NEITI: Nigeria Loses $16bn To Production Sharing Contracts

The Nigeria Extractive Industries Transparency Initiative (NEITI) said that Nigeria lost at least $16 billion  in 10 years due to non-review of the 1993 Production Sharing Contracts, (PSC), with oil companies.

This was one of the highlights of  the latest report by NEITI released in Abuja Sunday. It was tagged “The Steep Cost of Inaction”.

It said that the losses were recorded between 2008 and 2017.

The study  done in conjunction with Open Oil, a Berlin-based extractive sector transparency group, found  that the losses could be up to $28 billion  if, after the review, the Federation were allowed to share profit from two additional licences.

NEITI, therefore, called for an urgent review of the PSCs to stem the huge revenue losses to the Federation.

It added that the review was particularly important for Nigeria  because oil production from PSCs had surpassed production from Joint Ventures (JV) with PSCs now contributing the largest share to federation revenue.

“Between 1998 and 2005, total production by PSC companies was below 100 million barrels per year while JV companies produced over 650 million barrels per year.

” By 2017, total production by PSC companies was 305.800 million barrels, which was 44.32 per cent of total production.

” Total production by JV companies was 212.850 million barrels, representing 30.84 per cent of total production.” It said.

NEITI stated that the Deep Offshore and Inland Basin Production Sharing Contracts provided for a review of the terms on two conditions.

“The first review was to be triggered, if oil prices exceeded 20 dollars per barrel.

“Section 16 (1) of the Deep Offshore and Inland Basin Production Sharing Contracts specifies that: The provisions of the Act shall be subject to review to ensure that if the price of crude oil at any time exceeds 20 dollars per barrel, real terms, the share of the Government of the Federation in the additional revenue shall be adjusted under the Production Sharing Contracts to such extent that the Production Sharing Contracts shall be economically beneficial to the Government of the Federation.”

NEITI observed that this review should have been activated in 2004 when oil prices exceeded the 20 dollars per barrel mark.

It added that although the review was not done in 2004, the judgement of the Supreme Court in October 2018 had mandated the Attorney General of the Federation to work together with the governments of Akwa Ibom, Rivers and Bayelsa States to recover all lost revenues accruable to the Federation with effect from the respective times when the price of crude oil exceeded $20 per barrel.

It further stated that the second review was to be activated 15 years following commencement of the PSC Act, where Section 16 (2) states that “Notwithstanding the provisions of subsection (1) of this section, the provisions of this Decree shall be liable to review after a period of 15 years from the date of commencement and every 5 years thereafter”.

The transparency watchdog disclosed that at inception in 1993, the PSC terms were drawn up to  attract oil and gas companies to invest in the exploration and production of offshore fields considering the risks involved coupled with low oil prices.

“Thus the PSC contracts were supposedly more beneficial to the companies. However, the Law anticipates that the companies would have recouped their investments when oil price increases and after many years of operations, hence the two trigger clauses in the Act.

“Since the Supreme Court judgement has addressed the condition for the first review, this second review was the focus of NEITI’s Policy Brief.

” This second review should have happened in 2008 and informed why it chose 2008 as the the start date for commencement of estimated losses in the model,” NEITI noted.

It explained that to determine the losses, the analysis was conducted for the seven producing fields of the 1993 PSCs, which are Abo (OML 125): operated by Eni; Agbami-Ekoli (OML 127 & OML 128): operated by Chevron; Akpo & Egina (OML 130): operated by Total and South Atlantic Petroleum; and Bonga (OML 118): operated by Shell.

Others, it said are Erha (OML 133): operated by ExxonMobil; Okwori & Nda (OML 126): operated by Addax; and Usan (OML 133): operated by ExxonMobil.

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Three Tiers Of Government Shared N2.8tr In Six Months – NEITI

The three tiers of government shared N2.788 trillion between January and June this year, which represents a 38 per cent increase on the N2.019 trillion shared within the same period last year.

The shared amount also represents barely 40 per cent of this year’s federal budget.

This disclosure is contained in the Nigeria Extractive Industries Transparency Initiative (NEITI) quarterly review, which focuses on disbursement from the Federation Accounts and Allocation Committee (FAAC), which was made available in Abuja yesterday by the Director of Communication, NEITI, Dr. Orji Ogbonnaya Orji.

The review was based on data obtained by NEITI at the meetings of FAAC and data from the National Bureau of Statistics, Office of the Accountant General of the Federation, Federal Ministry of Finance and the Debt Management Office (DMO).

Out of $2.788 trillion disbursed in the first half of 2017, the Federal Government received N1.09 trillion, 36 state governments got N923 billion while N549.8 billion went to 774 local councils in the country.

A further breakdown shows that the amount released to the three tiers of government was N430.16 billion in January, N514 billion in February, N496.40 billion in March, N418.82 billion in April, N418.82 billion in May and N462.36 billion in June.

However, despite the 38 per cent increase in disbursements in the first half of 2017 when compared with 2016, all the three tiers of government suffered significant revenue decline in terms of projected FAAC disbursement.

For instance, while the expected FAAC disbursement for the three tiers of government was N4.7 trillion, the actual FAAC disbursement to them was N2.788 trillion, representing a shortfall of over 40.67 per cent.

