Posted by Adewale Sanyaolu | 20 February 2017 | 1,746 times
•NLNG MD Tony Attah.
Oil workers and the National Assembly may soon be on a collision course over the underground maneuverings of the legislature to amend the Act setting up the Nigerian Liquefied Natural Gas Company (NLNG). The stakeholders were worried that the proposed may be part of government plan to dispose of the national assets.
But the development has however, met stiff resistance from Nigerians, public commentators, stakeholders, and especially oil workers who feel the amendment was uncalled for. Stakeholders argued, for instance, that the attempt by the National Assembly to surreptitiously amend the NLNG Act primarily to force the company to remit 3 per cent of its annual budget as funding to the Niger Delta Development Commission (NDDC) will go against Bilateral Investment Treaties (BIT).
The NLNG, which was incorporated on May 17, 1989, with an initial investment of $6 billion, now has an asset base of over $11 billion.
One of the industry union, PENGASSAN has opposed the proposed amendment, describing it as unnecessary and saying, “the amendment can cause imminent losses that will far outweigh any doubtful gains.”
Former Minister of Petroleum Resources, Prof. Tam David-West, had equally faulted a similar move that suggested the sale of NLNG.
David-West, in an interview with Daily Sun, had said the clamour showed lack of understanding of the current economic quagmire, describing oil and gas sector as the blood of the nation, saying the clamour for outright sale of the country’s shares in the company was a wrong way to tackle economic recession.
Amending the Act
The NDDC, in attempt to begin enjoying the 3 per cent remittance, approached the courts in 2005, but unfortunately lost right at the Supreme Court. The NDDC establishment Act, specifically Section 14 (2) (b), stipulates that 3 per cent of the total annual budget of any oil producing company operating onshore and offshore in the Niger Delta area shall be paid into the funds of NDDC for the development of the Niger Delta region.
However, the NLNG (Fiscal Incentives, Guarantees and Assurances) Act clearly exempted the NLNG from such contributions or payments and that has been established in all the court judgments up to Supreme Court in 2011.
And to halt the amendment process, a non-governmental organisation, the Committee for the Defence of National Interests (CODNI), has warned against alleged secret moves by the National Assembly to hurriedly amend the Act establishing NLNG. The warning was contained in a statement issued yesterday in Lagos and signed by the group’s National Coordinator, Mr. Zach Ezoh.
“We wish to alert the general public about this insidious plot and to call on patriotic members of the National Assembly to rise to the occasion and prevent this looming economic catastrophe as it will further compound the country’s woes,” CODNI said.
NLNG as Nigeria’s cash cow
NLNG is today Africa’s biggest producer of liquefied natural gas, and has proven to be a viable venture for the Federal Government, which holds 49 per cent equity with Shell, Eni and Total, sharing the remaining 51 per cent. Since its inception in 2007, the firm has continued to pay out dividends to the Federal Government in addition to touching lives within and outside its host community in Rivers State.
It was the NLNG, for instance, that paid $2.1 billion dividend with which the Federal Government bailed out states and local governments having financial challenges to enable them pay workers’ wages. The NLNG, in its 2016 Facts and Figures, said it has paid $65 billion in dividends, taxes and gas purchase levies to its shareholders from inception. The firm stated that 61 per cent of the money went to the coffers of governments at different levels between 1999 and 2015.
The former NLNG Managing Director, Mr. Babs Omotowa, had in April while presenting the 2016 Facts and Figure, maintained that $39.56 billion (N7.793 trillion) in dividends, taxes, levies and other remittances were paid to the governments at different levels in Nigeria in 17 years.
The Nigerian National Petroleum Corporation (NNPC), which manages Federal Government’s shares in the NLNG, Omotowa said, received $15.69 billion (N3.09 trillion), representing over 40 per cent of the total remittance to the government as dividends.
NLNG raked in $90.370 billion (N17.802 trillion) during the period under review, and according to Omotowa, about 44.44 per cent of these revenues were ploughed back to Nigeria through dividends and gas purchase to the NNPC, Company Income Tax (CIT) and Education Tax (ET) to the Federal Inlands Revenues Services (FIRS), Pay As You Earn (PAYE), Withholding Tax (WT), Value Added Tax (VAT), state and local government taxes, regulatory fees and levies, and local contractors for goods and services.
