A Quick Run Down of The Legislative Dispute Between NLNG vs National Assembly


Nairametrics| The Nigerian Liquefied Natural Gas project is arguably one of the best examples of how government and the private sector can join hands to create value. The Nigerian Government owns 49% of NLNG while Shell Gas (25.6 per cent), Total (15 per cent) and Eni (10.4 per cent) owns the rest.

It is also one of the government’s most profitable investments and is a shining example for the likes of NNPC, Discos (government owns about 40%), Power Generation Companies and other private sector driven entities co-owned or owned fully by the government. The NLNG has also been a consistent dividend payer to the government declaring dividend every year since 2008. In fact, we understand the government has earned over $15 billion in dividends from NLNG. The company was incorporated with $6 billion and is thought to have about $11 billion in assets, generated revenues of over $90 billion.

So why then is the National Assembly about to rock the boat? We don’t have the answers but what we know so far about the case is clearly outlined below for you to make up your minds

What the Legislators want to do

  • The National Assembly last year, began plans to amend the act setting up the NLNG
  • They want to include a clause that forces NLNG to pay a 3% tax on its annual budget to the Niger Delta Development Commission (NDDC).
  • The tax is a regressive one and is currently being paid by oil companies in the upstream sector of the industry.
  • A 3% tax on budget indicates, that you pay the government a tax on money you plan to spend not what you have spent.
  • It is also opined that they want to amend clause 7 of the NLNG act which exempts the NLNG from paying import duties, taxes, charges, levies and any other charge for importation of plant and machinery, goods and services used for its business operations.

Who came up with this idea

  • Apparently, the NDDC has been pursuing an amendment of this act after losing through the courts.
  • The NDDC went to court requesting that they be excluded from the list of agencies exempted from taxing NLNG. They were in court between 2005 and 2011 and took the battle all the way to the Supreme Court, eventually losing.
  • Sources suggest they have now resorted to plan b, which is to amend the law.
  • They also seem to have familiar friends in the NPA and other government agencies looking to widen their revenue base.

What about the National Assembly?

  • Sources inform us that this all started in 2015 when some legislators allegedly wanted the company to declare dividends early in time for the elections.
  • NLNG allegedly refused to declare dividends upsetting vested interest who vowed to strike back
  • Suddenly, the interest of some members of the National Assembly have now aligned with those long seeking to amend the act.
  • The move to amend the act started in 2016 and seems to be gathering storm

Why are critics against the amendment?

  • The NLNG Act was carefully crafted to allow foreign investors invest in an asset that will help explore Nigeria’s huge gas reserves
  • Successive governments had for over 3 decades failed form a Joint Venture that could help tap into its huge gas reserves. Most did not want to invest unless investments were in place and remain without change.
  • Amending the act therefore contravenes the spirit of the contract entered between Nigeria and the other stakeholders of the NLNG covered by Bilateral Investment Treaties (“BITs”) with France, The Netherlands and the United Kingdom, parent companies of Total, Shell and Eni.
  • The deal involves incentives, concessions, guarantees and assurances by the Nigerian government and reaffirmed in Letters of Assurance to lenders for the Nigeria LNG Trains 4 and 5 expansion to retain agreed fiscal and security regimes of the investment and not to levy any tax inapplicable to companies nationwide.
  • Those against the amendment believe that if it is carried out about $25 billion in proposed investments for Train 7 and possibly 20,000 jobs.

Who are those against the amendment

  • The Nigerian Labour
  • A cross section of oil and gas analysts
  • The oil and gas industry
  • Foreign investors

 

 

 

Nairametrics

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

What's your say?