The review further disclosed that N513 billion was spent on debt servicing by the three tiers in the first quarter of 2017. This was against the N1.276 trillion disbursements in the first quarter. This means that debt servicing took 40.27 per cent of FAAC disbursement for the first quarter of this year.

The publication expressed concern that, the nation’s debt in relation to revenues appears to have reached critical levels. It further disclosed that domestic debt servicing constituted 90 per cent of total debt servicing.

On the Paris Club debt refund to the 36 states and the Federal Capital Territory (FCT), it confirmed that N760.18 billion was released to the 36 states and the FCT Abuja.

It hinted that the money paid in two tranches represents refunds of over deductions from FAAC allocations to states and local councils used for quick payment of debt relief granted to Nigeria by the Paris Club between 1995 and 2002.

The quarterly review also confirmed that the NNPC has completed the refund of N450 billion owed the Federation Account, as a result of portions of domestic crude receipts withheld by the Corporation from November 2004. This followed the implementation of a payment schedule worked out between the Corporation and the Federation Allocation Accounts Committee.

Guardian

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NEITI Executive Secretary, Waziri Adio Declares Assets Publicly. (See Details)

The Executive Secretary of NEITI, Waziri Adio who was recently appointed by President Buhari has publicly declared his assets. He declared his assets after issuing a press release to several news outlets including Nairametrics.

Here is a summary of his assets

Cash in Nigerian Banks:

• As at 30 March 2016, I had a total of N3, 810, 206 in Naira accounts with Access Bank, Standard Chartered Bank and United Bank for Africa.
• As at 30 March 2016, I had a total of $821 in domiciliary accounts in Access Bank and UBA.

The foreign accounts I operated at different times as a student or a fellow in the US are all closed.

Buildings:

• One unit of a 3-Bedrooom bungalow in an estate in a suburb of Abuja bought in 2011 at N17.5m, renovated and currently valued at N25m;
• Two units of 3-bedroom flats built over 13 years (between 2000 and 2013) in Lambe, Ogun State, currently valued at N12m.

Undeveloped Plots:

• Two plots together measuring 1000 sqm demarcated by a dwarf fence in Iwo, my hometown in Osun State, bought in 2013, valued at N700, 000;
• Yet-to-be-located 600 sqm in a disputed estate in Sabon-Lugbe, Abuja bought in 2011 at N750, 000.

Private Companies:

I have beneficial interests in the following private companies that I co-founded:

• Think Tank Consult Limited
• SW4 Media Limited, Publishers of Metropole Magazine
• Elan-Metro Foods Limited
• Cable Newspaper Limited, Publishers of TheCable online newspaper

I also have equity in two non-operational companies:

• Papyrus Media Limited
• Bamisoro Media Limited

Vehicles:

• VW Passat bought new in 2011 at N5.8m
• BMW X5 2008 Model bought second hand in February 2016 at N3.3m

Household Furniture/Items:

• 9 KVA Hyundai Diesel Generator bought at N850, 000
• 3 KVA Sunkam Inverter bought at N450, 000
• Other household furniture, electronics, exercise equipment, artworks and others valued at N3.5m

Shares in Publicly Quoted Companies:

I have shares in Skye Bank, Sterling Bank and Staco Insurance, bought in 2008 at N2.5m now presently valued at N296, 610.

Assets of Spouse and Children:

• My wife runs two businesses: a salon and a bakery, with equipment and distribution vehicles all valued at N28.5m.
• We have three children under 18 and they do not own any assets.?

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Buhari Appoints Waziri Adio As New Boss Of NEITI

President Muhammadu Buhari has appointed Waziri Adio as the executive secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI).

The appointment was announced on Tuesday by the office of the secretary to the government of the federation in a statement signed by Bolaji Adebiyi, the director of press.

Adio, who had served as a director of communications at NEITI from 2007 to 2008, is a communication consultant and publisher of Metrolope Magazine. Between 1995 and 2003, he held various editorial positions in THISDAY newspaper. He left in 2003 to become special adviser, research and strategy, to Adolphus Wabara, who was then senate president. Adio resigned his job in 2004 and joined the United Nations Development Programme (UNDP) as communication specialist, a position he held till 2007.

He graduated with a BSc in mass communication from the University of Lagos in 1992, and obtained an MSc in journalism from Columbia University, New York,in 1999. He also earned a master’s degree in public administration from the Kennedy School of Government, Harvard University, Massachusetts, USA, 2009.

The new Governing Board of NEITI has the Minister of Solid Minerals Development, Dr. Kayode Fayemi as Chairman.

Other members are Permanent Secretary, Federal Ministry of Finance; Group Managing Director, Nigeria National Petroleum Corporation; President, Miners Association of Nigeria and a Representative of the Civil Society Organisations to be elected by the organisations.

Others are President, Nigeria Mining and Geosciences Society; ?President, Nigeria Union of Petroleum and Natural Gas; Hannatu Musa Musawa (Journalist), representing North-West geo-political zone; Lawan Gana Lantaiwa (Consultant), representing North-East geo-political zone; Bernard B. A. Ver (Accountant), representing North-Central geo-political zone and Mrs. Anne Adaeze Onyekwena, representing South-East geo-political zone.

The list also included Emmanuel Chiejina (Lawyer), representing South-South geo-political zone; Gbenga Onayiga (Journalist), representing South-West geo-political zone.
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