FG Jus­ti­fies Oil Ex­plo­ration in North, To Rein­vest Pro­ceeds from JV As­sets

Records N1.6tn oil rev­enue, to in­crease ex­cise duty on al­co­hol and to­bacco

THISDAY - - FRONT PAGE - Ndubuisi Fran­cis and Udora Orizu in Abuja

De­spite its cam­paign for eco­nomic di­ver­si­fi­ca­tion, in­creas­ing global shift to­wards al­ter­na­tive and cleaner en­ergy sources, and fu­tile at­tempts in the past dis­cov­er­ing oil in com­mer­cial quan­ti­ties in North­ern Nige­ria, the fed­eral gov­ern­ment yes­ter­day jus­ti­fied the con­tin­u­ing search for oil in the North­ern part of the coun­try.

Sev­eral an­a­lysts have con­tin­ued to ques­tion the jus­ti­fi­ca­tion for the over $3 bil­lion re­port­edly sunk into oil ex­plo­ration in the North by the cur­rent ad­min­is­tra­tion, in spite of its clam­our for eco­nomic di­ver­si­fi­ca­tion as well as the global re­al­ity of the di­min­ish­ing sig­nif­i­cance of the com­mod­ity in a cou­ple of years.

But the Min­is­ter of State, Petroleum Re­sources, Dr. Ibe Kachikwu, who of­fered per­spec­tives on gov­ern­ment’s oil ex­plo­ration drive in the North, said yes­ter­day that many fun­da­men­tal fac­tors in­formed the de­ci­sion to con­tinue prospect­ing for oil in the re­gion.

Re­spond­ing to ques­tions at the pub­lic pre­sen­ta­tion of the 2018 bud­get pro­posal in Abuja, Kachikwu stated that the gov­ern­ment has a

real obli­ga­tion to ex­plore for oil any­where there is rea­son to do so, not­ing that one of the rea­sons for the ex­plo­ration ac­tiv­i­ties in the North was the fact that it had been es­tab­lished that oil lies un­der­neath the Lake Chad Basin.

He stated that the fact that the price of oil has fallen was not enough rea­son to stop ex­plo­ration ac­tiv­i­ties, adding that the com­mod­ity was still the coun­try’s dom­i­nant for­eign ex­change earner.

Kachikwu, who stated that a huge re­spon­si­bil­ity still lies with oil, noted that the drop in oil prices and in­creas­ing world at­ten­tion to­wards other en­ergy sources would not stop ham­strung ex­plo­ration ac­tiv­i­ties.

He said: “Mas­sive ex­plo­ration ac­tiv­i­ties will con­tinue to pro­ceed ob­vi­ously in oil pro­duc­ing ar­eas. The con­tri­bu­tion of oil in the 2018 bud­getary ex­pen­di­ture ex­pec­ta­tion is al­most 60 per cent, that is, if you take the 37 per cent in debt. A huge amount of re­spon­si­bil­ity lies with oil.”

He, how­ever, pointed out that his per­sonal phi­los­o­phy in the ex­plo­ration of oil was that the Nige­rian Na­tional Petroleum Cor­po­ra­tion (NNPC) should not drive the process.

“My phi­los­o­phy is that it shouldn’t just be NNPC that should prospect for oil in the North-east. What we are try­ing to do is to be­gin an in­land basin pro­gramme and then we put in enough pro­cesses and in­cen­tives to bring the pri­vate sec­tor to look for oil at their own cost un­der Pro­duc­tion Shar­ing Con­tracts (PSCs) and that will there­fore not place a bur­den on the fed­eral gov­ern­ment but at least open up the fron­tiers which will be for the good of the coun­try,” he said.

In his pre­sen­ta­tion on the de­tails of the 2018 bud­get, the Min­is­ter of Bud­get and Na­tional Planning, Sen­a­tor Udoma Udo Udoma said the 2018 rev­enue pro­jec­tions re­flected a new fund­ing mech­a­nism for the oil joint ven­ture (JV) op­er­a­tions, al­low­ing for cost re­cov­ery in lieu of pre­vi­ous cash call ar­range­ments.

The min­is­ter said that this would come with ad­di­tional oil-re­lated rev­enue aris­ing from roy­alty re­cov­er­ies, new/ mar­ginal field li­cens­ing, early li­cens­ing re­newals, and re­view of the fis­cal regime for the PSCs.

Udoma dis­closed that key re­form ini­tia­tives in the 2018 bud­get to im­prove rev­enue gen­er­a­tion in­cluded re­struc­tur­ing the gov­ern­ment’s eq­uity in the JV oil as­sets (re­duc­tion in eq­uity hold­ing) with pro­ceeds to be rein­vested in other as­sets.

This, he noted, will im­prove ef­fi­cien­cies in the op­er­a­tions of the JVs and po­si­tion them for bet­ter rev­enue per­for­mance in the fu­ture.