“Between 1999 and 2015, the dividend to the government through its shareholding was $15.348 billion; gas purchase through NNPC amounted $11.87 billion; gas purchase through escrow as per agreement between NNPC and the other Joint Venture (JV) partners under Modified Carry Agreement (MCA) was $1.152 billion.
Other remittances include $3.862 billion paid as CITs and ETs to the FIRS between 1999 and 2015; $334 million paid as PAYE; $946 million paid as WT; $647 million paid as VAT; $8.159 million paid as taxes to states and local governments; $299.062 million paid as regulatory fees and levies and $5.053 billion paid to local contractors for goods and services.
In 2015 alone, its corporate income tax paid to the Federal Government amounted to about $2.2 billion, he said, adding that since 2008, the company also contributed about 4 per cent of Nigeria’s yearly Gross Domestic Product (GDP). “NLNG provided more than 12,000 jobs in each construction year. Overall, the major sub-contractors employed over 18,000 Nigerians in technical jobs in the base project,” he said.
President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Mr. Francis Johnson, in an interview with Daily Sun, said oil workers are opposed to the amendment of the NLNG Act because it will impact negatively on the image of Nigeria.
Johnson said it remained worrisome that legislators that are elected by Nigerians, who ought to be at the vanguard of protecting national interest are the ones championing the cause to mortgaging the future of generation yet unborn.
The PENGASSAN boss equally commended the courage of President Muhammadu Buhari for not bowing to pressures from some cabals to sell off national assets. It argued that the international community would perceive Nigeria as a country which does not honour its promises as well as one which does not take its call for foreign investments, led by the President Muhammadu Buhari administration, seriously.
The proposed amendment, it said, could directly affect some $25 billion worth of foreign investments as well as another 18,000 Nigerian jobs linked to NLNG’s Train 7 and 8 expansion programmes, adding that this will negate the job creation and job security policy being propagated by the current administration.
The senior staff trade union added that the National Assembly’s proposed action would also not only affect recent gains made in the area of gas flaring in Nigeria, which has reduced from 65 per cent to less than 20 per cent, but lead to the loss of up to $124 million annually payable as taxes and dividends to the Federal Government.
Why Act shouldn’t be amended
Former Managing Director of NLNG, Mr. Babs Omotowa, last year, said any tinkering with the Nigeria NLNG Act of 2004 will violate bilateral agreements with international investors as well as cost the country a huge $25 billion in Foreign Direct Investment (FDI) and fines running into billions at the International Courts.
Omotowa said NLNG, through its expansion programme, which involves the expansion of production capacity of the LNG plant in Bonny, Rivers State, with a Train 7 and 8, could attract $25 billion, create 30,000 construction jobs, help to further reduce gas flaring, and generate over $1 billion to $2 billion additional revenue to the country in taxes and dividend.
“In a period of huge youth unemployment and need for more revenue, this should really be a cause we should have all hands on deck for especially as NLNG has demonstrated its pedigree having attracted $15 billion in foreign investment, grown from a 2 Train to a 6 Train plant, contributed to reducing gas flaring from 65 per cent to below 20 per cent, delivered $33 billion to Nigeria from a $2.5 billion investment.
“This potential $25 billion in investment, creation of 30,000 jobs, reduced gas flaring, etc, is being put in jeopardy by attempts to renege on promises that Nigeria gave to foreign investors that enabled the historical $15 billion investment historically attracted.
“While the Executive has demonstrated full commitment to the need to keep the sanctity of the NLNG Act, the attempt by the legislature to amend the clear promises made to investors will cost the country quite a lot.
“Apart from the relocation of investments in excess of $25 billion to other countries, Nigeria will also be opened to fines running into billions of dollars in International Courts for reneging on agreements. Such incentives in the NLNG Act are normal in the LNG world including in Qatar, Oman, Malaysia, Angola, among others. Even in Nigeria, more generous incentives are contained in legislation such as the Oil and Gas Free Trade Zone Act,” he said.