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Revenues From Oil, Gas Firms Drop By 40%

…Oil, Gas Firms Owe Nigeria N1.32Tn In 202

The 2020 oil and gas industry audit report released by Nigeria Extractive Industry Transparency Initiative (NEITI) on Monday, indicates that companies’ liabilities to the Federation stood at N1.32Trillion or $3.17billion as at December 31st 2020.

Dr. Orji Ogbonnaya Orji, the Executive Secretary of NEITI, made this revelation during the public presentation of the agency’s industry reports of the oil, gas, mining as well as the Fiscal Allocation and Statutory Disbursement in Abuja.

The public presentation of the 2020 NEITI reports was witnessed by Mr. Olusegun Adeyemi Adekunle, Chairman, National Stakeholders Working Group (NSWG), Muhammad Nami, Executive Chairman, Federal Inland Revenue Service (FIRS), Mallam Umar Jiya, Chief Financial Officer, NNPC Limited, heads of Non-governmental Organizations (NGOs) among others.

This is the Executive Chairman of Federal Inland Revenue Service (FIRS) Mr. Muhammad Nami, said collaboration with NEITI helped it generate N6.4 in 2021 using the information and data from the audit reports.

Orji, noted that compared to the N2.6Trillion owed in 2019 the revenues recorded a dip by 40 percent within the year under review, adding that the number of defaulting companies dropped from 77 reported by NEITI in 2019 to 51 in 2020.

The NEITI boss described the current debts as collectable revenues that are due to the Federation by the Department of Petroleum Resources and the Federal Inland Revenue Service, stressing that the latest reports outlined the specific revenue streams that accounted for the liabilities in question.

“These include royalty oil, royalty gas, concession rentals, Petroleum Profit Tax, Company Income Tax, Education tax, Value Added Tax, Withholding Tax among others.

“The courageous public disclosure of companies’ liabilities to the Federation by NEITI was in line with its national mandate and in fulfilment of its obligation as a member of the global Extractive Industries Transparency Initiative (EITI), and not in any way against the companies. ”NEITI’s disclosure seeks to draw the attention of the oil and gas companies to their obligations to remit all revenues due to government, especially at this time that government is in dire need of revenues to rebuild the nation’s infrastructure and improve the investment climate in the country” Dr. Orji explained.

Orji described the companies as the backbone of the industry. “Without the companies there will be no industry, no investments and no revenues to remit”. So NEITI will continue to support the companies and also expect that they live up to their obligations, as regard to payment of taxes, royalties and levies to the Federation, as they do in other jurisdictions of their operations.

The NEITI 2020 oil and gas report also revealed that Nigeria earned $20.43billion from the oil and gas sector in 2020. The figure represents a decline of 40% compared to the 34.22billion realized from the sector in 2019.
On remittances to the Federation Account from the oil and gas sector, the report also disclosed that $14.65Billion, representing 71.17% of the total earnings in 2020, was remitted to the account, while total aggregate financial flows from the oil and gas sector to government in ten years (2011-2020) was $394.029 billion.

The report also revealed that the total crude oil production in 2020 was 646.7mmbbls, representing a 12% decrease when compared to the 735.24 mmbbls produced in 2019. Out of the above total production in 2020, 648.48mmbbls were lifted, and this was 11.85% lower than the 735.66mmbbls lifted in 2019.

Speaking on domestic crude allocation and consumption, the NEITI report also disclosed that 107.746mmbls was managed by the NNPC under the Direct Sale Direct Purchase arrangement. It also revealed that the value of the crude exchanged under the DSDP arrangement was $6.7billion, while the value of the refined products received for local consumption was $6.03billion, indicating a variance of $134.78million.

As regard to fuel subsidy, the NEITI report further disclosed that NGN106.9billion was paid as subsidy between January and June 2020 to sustain product availability with an outstanding balance of N26.74Billion yet to be paid. NEITI also reported that 20.01billion litres of petrol, 52million litres of kerosene and 5.33billion litres of diesel were respectively imported into the country for domestic use during the period under review.

Also speaking on oil theft and crude losses, the report made assessment based on the data provided to NEITI by 22 of the 69 covered companies. According to the result of the assessment, 39.16mmbls of crude valued at US$44.73million (N15.71billion) was stolen with 349 cases of pipeline vandalism recorded in 2020. This is an improvement when compared to the 1,387 cases of vandalism reported in 2019.

On Gas production, the report revealed that the gas sub-sector contributed over $1.5billion to the Federation account. According to the report, the total gas production in 2020 was 3.01million cubic feet. While 64% of this total quantity was sold, 8% was flared and 4% unaccounted for.

The NEITI report also showed that the oil and gas sector contributed only 8.16% to the total GDP in 2020. This represents a decline of 0.46% when compared to the 8.62% recorded in 2019. The report further revealed that the sector dominated the country’s export in 2020, contributing about 75% (N9.44Trillion) of the total export value of N12.52Trillion.

Furthermore, the report made far reaching recommendations including the urgent need 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. NEITI’s concern is on 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.

The report also welcomed the Petroleum Industry Act and the prompt decision of President Buhari to set up a nine-member committee, including NEITI, to oversee its implementation adding that the courageous implementation of the reports of the Steering Committee when concluded will set the stage for a new oil and gas industry ready for competition and investment going forward.

This is the 13th cycle of independent oil and gas industry report by the Nigeria Extractive Industries Transparency Initiative (NEITI) in line with the NEITI Act 2007 and in fulfilment of Nigeria’s obligation to the global Extractive Industries Transparency Initiative (EITI). The report reconciled payments from eighty-three (83) entities. They included sixty nine (69) oil and gas companies, thirteen government agencies and the Nigerian Liquefied Natural Gas (NLNG).

The audit was conducted by Taju Audu & Co. (Chartered Accountants), an indigenous accounting and auditing firm.

Meanwhile, the transparency agency stated that though it unveiled three reports this Monday, it will release the details of the reports for the solid minerals sector and the fiscal allocation and statutory disbursements at a date to be announced soon.

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