He also dis­closed that that there would be an up­ward ad­just­ment on the ex­cise duty im­posed on al­co­hol and to­bacco.

The min­is­ter also spoke on the tax ad­min­is­tra­tion im­prove­ment ini­tia­tives aimed at pos­i­tively af­fect­ing col­lec­tion across var­i­ous tax cat­e­gories, in­clud­ing the Vol­un­tary As­sets and In­come Dec­la­ra­tion Scheme (VAIDS).

He dis­closed that about N300 bil­lion was pro­vided for roads across the coun­try in the 2018 bud­get, adding that the fed­eral gov­ern­ment was de­sirous of at­tract­ing pri­vate sec­tor par­tic­i­pa­tion in all facets of the econ­omy.

Ac­cord­ing to him, “The 2018 bud­get pro­posal seeks to con­tinue the re­fla­tion­ary poli­cies of the 2016 and 2017 bud­gets which helped put the econ­omy back on the path of growth.

“Thus, we plan to con­tinue to spend more on on­go­ing in­fra­struc­ture projects that have po­ten­tial for job cre­ation and in­clu­sive growth; we will con­tinue to lever­age pri­vate cap­i­tal and coun­ter­part fund­ing for the de­liv­ery of in­fra­struc­ture projects.”

Udoma stated that as with the 2016 and 2017 bud­gets, the 2018 bud­get had been pre­pared on Zero Based Bud­get (ZBB) prin­ci­ples.

He stressed that the 20182020 Medium Term Fis­cal Frame­work (MTFF) and the bud­get pro­posal re­flected many of the re­forms and ini­tia­tives in the Eco­nomic Re­cov­ery and Growth Plan (ERGP), “which is our roadmap to eco­nomic re­cov­ery and sus­tain­able growth”.

But con­sid­er­ing present re­al­i­ties, he said the growth pro­jec­tion for 2017 had been re­vised down­wards from 2.9 per cent to 1.5 per cent.

Pro­vid­ing fur­ther in­sight into the per­for­mance of the cap­i­tal com­po­nent of the 2017 bud­get, Udoma said as of Oc­to­ber 31, N450 bil­lion had been re­leased to the min­istries, de­part­ments and agen­cies of the gov­ern­ment.

The min­is­ter also dis­closed that the gov­ern­ment had also recorded 87 per cent per­for­mance in over­all ex­pen­di­ture, even as he noted that un­der the 2017 bud­get, N1.6 tril­lion had been recorded as oil rev­enue.

Udoma said the gov­ern­ment was hav­ing prob­lems with non-oil rev­enue, not­ing that earn­ings from com­pany in­come taxes and Value Added Tax (VAT) un­der­per­formed.

But he ap­plauded the per­for­mance of the Nige­ria Cus­toms Ser­vice (NCS), not­ing that it has al­most met its rev­enue tar­get for the pe­riod.

Lament­ing the poor per­for­mance of in­de­pen­dent rev­enue sources, he re­gret­ted that the rev­enue gen­er­at­ing agen­cies were not meet­ing their obli­ga­tions.

On this score, he said the gov­ern­ment was con­sid­er­ing amend­ing the Fis­cal Re­spon­si­bil­ity Act to check the trend.

Re­spond­ing to a ques­tion on the ap­a­thy of cit­i­zens to pay­ing tax, the Min­is­ter of Fi­nance, Mrs. Kemi Adeo­sun blamed the dis­cov­ery of oil for the low tax regime in the coun­try.

She said Nige­ria, with a pop­u­la­tion of 180 mil­lion peo­ple and oil pro­duc­tion of about 2 mil­lion bar­rels per day can­not sur­vive with­out tax.

The min­is­ter stressed that peo­ple should not com­pare Nige­ria with Saudi Ara­bia, with a pro­duc­tion of ten mil­lion bar­rels of oil per day and a pop­u­la­tion of 30 mil­lion peo­ple.

“Peo­ple are not pay­ing taxes, not be­cause of ap­a­thy, but be­cause we have gone on for the last 35 years with a cul­ture that when peo­ple don’t pay taxes there are no con­se­quences.

“It is fraud­u­lent for any­one to say he does not pay taxes be­cause he does not see what he’s get­ting from gov­ern­ment, so we are go­ing to have to come to­gether as na­tion for the fu­ture and do the right thing,” she said.

Also re­fer­ring to the Dan­gote Group, the min­is­ter stated that the gov­ern­ment never granted any com­pany tax hol­i­day or amnesty for roads con­struc­tion, adding that gov­ern­ment has an un­der­stand­ing with some com­pa­nies on some roads.

Ac­cord­ing to her, such com­pa­nies would re­pair cer­tain roads while the funds ex­pended on the roads will be recog­nised as taxes al­ready paid.

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