$111 oil price: Governors seek NLNG’s model for NNPC dividend payment

..Lament NNPC’s zero contribution into Fed Account

…Commend SEPLAT’s acquisition of ExxonMobil

By Abimbola Abatta, Uthman Salami, and Ariemu Ogaga

The Nigeria Governors’ Forum (NGF) has recommended model of Nigeria Liquefied Natural Company (NLNG) ownership structure for the new Nigerian National Petroleum Company (NNPC) Limited to be unveiled in July 2022. This is to boost payment of dividend as revenue earnings of the Federal Government and 36 states   into the Federation Account.

It would be recalled that the NLNG announced  recently payment  of about $18 billion dividends  to the Federal Government of Nigeria courtesy of its shareholding in the company, via the Nigerian National Petroleum Corporation (NNPC). The NLNG also claimed that it paid $9billion in taxes to the Federal Government between 2008 and 2020.

With its plant construction, the company equally generated considerable Foreign Direct Investment (FDI) for the country. NLNG has assets (i.e. property, plant and equipment) worth about USD17.5 billion with 51% stake by international oil companies and 49 per cent belonging to the country through the NNPC.

It was equally revealed, as shown by statistics, that transparency is central to the challenge confronting the oil and gas sector

Ekiti State Governor and Chairman of NGF, Kayode Fayemi made the recommendation Thursday at the Governor’s Forum session which marked the end of the panelist’s session of the 5th edition of the Nigerian International Energy Summit (NIES 2022).

He said that the NGF seeks “a situation where at some point even the industry itself could operate the way the Nigeria LNG operates currently, so that at the end of the day there’s greater transparency, there’s greater accountability and the governance framework is really built on efficiency of the industry.”

According to Fayemi, the concerns bordering on transparency, accountability and governance of the sector are geared towards revitalising the industry.

The NGF further hinted that despite declaring profits in the last few months, the NNPC added nothing to the Federation account this month.

The NGF boss said, “This is a time to talk about revitalisation, the Petroleum Industry Act (PIA) has just been passed into law, even if Governors have some issues as the Minister already knows, we do have with the law itself, and that is being worked on by the implementation committee but we think it is a significant step 20 old years after that attempt started to review the 1969 Petroleum Act that has been the driver of the industry over the last 50 old years.

“And clearly the gaps that have been noticed in growing the industry and growing the sector particularly in ensuring that we run a sustainable institution that would not only respond to the yearnings of the industry, but also the general concerns of the Nigerian public. So, the things that have been addressed partly in the law.

“For us as states that are beneficiaries of the goose that lays the golden egg, the oil and gas industry, we also are very desirous that this industry is sustained over the long term. We see areas of concerns particularly in terms of revitalising the industry around transparency around accountability around governance of the sector.

“We’ve just had Federation Allocation Accounts Committee (FAAC) meeting a couple of days ago, and the NNPC contributed zero to the Federation account this month and this is not the first month that the NNPC is contributing zero. Over the last couple of months, we’ve been having these challenges; of course, we know why.

“Even though oil prices in the international market is going up, maybe $110 today or more, the more it goes up, it would appear that the more we suffer locally now. So there’s an ambiguous relationship  between what is happening in the international market and what we’re experiencing here in Nigeria. As critical stakeholders in the Nigerian Federation, states are naturally concerned about this, they are concerned about how to grow this industry and ensure that this industry is sustained over the long term in a manner that it can benefit those who are stakeholders in the industry. That is partly why for us governance of the sector is a very, very critical thing to do. The PIA is responding to some of the issues that we have about that, but it’s like a typical transition.

“In every transition, the old is done but the new is not yet born; you’re caught in the middle and there is a significant amount of confusion that happens in that transition period. I guess that’s what we’re experiencing now but the faster we can complete that process of transition, I think the better it is for us.

“Also because of the nature of the industry and the exclusivity of the industry in the constitution of Nigeria, States have always had their own issues, whilst in principle, we understand why the industry is in the exclusive nature of the Nigerian constitution or in the exclusive list.

“We also feel we need to begin to look at this rather differently in a manner that strengthens the commitment to private sector development, but also strengthens the ownership across states, local authorities, if they have the wherewithal to do this and also the federal government, and one of the things that states are interested in is how institutions, companies that they’ve created themselves or established as private sector entities either in joint venture partnership with other private sector entities or exclusively as a special purpose vehicle to warehouse state interests should be able to participate actively in the oil and gas industry, as we do.

“As I recall when I was in the Ministry of Mines, we made it possible for states to set up a special purpose vehicle that can then apply for licence in order to actively participate in the mining industry, be it gold or bitumen.

“So that’s in terms of revitalising the industry and ensuring sustainability over the long term; that’s an area that I think we need to look at.”

Noting that transparency is the basis of the challenge confronting the sector, he said: “On my way here, I was looking at the Natural Resources Governance Institute reports and Nigeria is not doing very well. We rank 40 out of 58 natural resource countries on the transparency index, because we are still believed to run a largely opaque industry and we see it ourselves.

“NNPC declares profits yet it cannot meet its obligations. My simple knowledge of economics teaches me that it is only after you’ve met all your obligations, that you then talk about making profits. So, if your obligation to the Federation Account has not been met. How can you then talk about profit making?

“Local content is growing in the industry. I saw a report; Seplat buying of Mobil Producing assets in the country. This is something that should be commended because Seplat is a local player even though operating in the global market, I believe that there must be some positive to that and we must build on such initiatives as long as it is transparently done before.”