Oil companies’ unpaid debts blow hole in Nigeria’s finances as NEITI reports $6bn, N66bn in arrears

Business a.m.

The Nigerian Extractive Industries Transparency Initiative (NEITI) has confirmed an unsettling trend in the oil sector, reporting that as of June 2024, oil companies operating in the country as of June 2024, are heavily indebted to the Nigerian federation, with liabilities hitting $6.071 billion and N66.4 billion, respectively.

The report indicated that as of August 31, 2024, the liabilities owed to the Nigerian government totaled $6.071 billion and N66.4 billion in unpaid royalties and gas flare penalties, which were owed to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) by various oil companies operating in Nigeria.

Adding to the figures of unpaid liabilities in the Nigerian oil and gas sector, the NEITI report also revealed that by June 2024, various oil companies were indebted to the Federal Inland Revenue Service (FIRS) for unpaid petroleum profit taxes, company income taxes, withholding taxes, and Value Added Tax (VAT), totaling $21.926 million and N492.8 million.

Orji Ogbonnaya, the executive secretary of the NEITI, disclosed the finding in the agency’s 2022/2023 oil and gas industry report, which was presented in Abuja recently.

The  NEITI executive secretary noted that the document was more than just a collection of data, but a call for immediate action. He described the release of the report as a major step forward in the journey towards greater transparency, accountability, and good governance within the Nigerian extractive industry.

According to Ogbonnaya, “This report, produced by the Nigeria Extractive Industries Transparency Initiative, comes at a critical time when the nation is intensifying its reforms in the oil and gas sector. The report provides valuable insights that will help guide policy, encourage robust public debate, and ultimately improve governance in the management of our natural resources.” 

Ogbonnaya further highlighted some of the report’s critical findings and recommendations, including the discovery of revenue leakages within the oil and gas industry, the necessity for improved compliance with existing regulatory frameworks, and proposals for enhancing transparency and accountability in oil and gas operations.

The report, upon closer examination, revealed a trend of increasing petrol imports over the years, leading to a substantial increase in the cost of price differentials or subsidies paid by the government.

Between 2014 and 2023, the analysis showed that the government spent a substantial portion of its resources on these subsidies, with the cost escalating alongside the growing importation of petrol.

Comparing the data from 2022 and 2023, the NEITI report disclosed that the Nigerian government paid N3.01 trillion for the petrol subsidy in 2023, less than the N4.71 trillion  expended in 2022.

The report also highlighted that 23.54 billion litres of petrol were imported in 2022, while this figure dropped to 20.28 billion litres in 2023, representing a 14 percent decline in imports following the removal of the subsidy.

The NEITI analysis disclosed that in 2014, the Nigerian government incurred a subsidy cost of N480 billion for the importation of 18.93 billion litres of petrol. However, despite an increase in the volume of fuel imported to 19.27 billion litres in 2015, the subsidy expenditure dropped to N320 billion.

Further analysis of the NEITI report for the years 2016 and 2017 showed that in 2016, the Nigerian government spent N100 billion to subsidise the importation of 18.76 billion litres of petrol, while in 2017, the government expended N140 billion for the importation of 16.88 billion litres of petrol products.

According to the NEITI report, the subsidy expenditure experienced a surge in 2018, increasing by N580 billion to N720 billion for the importation of 20 billion litres of petrol, despite no significant increase in the volume of fuel imports compared to the previous year.

In 2019, despite an increase in the volume of fuel imports to 20.60 billion litres, the subsidy expenditure declined sharply to N580 billion, only to further reduce to N130 billion in 2020.

The NEITI report showed that the subsidy expenditure fluctuated in the years following 2020, with the Nigerian government spending N1.16 trillion on subsidies for the import of 22.54 billion litres of fuel in 2021. In 2022, the government disbursed N4.71 trillion as a price differential for the importation of 23.54 billion litres of petrol, and in 2023, the subsidy expenditure dropped slightly to N3.01 trillion for 20.28 billion litres of imported fuel.

Responding to the revelations, Olanipekun Olukayode,  the chairman of the Economic and Financial Crimes Commission (EFCC), vowed to recover the$6 billion and N66 billion that the oil companies owed to the Nigerian Federation.

The EFCC chairman also announced that he had authorised the transfer of over N1 billion derived from funds recovered through previous NEITI audits into the federation account.

“Over the years as an anti-corruption agency in the country we are part of the success of the work of NEITI. Where the work stops at the level of presenting this report, then we take off from there to ensure that the recommendations therein and revelations therein particularly as relates to criminal infractions, and violation of our financial laws, it is taken up seriously.

“I am also happy to announce to you that as of yesterday (Wednesday), I still approved that over a billion so remitted to the Federal Government account as a result of the work of the last report of NEITI,” Olukayode said.