*Says Nigeria’s Petroleum Industry Act Unconstitutional, Should Be Scrapped
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Nigeria is currently losing N3 trillion (15 per cent of its national budget) yearly to tax avoidance by oil rig companies, Senior Partner, Olisa Agbakoba Legal (OAL), Olisa Agbakoba, has said.
Addressing the media in Lagos yesterday, Agbakoba said the loss of this revenue significantly impacts the government’s ability to fund development projects and public infrastructure.
He alleged that oil rig companies have formed a cartel for tax avoidance, with the Nigerian Maritime Administration and Safety Agency (NIMASA) confirming that they don’t collect tax from oil rigs, lamenting that this represents a massive loss of potential government revenue.
The OAL senior partner said that the practice of tax avoidance by these companies creates an uneven playing field and discourages complaint companies.
Agbakoba said Nigeria has continued to face significant fiscal challenges despite its wealth and with approximately 44 major solid minerals, the most prominent being oil and gas, it is perplexing that these resources have failed to adequately address the country’s development needs.
‘‘The Nigerian oil and gas industry is a powerhouse in Africa with an estimated value of over $3.8 trillion and an average daily production of 1.4 million barrels per day. Over the past 40 years, the cumulative revenue from oil and gas has exceeded $1 trillion, an amount that should have been sufficient to transform the nation’s economy and infrastructure. Yet, Nigeria consistently resorts to borrowing, with the total public debt standing at N121.67 trillion ($91.46 billion) as of March 31, 2024, according to the Debt Management Office,” Agbakoba said.
He pointed out that Nigeria’s oil and gas sector has all it takes to take the country out of the doldrums but was been stagnated as a result of faulty laws and weak enforcement in some instances.
He said the Petroleum Industry Act (PIA) as a set of law was weighing down the industry because major parts of the law gives room for renting seeking which favours most the IOCs to cheat and undermine the country.
He however called for the repeal of the PIA to give room for a fresh set of laws that would govern the oil and gas industry to prosperity for all Nigerians.
He said PIA which created room for two industry regulators and two ministers shouldn’t have been in the first place.
‘‘What are we doing with two industry regulators and what purpose does it seek to achieve. The powers of the Group Chief Executive Officer of the NNPC Limited have weakened the role of the two ministers.”
He added that the NNPC’s position as both a regulator and operator creates conflicts of interest and inefficiencies while multiple agencies with unclear mandates lead to bureaucratic bottlenecks and inefficiencies.
The expert posited that, the current structure heavily favors IOCs, resulting in a significant portion of revenues leaving the country.
According to him, IOCs often have more bargaining power in negotiations with the government due to their technical expertise and financial resources, saying their dominance has led to a lack of technology transfer and skill development among local companies.
On solutions, Agbakoba said government implement regulations requiring IOCs to maintain a certain percentage of their operational funds in Nigerian banks.
Others are; Implement policies to increase Nigerian participation in legal services, shipping, banking, insurance, drilling, oil field services, and engineering within the oil and gas industry, create incentives for international firms to partner with Nigerian companies in these sectors.
Develop specialized training programs in oil and gas law, maritime services, financial management, and insurance for the energy sector, provide support for Nigerian insurance companies to develop capacity in marine insurance.
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