Unremitted Revenue Rises To $9.85bn, NEITI Latest Oil And Gas Report Reveals

• 80% of the financial liabilities are owed by the NNPCL
• The Federation earned $23.04Billion in 2021 with $13.2billion or 57.27% of total revenue shared to the federating units after deductions
• Report urges computation of 13% derivation based on Section 162 (2) of Nigeria’s Constitution

Abuja September 18, 2023. The total unremitted revenues to the Federation by some relevant government agencies and companies in the oil and gas sector in the year 2021 have risen to over $9.85bn.

The figure and other vital pieces of information and data about Nigeria’s petroleum sector is contained in the 2021 Oil and Gas Industry Report by the Nigeria Extractive Industries Transparency Initiative (NEITI).

Executive Secretary of NEITI, Dr. Orji Ogbonnaya Orji while presenting the highlights of the report stated that the information and data contained in the NEITI latest reports paid special attention to helping the government at all levels to shore up revenue, support national development and poverty reduction through resource mobilisation. The report therefore provided update on the financial liabilities of the NNPCL and some companies to the federation.

He lamented that despite the concerted efforts made last year to recover some of the revenues through the Ad Hoc Committee that was set up by the National Assembly, the 2021 figures showed an increase.

A compilation of the outstanding financial liabilities due to the Federation by the report indicated that a total of $13.591mn 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 at December 31, 2022. Over 80% of these outstanding financial liabilities are owed by NNPCL

The Secretary to the Government of the Federation, Senator George Akume represented by the Permanent Secretary, Political and Economic Affairs Mrs. Esuabana Nko while unveiling the report reaffirmed the federal government’s commitment to support and deepen the implementation of the EITI in Nigeria.

According to the SGF, “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. As an Administration, we are convinced that the revival of our economy and the 8-point agenda that we recently unfolded cannot yield the desired result if we do not support and strengthen anti-corruption and reform oriented Agencies like NEITI”.

She added that “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”.

Chairman Senate Committee on Oil and Gas Host Communities, Sen. Benson Agadaga, reaffirmed government’s commitment to implement 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 programme for the oil and gas sector”, Sen. Agadaga stated.

The Chairman Senate Committee on Petroleum Upstream Sen. Eteng Williams commended the vital role NEITI is playing and urged NEITI to continue to ensure revenue mobilization for the country now that subsidy is gone.

The Chairman, House Committee on Petroleum Resources, (Downstream) Hon. Ikeagwuonu Ugochinyere (Ikenga Imo) pledged the support of his Committee to lay the report on the floor of the House and debate it extensively to ensure the implementation of the recommendations made therein, as enshrined in Sections 3 and 4 of the NEITI Act.

“Working together, we will ensure the realization of government’s desire to diversify the economy for the attainment of alternative source(s) of revenue and clean energy, that will bring about the realization of the projected one trillion-dollar revenue for Nigeria in the next 8 years.”.

The Minister of Budget and National Economic Planning Sen. Abubakar Atiku Bagudu represented by the Permanent Secretary, Nebeolisa Anako stated that the data generated by NEITI will help the ministry in its planning mandate for the country.

“The budget outlay for the country for the current national development plan for five years is N348trillion. 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 published this Monday in Abuja with the theme: “NEITI Oil & Gas Industry Report 2021: Relevance built on revenue growth and impact” also made several vital disclosures in line with the NEITI Act 2007 and the EITI 2019 Standard.

The report showed that Nigeria earned a total revenue of $23.046bn from the sector in 2021. The sum is about 13 percent higher than the corresponding total of $20.43bn realized in 2020.

Breakdown of the earnings showed that about $8.67bn, or 37.6 percent of the revenue was realized from the sale of crude oil and gas; $13.37bn, or 58.02 percent, from taxes and other specific revenue flows, and $1.01bn, or 4.38 percent, went into payments to sub-national entities.

An analysis of the total revenue realized, the report stated, showed unremitted revenues and quasi-fiscal expenditure by the NNPCL of $1.95bn (8.47%) and $6.93bn (30.08%) respectively. Transfers to the Federation amounted to $13.2bn (57.27%), while Sub-national payments totaled $963.63mn or 4.18%. Available revenue for sharing by the federating units after the deductions and in accordance with the revenue allocation formula was US$13.2billion which represented 57.27% of the total revenue collected. This is lower than the 71.7% shared in 2020.

The quasi-fiscal expenditure of $6.931billion (equivalent of N2.651trillion) were deducted from the Federation’s revenue before remittance without appropriation by the National Assembly. A breakdown of the $6.93bn deductions showed payments of $3.52bn or 15% for Joint Venture Cost Recovery and $3.031bn (about N1.16 trillion) or 13.15 percent for products subsidy/value loss. Other deductions are $258.43mn for government priority projects; $75.51mn for pipeline maintenance and holding cost and $42.40mn for crude oil and products losses.

The NEITI report also observed that none of the refineries was operational in 2021 despite spending about N200billion between 2020 and 2021 on refinery rehabilitation which was deducted from the Federation sales proceeds. These deductions the report reiterated, remains a heavy cost to Federation Revenue remittances.

In addition, the report said about $1.95bn, or 8.47% of the total revenue was not transferred to the Federation Account by the NNPCL during the year under review. Breakdown of the withheld revenue included, $722.6million for NLNG dividend; $871.15mn from domestic crude sales, $859,583 miscellaneous revenue and  $286.42mn from export crude sales. $24.332million and $45.76million were withheld from transportation revenue and domestic gas proceeds.

A ten – year trend analysis of financial flows from the oil and gas sector from 2012 to 2021 showed earnings of $348.63Billion.

On crude oil production and exports, the NEITI report indicated that total metered crude oil production was 634.60 million barrels, out of which the nation lost 68.47 million barrels to production adjustment, measurement error, theft and sabotage. The figure showed a 13% reduction from the production volumes of 2020.

The report pointed out that a total 29 companies suffered crude losses from theft and sabotage amounting to 37.57 million barrels. The decline in crude oil losses due to theft and sabotage from 39.08million barrels in 2020 to 37.57million barrels in 2021 was generally due to the decline in crude oil production during this period.

On gas production and utilization, the NEITI report said a total of 2.74million standard cubic feet of gas was produced during the year, with the volume 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 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,  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 bonus 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 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 loans transaction 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 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 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 $7.76million.

DR. Orji urged policy makers to take seriously the findings and recommendations of the NEITI oil and gas report 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 is utilised for the benefits of the citizens.

Details of the report can be found on the NEITI website: www.neiti.gov.ng.

Hard copies of the report are also available.