9.446mn, Company Income Tax (CIT) $532.509mn, Late Return Penalty $75,705.56, Education Tax (EDT) $580,472.38. Value Added Tax (VAT) $1.354mn, and withholding tax (WHT) $1.602mn.
These liabilities did not include outstanding cash-call liabilities in joint venture operations payable by the Federation of ₦120.439 billion and US$507.949million (₦209.524billion), totalling ₦330.007billion; as well as deductions by the NNPC from Domestic Crude Account before Remittance to the Federation Account.
These included N751.11bn ($1.94bn) that was not due for payment as at December 2021; N334.87bn ($871.15mn) that was outstanding as at December 2021; N1.20trn. ($3.15bn) deducted against the domestic sales proceeds as subsidy; crude oil & product losses incurred N16.20bn; pipeline repairs & maintenance N22.05bn and strategic stock holding N6.15bn.
The Executive Secretary lamented that despite the concerted efforts made last year to recover some of the revenues through the Ad Hoc Committee set up by the National Assembly, the 2021 figures showed an increment.
The Secretary to the Government of the Federation, George Akume, represented by the Permanent Secretary, Political and Economic Affairs, Esuabana Nko who unveiled the report said the Federal Government was committed to support and deepen the implementation of the EITI process in Nigeria.
“The government is fully committed to the fight against corruption in the extractive industry in particular and in other sectors of the economy. We are convinced that the revival of our economy be achieved if we do not support and strengthen anti-corruption and reform-oriented agencies like NEITI,” she said.
“The NEITI 2021 Industry Reports being unveiled is quite timely, coming when the government is fully committed to shoring up revenues by paying priority attention to the effort to attracting investments to the key sectors of our economy, the oil and gas sector being one of them,” she added.
Chairman, Senate Committee on Oil and Gas Host Communities, Benson Agadaga, reaffirmed government’s commitment to implement the recommendations of the NEITI oil and gas report.
“Be assured that the Federal Government will carefully study this important report and adopt it as a valuable working document as part of our overall reform programme for the oil and gas sector”, Agadaga said.
The Chairman Senate Committee on Petroleum Upstream, Eteng Williams, commended the vital role NEITI was playing to promote the growth of the nation’s economy and urged NEITI to continue to ensure revenue mobilization for the country now that subsidy is gone.
The Chairman, House Committee on Petroleum Resources, (Downstream), Ikeagwuonu Ugochinyere, pledged the support of his Committee to lay the report on the floor of the House for extensive debate to ensure the implementation of its recommendations, as enshrined in Sections 3 and 4 of the NEITI Act.
“Working together, we will ensure the realization of government’s desire to diversify the economy for the attainment of alternative source(s) of revenue and clean energy, that will bring about the realization of the projected one trillion-dollar revenue for Nigeria in the next 8 years,” Ugochinyere said.
The Minister of Budget and National Economic Planning, Abubakar Atiku Bagudu, represented by the Permanent Secretary, Nebeolisa Anako, stated that the data generated by NEITI would help the ministry in its planning mandate for the country.
“The budget outlay for the country for the current national development plan for five years is N348trn. Majority of this inflows are going to be from the private sector, with the oil and gas sector as key to the realization of this goal,” he said.
The NEITI 2021 Oil and Gas report which has the theme: “Relevance built on revenue growth and impact” also made several vital disclosures in line with the NEITI Act 2007 and the EITI 2019 Standard.
The report showed total revenue of $23.046bn realized from the sector in 2021 was about 13 percent higher than the corresponding total of $20.43bn in 2020.
A breakdown of the earnings showed that about $8.67bn, or 37.6 percent of the revenue was realized from the sale of crude oil and gas; $13.37bn, or 58.02 percent, from taxes and other specific revenue flows, and $1.01bn, or 4.38 percent, went into payments to sub-national entities.
An analysis of the total revenue realized, the report stated, showed unremitted revenues and quasi-fiscal expenditure by the NNPCL of $1.95bn (8.47%) and $6.93bn (30.08%) respectively. Transfers to the Federation amounted to $13.2bn (57.27%), while Sub-national payments totaled $963.63mn or 4.18%.
Available revenue for sharing by the federating units after the deductions and by the revenue allocation formula was $13.2bn, representing 57.27% of the total revenue collected. This is lower than the 71.7% share in 2020.
The quasi-fiscal expenditure of $6.931bn (the equivalent of N2.651trn) were deducted from the Federation’s revenue before remittance without appropriation by the National Assembly.
A breakdown of the $6.93bn deductions showed payments of $3.52bn or 15% for Joint Venture Cost Recovery and $3.031bn (about N1.16 trn) or 13.15 percent for products subsidy/value loss.
