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Petrol Price Hike, Ailing Refineries, Others Marred Buhari’s First Term

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  • Petrol Price Hike, Ailing Refineries, Others Marred Buhari’s First Term

In this report, OKECHUKWU NNODIM analyses some of the industry issues and promises made by the government in the oil and gas sector during the first term of President Muhammadu Buhari

President Muhammadu Buhari and his party, All Progressives Congress, made several promises before the 2015 general elections that eventually brought Buhari to power. Buhari also made a lot of promises when he assumed office in 2015, especially in the oil and gas sector. Industry observers stated that considering the enormous importance of the oil sector, which accounts for more than 70 per cent of Nigeria’s exports and foreign exchange earnings, according to the data from the National Bureau of Statistics, the President had to retain the position of the Minister of Petroleum Resources and appointed Ibe Kachikwu as the Minister of State for Petroleum Resources. The President and Kachikwu went further to make other promises in the oil sector road map called “7 Big Wins”, which was inaugurated by Buhari in October 2016. While some of the targets of the Buhari administration for the oil sector were achieved, many others that largely affect most Nigerians have not been fulfilled. Below are some of the unresolved and partly resolved issues by this government.

Abysmal performance by refineries

The Buhari government had promised to increase the performance or output of Nigeria’s refineries to about 90 per cent by 2019. Unfortunately, this is not so, despite the fact that the first tenure of this administration had recently elapsed and a new one has started. Nigeria’s refineries in Port Harcourt, Kaduna and Warri have been performing poorly. In fact, the latest data from the Nigerian National Petroleum Corporation in its most recent monthly and financial report for January 2019, put the monthly consolidated operational performance of the refineries at 5.5 per cent. This, of course, is a far cry from 90 per cent operational performance that was targeted by the current government when it came onboard in 2015.

In May 2017, Kachikwu, while speaking as a guest on BBC Hard Talk in London, vowed to resign if the country failed to attain self-sufficiency in the refining of petroleum products by 2019. When asked to state the year that Nigeria would be self-sufficient in refining petroleum products, Kachikwu replied, “I have said 2019, and that is the target that I gave.”

On whether he would leave office if he failed to achieve the target, the minister replied, “Yes, of course. That is the reason why you are in government.”

The minister, during the interview, revealed that the government’s target was to get the refineries working at 90 per cent operational capacity. “Those refineries were down before the President came. Since coming, we’ve been able to get them back to produce seven million litres versus zero. That’s not the 90 per cent template but we’re now refurbishing the refineries.”

Petroleum products imports persist

Nigeria’s inability to revamp its refineries had made it tough for the country to meet its petroleum products’ needs through domestic refining, a development that had made the country to depend largely on imported finished products of crude oil. Figures from the NBS showed that the amount spent by the Federal Government on the importation of petrol increased by nearly 50 per cent to N2.95tn. The bureau stated that Nigeria spent N1.97tn on petrol imports in 2017, N1.63tn in 2016 and N1.14tn in 2015. The importation of Premium Motor Spirit, popularly called petrol, accounted for 22.4 per cent of the nation’s total imports in 2018, up from 20.6 per cent in 2017, 18.4 per cent in 2016 and 17 per cent in 2015. This showed that petrol imports increased under the current administration.

Petrol subsidy/under-recovery still on

The Nigerian National Petroleum Corporation, as a supplier of last resort, is still spending humongous sums subsidising petrol under the current government. Although the corporation now refers to it as under-recovery, it still spends heavily on petrol subsidy. Buhari had pledged to address the issue of subsidy, as many Nigerians had condemned the corruption associated with the scheme in the past administrations. In December last year, NNPC said it was subsidising Premium Motor Spirit, popularly known as petrol, by about N1.5bn every day. Although the corporation insisted that it was not paying subsidy on petrol, as it had no parliamentary approval for such, it revealed that what the NNPC incurred as under-recovery on PMS was between N20 and N25 per litre as at that time.

