In the year 2021, the total unremitted income to the Federation by various key government agencies and enterprises in the oil and gas sector has climbed to more than $9.85 billion.
The figure, as well as other important pieces of information and data concerning Nigeria’s petroleum sector, may be found in the Nigeria Extractive Industries Transparency Initiative’s (NEITI) 2021 Oil and Gas Industry Report.
While presenting the highlights of the report, NEITI Executive Secretary Dr. Orji Ogbonnaya Orji stated that the information and data contained in the NEITI latest reports paid special attention to helping the government at all levels shore up revenue, support national development, and poverty reduction through resource mobilization.
As a result, the research gave an update on the NNPCL’s and other enterprises’ financial liabilities to the federation.
He bemoaned the fact that, despite the National Assembly’s Ad Hoc Committee’s concerted efforts last year to recoup part of the earnings, the 2021 data showed an increase.
According to the report’s compilation of the Federation’s outstanding financial liabilities, a total of $13.591mn in revenues was payable to the Federal Inland Revenue Service (FIRS) as of July 31, 2023, while the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) had outstanding tax collectible revenues of $8.251bn as of December 31, 2022. NNPCL is responsible for more than 80% of these outstanding financial liabilities.
While unveiling the report, the Secretary to the Government of the Federation, Senator George Akume, represented by the Permanent Secretary, of Political and Economic Affairs, Mrs. Esuabana Nko, reaffirmed the federal government’s commitment to support and deepen EITI implementation in Nigeria.
“President Bola Tinubu’s administration is fully committed to the fight against corruption in the extractive industry in particular and in other sectors of the economy,” according to the SGF. As an administration, we are sure that if we do not support and strengthen anti-corruption and reform-oriented agencies such as NEITI, the rebirth of our economy and the 8-point agenda that we recently unveiled would not produce the required results.”
She added, “The NEITI 2021 Industry Reports being unveiled is quite timely, coming when the present administration is fully committed to shoring up revenues through priority attention to attracting investments to the key sectors of our economy, the oil and gas sector being one of them.”
Sen. Benson Agadaga, Chairman of the Senate Committee on Oil and Gas Host Communities, underlined the government’s commitment to implementing 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 program for the oil and gas sector,” Sen. Agadaga said.
Sen. Eteng Williams, Chairman of the Senate Committee on Petroleum Upstream, praised NEITI’s critical role and asked NEITI to continue to ensure revenue mobilization for the country now that the subsidy is gone.
The Chairman of the House Committee on Petroleum Resources (Downstream), Hon. Ikeagwuonu Ugochinyere (Ikenga Imo), pledged the Committee’s support to lay the report on the floor of the House and extensively debate it to ensure the implementation of the recommendations made in the report, as enshrined in Sections 3 and 4 of the NEITI Act.
“By working together, we will ensure the realization of the government’s desire to diversify the economy in order to achieve alternative source(s) of revenue and clean energy, which will result in the realization of Nigeria’s projected one trillion-dollar revenue in the next eight years.”
Sen. Abubakar Atiku Bagudu, Minister of Budget and National Economic Planning was represented by Permanent Secretary Nebeolisa Anako, who indicated that the data collected by NEITI will aid the ministry in its planning responsibility for the country.
“The budget outlay for the country for the current national development plan for five years is N348 trillion. The majority of this inflow is going to be from the private sector and the oil and gas sector is key to the realization of this goal.”
The NEITI 2021 Oil and Gas report, titled “NEITI Oil & Gas Industry Report 2021: Relevance built on revenue growth and impact,” was released in Abuja on Monday. It also made other important disclosures in accordance with the NEITI Act 2007 and the EITI 2019 Standard.
According to the research, Nigeria will generate $23.046 billion from the sector in 2021. The total is approximately 13% greater than the similar figure of $20.43 billion realized in 2020.
The earnings were broken down as follows: $8.67 billion, or 37.6 percent of revenue, came from the sale of crude oil and gas; $13.37 billion, or 58.02 percent, came from taxes and other particular revenue flows; and $1.01 billion, or 4.38 percent, went to payments to sub-national entities.
