KEY POINTS
- Nigeria’s oil and gas sector owes the federal government over $6 billion and ₦66 billion, according to a NEITI report.
- The debts stem from unpaid taxes, royalties, and penalties from companies operating in the country.
- NEITI is urging the government to take immediate action to recover these funds to improve national revenue.
Oil and gas companies operating in Nigeria owe the federal government more than $6bn and ₦66bn in unpaid taxes, royalties and penalties, NEITI report says. The report shows that the government has failed to effectively tax the industry, which is still important for the country’s economy.
The NEITI report that was launched recently as the organization continues to work towards increasing the transparency of the Nigerian extractive industries reveals that there is a lot of fraudulent activities in the sector.
This shows that different companies in the oil and gas sector in Nigeria have not been able to pay their royalties to the federal government contributing to the fiscal problem.
A particular emphasis is made on unpaid debts that endanger economic stability.
BusinessDay said the debts include unpaid taxes, royalties and penalties, with NEITI pointing out that it has discovered that there are major loopholes in the payment of Petroleum Profit Tax (PPT), royalties on oil, and levies from several energy firms. The report is now urging the government to take necessary actions to reclaim these funds since Nigeria still experiences fiscal challenges.
The Nigerian government depends on oil and gas sales revenues for most of its budgets, and the failure to pay such huge amounts has worsened its deficit.
As things stand, and with the recent fluctuations in the world markets and the local problems faced in Nigeria regarding production, the inability to recover these monies would likely threaten the economy even more.
Government action needed as neiti paints a gloomy picture.
The NEITI report also recommends that the government should enhance its measures of increasing its shares in the revenue from the oil and gas sector. It suggests that the federal government increase its monitoring of payments and increase the penalties for non-payment by firms.
The transparency body has always been calling for improvement in the governance and accountability of the Nigerian resource endowment sectors.
Some of the companies have disputed these figures, however, the data by NEITI is based on various audits carried out to verify industry remittance to government. These audits are part of the efforts that NEITI has been employing to ensure that the management of the Nigerian energy sector becomes more responsible.
The delayed payments have local and international analysts frowning as they pointed out that the government could be losing a lot of money in a time when the national budget is already feeling the heat.
NEITI is therefore calling for faster action to recover the outstanding funds and to enhance future compliance among the firms.
Impact on national revenue
The oil and gas industry is a strategic sector for the Nigeria economy; it is the source of about 60% of the government income, and more than 90% of Nigeria’s foreign exchange revenue.
Thus, the unpaid debts are a problem for the authorities, who are facing, inter alia, production losses, theft of oil, and reduced investment in the industry.
NEITI’s revelations come at a time the Nigerian government is looking at how it can strengthen its balance sheet and avoid excessive borrowing.
The $6 billion and ₦66 billion owed by oil companies could go a long way in filling up the national revenues which have been affected by the fluctuating oil market and internal problems.
Is this a path to fiscal recovery?
It is hopeful though guarded that with proper government interference and enhanced compliance with the payment requirements, it is possible for Nigeria to regain a significant proportion of the money due to the oil and gas sector.
However, it must be pointed out that it may take some time and a lot of political will to ensure that the compliance is effected especially among the influential cartel in the industry.
NEITI still believes that its report will trigger immediate government action, which may go a long way to stabilizing Nigeria’s economy.