The NNPC is the sole importer of petrol into Nigeria, a role it had maintained for more than a year after oil marketers stopped importing the commodity due to the Federal Government’s decision to halt the payment of fuel subsidy to marketers. NNPC’s Group Managing Director, Maikanti Baru, has explained that the corporation imports about 60 million litres of petrol daily and evacuates about 50 million litres. With the importation of 60 million litres daily and an under-recovery of N25 per litre, the corporation was spending about N1.5bn every day subsidising petrol as of December last year. Sources at the oil firm, however, stated that the figure had been fluctuating depending on the price of crude oil in the international market.

Petrol price increase

In May 2016, the Federal Government tried to put an end to the subsidy regime on petrol and approved an increase in the pump price of the commodity from N86.5 to N145 per litre. Kachikwu announced this in Abuja and stated that the decision was in order to increase and stabilise the supply of the product. The minister had also stated that any Nigerian entity was free to import the product, subject to existing quality specifications and other guidelines issued by regulatory agencies. But up till date, most oil marketers are not importing PMS, as NNPC remains the major importer of this commodity. The inability of other marketers to import this product often results in scarcity, although the NNPC had worked tirelessly to halt all forms of petrol scarcity by embarking on massive imports of the commodity. For instance, in December 2017 and early 2018, the country witnessed widespread fuel scarcity for several weeks.

Petroleum Industry Bill still being delayed

Prior to the general elections in 2018, the APC and its presidential candidate, Buhari, had campaigned that their government would ensure the speedy passage of the Petroleum Industry Bill. The PIB had been delayed for several years by previous governments. Experts and industry operators believe that the bill would address many shortcomings in the sector if passed by the government and implemented. But the PIB, which is supposed to address legislative limitations of petroleum sector laws, after being split into four, has not been passed. A part of the bill called the Petroleum Industry Governance Bill, was close to being signed into law, after scaling through the National Assembly in 2018. But up till today, that part of the petroleum bill, PIGB, and other sections of the PIB have not been passed into law.

NNPC monthly financial reports

Although the government has recorded some modest achievements in the oil sector, observers see the publication of the monthly financial and operations reports of the NNPC as one feat that should be lauded. Stakeholders say the corruption cases at NNPC seem to be abating under the current government. The Nigeria Extractive Industry Transparency Initiative, in one of its summarised statements about the national oil firm, stated, “It is clear that there is an ongoing reform in NNPC and the oil sector in general.” The oil firm had since May 2015 carried out several initiatives geared towards reducing corruption and ensuring transparency at the NNPC. The monthly financial and operations report is one of such initiative.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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MEND Tackles Ex-Agitators For Threatening To Bomb Oil Installations In Rivers 

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A war of words has ensued between a militant group, the Movement for the Emancipation of the Niger Delta (MEND) and a coalition of ex-agitators over alleged plan to attack oil installations in the region by the latter group.

Following the political crisis rocking Rivers State, a coalition of ex-agitators and fighters in the region under the aegis of Niger Delta Development Force had last week threatened to blow-up oil facilities in the region over what it termed a plot to seize financial allocations meant for local government areas in Rivers State through the courts.

The former warlords dared the Federal Government and the Central Bank of Nigeria, saying if they proceeded in withholding the funds for the state, it would have grave consequences.

Kicking against the threat, MEND’s spokesman, Jomo Gbomo, in a statement on Friday, said it will support security operatives in safeguarding crude oil installations from any attack.

Gbomo also said MEND is not in support of the violence that Rivers State has been experiencing due to the lingering feud between the Minister of the Federal Capital Territory, Nyesom Wike, and his successor and estranged political godson, Siminalayi Fubara.

Describing the attack plan as threat to the economy of the country, Gbomo said it would be most unfortunate for a political dispute between two politicians to cost the state and Nigeria assets that are pivotal to nation’s survival.

Noting that the both feuding political gladiators are sons of the Niger Delta, the spokesman asked those making the threats not to allow themselves be tricked using the present circumstance into carrying arms against the Nigerian state on behalf of any of them, not even for any price.

