.Seek review of asset divestments
Stakeholders in Nigeria’s oil and gas industry have urged the federal government to subject the dividends earned in the oil and gas sector by international oil companies (IOCs) to withholding tax, stressing that Nigeria is the only oil-producing country where dividends in the oil and gas sector are not subjected to withholding tax.
Speaking to THISDAY on the recent revelation by the Nigerian exploration and production (E & P) companies that the country lost an estimated $6 billion in the asset sales by the IOCs, some of the stakeholders also want the Acting President, Prof. Yemi Osinbajo to set up a technical team with the Bureau of Public Enterprises (BPE) as a member to review the divestments of assets by the IOCs.
They argued that the IOCs paid little amount as signature bonuses for the oil blocks in the 1950s and 1960s and raked in billions of dollars from the sale of the assets at the expense of the federal government.
One of the operators told THISDAY on condition of anonymity that the IOCs paid very little amount in the 1960s for the oil blocks and after making billions of dollars of profit, still went ahead to sell the assets and rake in billions of dollars when their licenses were about to expire and the assets relinquished to the federal government.
“When an IOC comes in here to invest its money, it produces oil and natural gas and exports it. There is no restriction whatsoever on what it does; what it brings and the revenue it earns. It is only in the Nigeria’s oil and gas industry that dividends are not subject to withholding tax,” he said.
Another operator, who spoke off the record, also argued that Angola subjects all the revenues earned by the operators to withholding tax.
“When Angola gives 30 or 40 per cent stake to an IOC, the IOC also pays signature bonus. Then when the IOC drills the well, it pays withholding tax on every barrel of crude it lifts,” he added.
Also in an emailed statement to THISDAY, Mr. Dan Kunle, who is an energy consultant and former Technical Assistant to a former Minister of Energy (Gas), Mr. Emmanuel Odusina, insisted that the acting President should set up a technical team with BPE as a member to review the asset sales.
He alleged that the Ministry of Petroleum and the Department of Petroleum Resources (DPR) were operating in defiance of the National Council on Privatisation (NCP) and BPE Act.
Kunle wondered why the deals involving the outright sales of Nigerian assets were consummated without the involvement of NCP, stressing that the Ministry of Petroleum and DPR must be made to account for what happened and how all the assets were transferred.
“The acting President should put together a Technical Panel (with BPE as member) to Investigate all the Upstream Assets Divestment from 2010 to 2015. The buyers and the sellers must be made to pay Capital Gain Tax. At what price or Signature Bonuses did they all enter into all these Concessions in the late 50s and 60s? It was very small token fees if at all they paid anything.
Over the years they invested money to develop and to produce oil which gave them and NNPC a lot of fortunes. But as the asset values started to decline or as the IOCs claim, onshore was no longer safe and attractive to them compared with the offshore, buyers jumped over one another to buy their 40 and or 45 per cent at exorbitant prices,” Kunle explained.
According to him, it was a good deal for the IOCs as they got huge premium at Nigerian expense, adding that the DPR and the minister did not ask them for Capital Gain Tax.
“As the case is today with the new owners of those divested assets, the operating environment has become more challenging for them to the extent that some of them are regretting their gambles – huge bank loans and debilitating interest overhangs,” Kunle added .