Something has definitely gone wrong with the accounting processes in the oil and gas industry, a situation which has thrown up conflicting figures and barrage of allegations of missing money in the government end of the partnership. This time, both industry groups and Nigeria Extractive Industry Transparency Initiative (NEITI) claim separately that both government and operators owe seven billion dollars in unpaid taxes, and joint venture cash calls respectively.
Whereas NEITI accused oil companies of cheating in tax payments, the players lament huge government’s debt to operated ventures. Whereas the pile of allegations against Nigerian National Petroleum Corporations (NNPC) finds refuge in the traditional corruption and secrecy camouflage, the trade of allegations of crippling debt between private players in the industry and government’s watchdogs in the industry posts ominous hint of poor record keeping and consequent accounting catastrophe.
At recent industry conferences hosted by several professional and business groups in the Nigerian petroleum industry, different producer groups comprising foreign multinational and indigenous companies lamented huge government debts as key drawback to realization of targets. According to Managing Director of Seplat Petroleum Development Company Limited, Mr. Austin Avuru, government owes the industry over seven billion dollars in delayed joint venture cash call payments. Chairman of the Oil Producers Trade Section of the Organized Private Sector, Mrs Elisabeth Proust, had also alluded to the debts in her presentations at industry conferences and events in Abuja. Government’s representative in the industry, NNPC which also manages state interests in the petroleum sector, had never disputed its high level of indebtedness to players that operate joint ventures in which it holds controlling stakes.
Under the joint venture funding arrangement, the partners contribute capital and operations funds to run the business in proportion to their equity stakes. However, NNPC which holds an average of 60 percent in the operations depends on state fund allocations carried in the national budget to fund its equities in the JVs. Because the budgets traditionally receive parliamentary approval and slow financial release processes, NNPC is always en retard in meeting its funding obligations to the joint venture operators, a situation which has led to various debt arrangements in bedging funding gaps created by the corporation’s late arrival to the table.
But while the industry points at the mounting government debt, the Nigeria Extractive Industry Transparency Initiative (NEITI) which suddenly started grabbing media headlines contends that the industry owes government by the same figure instead. NEITI in a statement by its Director of Communications, Mr. Orji Ogbonnaya Orji, accused oil companies operating in the country of owing the government over $7 billion (about N1.38 trillion), the same amount the firms claim as debts.
In the statement, the agency noted that “one important issue that NEITI will be bringing to the table if given the opportunity is how the committee can assist the government to recover over $7 billion owed by oil companies.” It said the amount was arrived at after the agency computed cases of underpayments and under assessments arising from subjective interpretation of memoranda of understanding and tax laws; maintaining that it had no doubt that its contributions would add value to the work of the committee.
“It is our expectation that Professor Sagay’s committee will provide NEITI and all agencies under the Inter-Agency Task Team an opportunity to make presentations,” the organization said. This would not be the first time NEITI’s figures are thrashed either by NNPC or the industry. The interpretation of tax laws and calculations of taxes payable by players, The UNION reports, fall within the purviews of Federal Inland Revenue Service (FIRS), Department of Petroleum Resources (DPR) and Board of Customs and Exercise. So far, none of the responsible industry and tax regulators have come up with supporting figures to validate claims by NEITI.