He said as an Ijaw son, he knows the gains of having an Ijaw man as governor in Rivers, adding that it is an achievement which would not have been possible but for the collaboration of other ethnic groups.

According to him, the current healthy collaboration from the various ethnic groups which produced an Ijaw son as governor was spearheaded by the FCT Minister.

The statement said not only would MEND back the Federal Government in protecting oil facilities, but it would also ensure that the masterminds of the threats to attack oil installations are fished out and meant to face justice.

The MEND spokesman, however, urged the elders and traditional institutions in the region to intervene in the face-off between Governor Fubara and the FCT Minister.

He also urged parties in the festering political crisis to seek judicial redress if peaceful dialogue fails.

 

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Northern Governors Oppose New VAT Model as FG Defends Tax Reform Bills

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The Federal Government has addressed concerns raised by the Northern Governors’ Forum regarding the proposed tax reform bills before the National Assembly.

Investors King gathered that Governors of 19 Northern States of Nigeria, under the platform of the Northern Governors’ Forum met with the traditional rulers from the region to agree to disagree with the Federal Government’s new value-added tax model.

In a communiqué read by the chairman of the forum, Governor Muhammed Yahaya of Gombe State, the governors strongly opposed the new derivation-based model for Value-Added Tax (VAT) distribution in the new tax reform bills proposed by President Tinubu’s government.

Addressing the governors’ concern, the FG in a statement on Thursday by the President’s Special Adviser on Information and Strategy, Bayo Onanuga stated that the proposed bills will streamline Nigeria’s tax administration processes, enhance efficiency and eliminate redundancies across the country’s tax operations.

According to Onanuga, the bills which is currently before the National Assembly for consideration emerged after extensive review of existing tax laws.

The statement reads, “While we commend the Governors and traditional rulers for supporting President Bola Tinubu over the success recorded in addressing the country’s security challenges, we consider it necessary to address the misunderstandings and misgivings around the tax reform already embarked upon by the administration.

“President Tinubu and the Federal Executive Council recently endorsed new policy initiatives aimed at streamlining Nigeria’s tax administration processes, enhancing efficiency and eliminating redundancies across the nation’s tax operations.

“These reforms emerged after an extensive review of existing tax laws. The National Assembly is considering four executive bills designed to transform and modernise Nigeria’s tax landscape.

“First is the Nigeria Tax Bill, which aims to eliminate unintended multiple taxation and make Nigeria’s economy more competitive by simplifying tax obligations for businesses and individuals nationwide.

“Second, the Nigeria Tax Administration Bill (NTAB) proposes new rules governing the administration of all taxes in the country. Its objective is to harmonise tax administrative processes across federal, state and local jurisdictions for ease of compliance for taxpayers in all parts of the country.

“Third, the Nigeria Revenue Service (Establishment) Bill seeks to rename the Federal Inland Revenue Service (FIRS) as the Nigeria Revenue Service (NRS) to better reflect the mandate of the Service as the revenue agency for the entire federation, not just the Federal Government.

“Fourth, the Joint Revenue Board Establishment Bill proposes the creation of a Joint Revenue Board to replace the Joint Tax Board, covering federal and all states’ tax authorities.

“The fourth bill also suggests establishing the Office of Tax Ombudsman under the Joint Revenue Board, which would serve as a complaint resolution body for taxpayers.

“It is instructive to note that these proposed laws will not increase the number of taxes currently in operation. Instead, they are designed to optimise and simplify existing tax frameworks.

“The tax rates or percentages will remain the same under these reforms, as they focus on ensuring a more equitable distribution of tax obligations without adding to the burden on Nigerians.

“The reforms will not lead to job losses. On the contrary, they are structured to stimulate new avenues for job creation by supporting a dynamic, growth-oriented economy.

