News - Oil & Gas - March 7, 2022

NEITI 2020 audit: 51 firms owe N1.3trn in royalty, PPT arrears to Nigerian govt.

By Bassey Udo

A total of 51 oil and gas companies are indebted to the Federation for outstanding royalty and petroleum profit tax (PPT) payments for 2020, the latest Nigerian Extractive Industries Transparency Initiative (NEITI) oil and gas industry report for 2020 has revealed.

The figure was made up of outstanding company income tax of $79.2million that should have been part of the collectible revenue by the Federal Inland Revenue Service (FIRS) as at September 30,2020, and outstanding $3.1million Federation revenue payable to the defunct Department of Petroleum Resources (DPR) as at December 31, 2020.

The NEITI report published on Monday in Abuja showed the figure excluded a previous N2.65trillion outstanding indebtedness by the companies reported by the transparency agency for 2019.

The Executive Secretary of the NEITI, Orji Ogbonnaya Orji, sais at the public presentation of three of the agency’s industry reports for the oil and gas, mining industries and solid minerals as well as the Fiscal Allocation and Statutory Disbursements as at December 31, 2020.

Although the number of defaulting companies reported in the 2020 audit dropped from 77 in 2019 to 51, the reported recommended that both FIRS and DPR (now Nigerian Upstream Petroleum Regulatory Commission) should take steps to recover the debts from the companies.

The reports said other revenue streams that accounted for the liabilities included payments for royalty oil, royalty gas, concession rentals, Company Income Tax, Education tax, Value Added Tax, and Withholding Tax.

The audit, which covered 69 oil and gas companies, included 13 government-owned agencies and the Nigerian Liquefied Natural Gas Company (NLNG) as well as four partially compiled companies.

During the year, the report showed that the country produced a total of 646million barrels of crude oil in 2020, from where a total of $20.4 billion, with a total of $14.7billion, or 71.7 percent, reconciled as oil and gas revenue receipts paid into the Federation.

When compared with a total of $34.4 billion realised as revenue from oil exports for 2019, the report showed the $20.4 billion revenue realised for 2020 declined by about 40 percent, while total aggregate financial flows from the oil and gas sector to the government in ten years (2011-2020) was about $394.029 billion.

The total crude oil production capacity was about 12 percent lower than the 735.24 million barrels produced in 2019.

Out of the above total production in 2020, about 648.48 million barrels were lifted, which is about 11.85 percent lower than the 735.66mmbbls lifted in 2019.

The $20.4 billion revenue, the report showed, is the least total revenue realised from crude oil exports since 2011.

The report also showed that about 3million standard cubic feet of gas valued at about $1.5billion was produced during the year, with about 64 percent of the total volume sold, 8 percent flared and 4 percent unaccounted for.

The NEITI report also showed that the oil and gas sector contributed only 8.16 percent to the total gross domestic product (GDP) in 2020.

This represents a decline of 0.46 percent when compared to the 8.62 percent recorded in 2019. The report further revealed that the sector dominated the country’s exports in 2020, contributing about 75 percent (N9.44 trillion) of the total exports value of N12.52 trillion.

The country recorded losses in terms of crude oil and petroleum products theft to the tune of 39.16million barrels valued at $44.7million, or N15.7billion.

On pipeline breaks during the year, the report said about 349 pipelines were vandalised during the year, compared with the 1,387 cases reported in 2019. About 92 of the cases reported in the latest report was attributable to weld failure and ten to rupture, with about $152.9million spent on pipeline maintenance and management.

Also, during the year about $526.2million, or N176.1 billion was recorded as “quasi fiscal expenditure”, while the Nigerian National Petroleum Corporation spent $6.7billion on 107.75 million barrels of crude oil involved in the direct sale/direct purchase crude oil export scheme. Crude oil product received under the DSDP scheme was valued at about $6.03 billion during the year.

Besides, out of a total of N133. 74 billion received by the NNPC as subsidy claims from fuel marketers between January and June 2020, about N106 billion was reconciled and paid, leaving a balance of N26.74 billion, while a total of $407.1 million was spent as social expenditure during the year.

The NEITI Executive Secretary said the report sought to draw the attention of the indebted oil and gas companies to their obligations to remit all revenues due to the government, especially at this time the government was in dire need of revenues to rebuild the nation’s infrastructure and improve the investment climate in the country.

Describing the companies as the backbone of the oil and gas industry, Orji said without them there would be neither the industry, investments nor revenues to remit.

“So, while NEITI will continue to support the companies, we also expect that they live up to their obligations, as regard their payment of taxes, royalties and levies to the Federation, as they do in other jurisdictions of their operations,” Orji said.

NEITI also reported that 20.01billion litres of petrol, 52 million litres of kerosene and 5.33billion litres of diesel, respectively, were imported into the country for domestic use during the period under review.

On its recommendations, NEITI called for further investigations into the circumstances surrounding the transfer of the Federation’s stake in OML 24 operated by Pan Ocean and New Cross Energy.

The agency expressed concern over the value for money of the transaction, payment for the federation equity interest and recovery of the $309.1million that should have been paid for the asset.

Welcoming the passage of the Petroleum Industry Act and the prompt decision of President Buhari to set up a nine-member committee, including NEITI, to oversee its implementation, NEITI said the implementation of the reports of the Steering Committee when concluded would set the stage for a new oil and gas industry ready for competition and investment going forward.

The latest report is the 13th cycle of independent oil and gas industry report by NEITI in line with the NEITI Act 2007 and in fulfilment of Nigeria’s obligation to the global Extractive Industries Transparency Initiative (EITI).

Meanwhile, the transparency agency said details of the reports for the solid minerals sector and the fiscal allocation and statutory disbursements would be released soon.

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