Other deductions are $258.43mn for government priority projects; $75.51mn for pipeline maintenance and holding costs, and $42.40mn for crude oil and product losses.
The NEITI report also observed that none of the refineries was operational in 2021 despite spending about N200bn between 2020 and 2021 on refinery rehabilitation which was deducted from the Federation sales proceeds.
These deductions, the report reiterated, remain a heavy cost to Federation Revenue remittances.
In addition, the report said about $1.95bn, or 8.47% of the total revenue was not transferred to the Federation Account by the NNPCL during the year under review.
A breakdown of the withheld revenue included $722.6mn for NLNG dividend; $871.15mn from domestic crude sales, $859,583 miscellaneous revenue, and $286.42mn from export crude sales. $24.332mn and $45.76mn were withheld from transportation revenue and domestic gas proceeds.
A ten-year trend analysis of financial flows from the oil and gas sector from 2012 to 2021 showed earnings of $348.63bn.
On crude oil production and exports, the NEITI report indicated that total metered crude oil production was 634.60 mn barrels, out of which the nation lost 68.47 mn barrels to production adjustment, measurement error, theft, and sabotage. The figure showed a 13% reduction from the production volumes of 2020.
The report pointed out that a total of 29 companies suffered crude losses from theft and sabotage amounting to 37.57mn barrels. The decline in crude oil losses due to theft and sabotage from 39.08mn barrels in 2020 to 37.57mn barrels in 2021 was generally due to the decline in crude oil production during this period.
On gas production and utilization, the NEITI report said a total of 2.74 million standard cubic feet of gas was produced during the year, with the volume about 8.96 percent lower than the 3,013,634mmscf produced in 2020. Total gas utilized in 2021 stood at 98%, while 2% could not accounted for by the companies based on the templates submitted.
With the nation’s gross domestic products put at about $434.17bn, the report said the oil and gas sector contributed about 7.24 percent to the GDP and $ 36.55 bn (N14.40 trn) to total exports of $ 47.31bn (N18.91 trn), representing 76.22 percent of the total exports in 2021, 0.8% higher figure than in 2020. 19,171 employees were said to be working in the sector in 2021.
Similarly, the total government revenue generated in 2021 was N10.75 trn, in which the oil and gas sector contributed N4.358 trillion, representing about 40.55 percent of the total revenue compared to 51 percent in 2020.
The higher export value in 2021 compared to 2020 was due to the increase in crude oil price in 2021 from $41.65 per barrel to $66.97 per barrel, the NEITI report disclosed.
NEITI also reported on the 2020/2021 marginal fields awards, the report observed that NUPRC regulation expected all successful applicants whose names were in the Notice of Preferred Bidder Status to have made payments for signature bonus before award. However, the report observed that the list of awardees contained names of companies that had not paid signature bonuses, with four companies whose names were not on the list of awardees making payment of signature bonuses.
NEITI also observed that the majority of the oil and gas companies in Nigeria exhibit complex structures that shield the real identities of their owners, thereby limiting the impacts of efforts at beneficial ownership disclosures.
As part of the recommendations, NEITI called on the NUPRC to implement fully the relevant sections of the Petroleum Industry Act (PIA) on Beneficial Ownership reporting.
Other copious recommendations included that the NNPC should transparently disclose details of the subsidy and the beneficiaries of the payments, render accounts on Project Eagle loans transaction, and review and investigate all pre-export financing arrangements and other loan arrangements done in exchange for the nation’s crude oil and gas.
NEITI also recommended that the government should commission a comprehensive audit of the premium motor spirit (PMS) subsidy-related financial transactions between NNPC and the Federation, determine all liabilities, and ensure accurate and verified data.
Furthermore, NEITI noted the discrepancies in records by some relevant government agencies on transactions in the sector, saying it raised concerns about the integrity and accuracy of the data and pieces of information disclosed by these agencies.
It therefore called on the concerned agency to improve its data management processes and establish controls that would prevent future discrepancies and maintain data integrity.
NEITI also drew attention to the practice of computing a 13% derivation on the balance of revenue after deductions from the total collections which it advised should be discontinued. Rather, the 13% derivation should be based on total collections for the relevant period by Section 162(2) of the constitution of the Federal Republic of Nigeria.
Finally, the report stressed the urgent need to strengthen the remediation mechanisms and involve independent third parties to conduct detailed investigations where necessary, especially with the PIA now in place for effective monitoring of the implementation process.
Details of the report reconciled on behalf of NEITI by an Independent Administrator, Messrs Taju Audu & Co., said a total of 69 companies and 13 government agencies, the NNPCL, the Nigeria LNG and Nigeria Sao Tome Joint Development Authority with 23 revenue streams covered. One company, Lekoil Limited did not submit any information for reconciliation but was captured to have paid over $7.76mn.