According to the research, an analysis of total revenue realized revealed unremitted revenues and quasi-fiscal expenditure by the NNPCL of $1.95bn (8.47%) and $6.93bn (30.08%), respectively. Transfers to the Federation totaled $13.2 billion (57.27%), while subnational payments totaled $963.63 million (4.18%). After deductions and in accordance with the revenue allocation formula, the available revenue for sharing by the federating units was US$ 13.2 billion, representing 57.27% of the total revenue collected. This is a decrease from the 71.7% reported in 2020.
Without authorization by the National Assembly, a quasi-fiscal expenditure of $ 6.931 billion (equal to N2.651 trillion) was taken from the Federation’s receipts before remittance. A breakdown of the $6.93 billion deductions revealed payments of $3.52 billion or 15% for Joint Venture Cost Recovery and $3.031 billion (approximately N1.16 trillion or 13.15 percent for product subsidy/value loss). Other expenses include $258.43 million for government priority projects, $75.51 million for pipeline maintenance and holding costs, and $42.40 million for crude oil and product losses.
The NEITI report further noted that none of the refineries were operating in 2021, despite spending around N200 billion on refinery restoration between 2020 and 2021, which was deducted from Federation sales profits. According to the report, these deductions continue to be a significant burden to Federation Revenue remittances.
Furthermore, the study stated that the NNPCL did not send approximately $1.95 billion, or 8.47% of total revenue, to the Federation Account during the fiscal year under review. The withheld revenue was broken down as follows: $722.6 million for NLNG dividend; $871.15 million from domestic oil sales; $859,583 miscellaneous revenue; and $286.42 million from export crude sales. Transportation revenue and domestic gas revenues were withheld for $ 24.332 million and $ 45.76 million, respectively.
From 2012 through 2021, a ten-year trend analysis of financial flows from the oil and gas sector revealed earnings of $348.63 billion.
According to the NEITI report on crude oil production and exports, the total metered crude oil output was 634.60 million barrels, of which the nation lost 68.47 million barrels due to production adjustment, measurement mistakes, theft, and sabotage. The amount represented a 13% decrease from 2020 production volumes.
According to the report, 29 firms incurred crude losses from theft and sabotage totaling 37.57 million barrels. The drop in crude oil losses due to theft and sabotage from 39.08 million barrels in 2020 to 37.57 million barrels in 2021 was mostly attributable to a drop in crude oil production during this time 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 a volume of 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 be 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% to the GDP and $ 36.55 billion (N14.40 trillion Naira) to total exports of $ 47.31 Billion (N18.91 trillion). This represented 76.22 % of the total exports in 2021, a 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 10.75 trillion Naira, to which the oil and gas sector contributed 4.358 trillion Naira. This represents about 40.55% of the total revenue compared to 51% 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.
It observed that NUPRC regulation expected all successful applicants whose names were in the Notice of Preferred Bidder Status to make payments for signature bonuses prior to 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 in the 2021 report 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 NEITI called on the NUPRC to implement fully the relevant sections of the PIA on Beneficial Ownership reporting.
Other copious recommendations made by NEITI in its 2021 report are that NNPC should transparently disclose details of the subsidy and the beneficiaries of the payments, render accounts on Project Eagle loan transactions, 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 PMS subsidy-related financial transactions between NNPC and the Federation, determine all liabilities, and ensure accurate and verified data.
Furthermore, the Agency noted the discrepancies in records by some relevant government agencies on transactions in the sector which it says raises 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 in accordance with Section 162(2) of the constitution of the Federal Republic of Nigeria.
It finally 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.
The report which was reconciled on behalf of NEITI by an Independent Administrator, Messrs Taju Audu & Co., had 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 $ 7.76 million.
DR. Orji urged policymakers to take the findings and recommendations of the NEITI oil and gas report seriously and use the data for economic planning and reforms of the sector. To the civil society, he stated that the information is to support their advocacy and public debates as well as tracking of reforms in the sector with a view to holding government at all levels and companies accountable, ensuring that the revenues from the sector are utilized for the benefits of the citizens.
Source: Platforms Africa
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