“Importantly, these laws will not absorb or eliminate the duties of any existing department, agency, or ministry. Instead, they aim to harmonise revenue collection and administration across the federation to ensure efficiency and cooperation.

“At the moment, tax administration lacks coordination among federal, state, and local tax authorities, often resulting in overlapping responsibilities, confusion, and inefficiency. Without reform, this inefficiency will persist.

“The proposed laws aim to coordinate efforts between different tiers of government, resulting in better tax resource management and greater clarity for taxpayers.

“Under existing laws, taxes like Company Income Tax (CIT), Personal Income Tax (PIT), Capital Gains Tax (CGT), Petroleum Profits Tax (PPT), Tertiary Education Tax (TET), Value-Added Tax (VAT), and other taxing provisions in numerous laws are administered separately, with individual legislative frameworks.

“The proposed reforms seek to consolidate these multiple taxes, integrating CIT, PIT, CGT, VAT, PPT, and excise duties into a unified structure to reduce administrative fragmentation.

“On the proposed derivation-based VAT distribution model, which the Northern Governors oppose, it must be stressed that the new proposal, as enunciated in the Bill, is designed to create a fairer system.

“The current model for distributing VAT is based on where the tax is remitted rather than where goods and services are supplied or consumed. The ongoing tax reform seeks to correct the inherent inequity in the current derivation model as a basis for distributing VAT revenue.

“The new proposal before the National Assembly outlines a different form of derivation which considers the place of supply or consumption for relevant goods and services. This means that states in the Northern region that produce the food we eat should not lose out just because their products are VAT-exempt or consumed in other states.

“These reforms are critical to improving the lives of Nigerians and were not put forward by President Tinubu to undermine any part of the country. There is no better time than now for the National Assembly to give due consideration to these bills that will overhaul our tax systems and create the revenue all the tiers of government require to fund the development our country and people urgently need.”

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Solid Minerals Sector Adds Over N1 Trillion to Nigerian Treasury in 16 Years – NEITI

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The Nigerian Extractive Industries Transparency Initiative (NEITI) said the solid minerals sector has contributed around N1.137 trillion in direct payments to various government levels over 16 years.

This was disclosed in the 2023 Solid Minerals Audit Report, the 16th audit cycle, which provided a comprehensive overview of the sector’s contributions from 2007 to 2023 published on Wednesday.

The report was conducted by indigenous firm Haruna Yahaya and Co., and covered the solid minerals industry’s economic contributions, revenue streams, and exports, providing recommendations for sector reforms.

The report showed a substantial increase in government receipts from N7.59 billion in 2007 to N341.27 billion in 2022, a 44-fold rise, indicating solid sector growth.

The 2023 report underscored the sector’s evolution into a vital revenue contributor for Nigeria, with cumulative contributions now exceeding N1 trillion. It disclosed that in 2022, the sector generated N345.41 billion, with a reconciled final revenue of N329.92 billion.

Meanwhile, the report also identified the solid minerals sector’s Gross Domestic Product (GDP) contribution at 0.83 percent in 2022, with incremental growth to 0.75 per cent in 2023, underscoring untapped potential.

The initiative reiterated the policy measures and reforms needed to unlock the sector’s capacity to significantly contribute to Nigeria’s economic diversification

“Company payments analysis indicated that total government revenue, including reconciled and unilaterally disclosed figures, reached N401.87 billion in 2023.

“Key revenue streams included VAT (N128.32 billion), FIRS taxes (N370.09 billion), Education Tax (38.64 percent), Company Income Tax (10.64 percent), and royalties (N9.06 billion).

The report also showed that discrepancies initially amounted to N301.6 billion but were reconciled down to N100 million, demonstrating NEITI’s transparency commitment.

The production and export data showed 95.07 million tonnes of minerals produced in 2023, with a significant export volume of 4.32 million metric tonnes, valued at N117.29 billion.

The report highlighted top mineral-producing states, including Ogun, Kogi, and Rivers, with Ogun leading production. Revenue contributions were led by Osun, Ogun, and Kogi states

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