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The Nigeria Extractive Industries Transparency Initiative (NEITI) 2020 Audit report released recently revealed that a total of 51 oil and gas companies owed the Federal Government N1.32 trillion (about $3.17 billion). These include Petroleum Profit Tax (PPT); Company Income Tax (CIT), royal oil and gas tax, Value Added Tax (VAT), Education Tax and Withholding Tax, among other remittances that the oil companies have reportedly defaulted. The Federal Inland Revenue Service (FIRS) ought to explain why these taxes were not paid and what it has done to punish the defaulters.
The audit report, which was made public by the Executive Secretary of the agency, Dr. Orji Ogbonnaya Orji, in Abuja, also noted that in the year under review (2020), revenue accrued to the government dropped by 40 per cent, as Nigeria reportedly earned $20.43billion only from oil and gas sector, compared to $34.22billion realised in 2019 financial year.
On remittances to the Federation Account as provided in Section 162(1) of the 1999 Constitution(as amended), the report also revealed that $14.65billion, representing 71.17 per cent of the total earnings in 2020, was remitted to the account, while aggregate financial earnings from the oil and gas sector in ten years(2011-2020) was $394.029billion.
In addition, the report showed that crude oil production in 2020 declined by 12 per cent, or a total of 646.7 million barrels when compared to 735.24million barrels produced in 2019.
On domestic crude allocation, 107.746 million barrels was managed by the Nigerian National Petroleum Corporation (NNPC) under the Direct Sale Purchase (DSP) arrangement. Also disturbing is the revelation that a total of 370 oil spill cases were recorded during the review period, and 3.4 million litres of oil spilled in one major spillage, 257 minor spill cases, and 23 medium spills.
Although the number of defaulting oil firms dropped from 77 as reported in the 2019 NEITI report to 51 in 2020, the continued default in their obligations to Federal Government amounts to a breach of the Constitution as well as economic sabotage. Those in charge of our tax system should know that the government needs these revenues to rebuild the nation’s infrastructure and improve the investment climate. In the 2019 audit report, when 77 oil companies failed to remit N2.66trillion (about $6.48 billion) to the Federation Account as required by the constitution, the government disclosed that it adversely affected its projected collectable revenues from the oil and gas sector.
It is unfortunate that the relevant government agencies charged with ensuring tax compliance seem to have continued to allow these companies to default, while the government has resorted to binge borrowing to meet its statutory obligations. Last year, a breakdown of the indebtedness of the oil companies showed that a total of $143.99billion was owed as petroleum profit taxes, $1.089billion as Company Income Taxes, and $201.69million as education tax. Other unpaid taxes included: $18.46million and £972,000 as Value Added Tax (VAT), $23.9 million and £997,000 as withholding tax, $4.35bn as royalty gas, while $270.187million and $41.86million were unremitted gas flare penalties and concession rentals respectively. As the audit report has again shown, the unremitted revenues can be used to address the perennial power shortage and other infrastructure deficits. It can also be used to improve the education and health sectors as well as create jobs for millions of unemployed Nigerians.
There is need for the government agencies to show seriousness in its enforcement processes and read the riot act to the oil and gas firms to sit up. NEITI should not allow this debt to remain unpaid before the next audit report. It should take advantage of the Memorandum of Understanding (MoU) it signed a few years ago with the Economic and Financial Crimes Commission (EFCC), the ICPC and the Nigerian Intelligence Unit, to recover all outstanding debts owed the Federal Government. For a long time, these companies have taken Nigeria for a ride. In the area of gas flaring, oil companies have reportedly failed to take government officials and agencies seriously in paying fines as recommended by the law on gas flaring. Henceforth, proactive enforcement has become imperative.
With the release of the audit report, NEITI has done the right thing in fulfillment of its duty as a member of the global Extractive Industries Transparency Initiative (EITI), which includes, ensuring that oil companies remit revenues due to the government. There is no doubt that the money from oil remains the backbone of the nation’s economy. Let the oil companies remit their taxes promptly to designated government account. We, therefore, urge all oil companies in the country to show transparency by evolving best sustainable business practices and pay all outstanding debts owed to the Nigerian government. We also call for prudent management of extractive resources of the country.
