President Muhammadu Buhari is seeking the collaboration of the leadership of the National Assembly to pass a law amending regulations governing the deep offshore and inland basin production sharing contracts with oil companies before the end of the current legislative term in May this year.
He has accordingly directed the secretary to the government of the federation to as, a matter of priority, “liaise with the leadership of the National Assembly to pass the amendment to the deep offshore and inland basis production sharing contract before this legislative year expires in May 2019”.
But this could be an uphill task as National Assembly workers who spoke to BusinessDay said preparation for the 2019 budget is the priority of the 8th Assembly before it winds down.
For a cash-strapped Federal Government, amending the provision requiring raising revenue when oil prices exceed $20 a barrel is critical. Nigeria has already lost $21 billion over this non-amendment, according to the Federal Government.
President Buhari’s directive is contained in a one-page letter titled “RE-SUIT NO SC 964/2016 REQUEST FOR ENFORCEMENT OF THE JUDGMENT OF THE Supreme Court”, which was signed by Abba Kyari, chief of staff to the president, and sent to the both the attorney-general, Abubakar Malami, and the secretary to the government of the federation (SGF).
The urgency of the matter appears to have resulted from the fallouts from a strange consent judgment entered into by the attorney-general in the suit brought against the Federal Government by Rivers, Bayelsa and Akwa Ibom States seeking to block perceived losses from the failure to adjust to production sharing contract terms as provided for by sections 16(1) & (2) of the Deep Offshore and Inland Basin Production Sharing Contracts Act, Cap D3.
The law says, “The provisions of this Act shall be subject to review to ensure that if the price of crude oil at any time exceeds $20 per barrel, real terms, the share of the government of the federation in the additional revenue shall be adjusted under the production sharing contracts to such extent that the production sharing contracts shall be economically beneficial to the government of the federation.”
Instead of fighting the case brought by the three states, the attorney-general says he was “compelled to concede to the claims of the states in the suit”, having carefully considered the merits of the case and the reliefs sought by the states and “bearing in mind that the adjustment of the share where the price of crude oil exceeds the twenty dollars benchmark is beneficial to the Federal Republic of Nigeria, particularly the benefits of the recovery of the outstanding and unpaid difference inclusive of interest over the years”.
According to the attorney general, “From the calculations of a team of experts, the additional revenue recoverable as at December 2017 plus accrued interest on the outstanding amount calculated up to the end of December 2018 stands at $43,747,120,957.”
Claiming that the “most effective mode of ensuring enforcement and execution of the judgment in the utmost interest of the Federal Republic of Nigeria is a quasi-judicial/administrative approach”, Malami then sought the blessing of Buhari as both president and petroleum minister to “implement the recovery by whatever means possible including but not limited to directing a lien on all available profit oil or the accounts due and or receivable by both contracting parties (international oil companies and Nigerian National Petroleum Corporation jointly or severally) immediately or instalmentally until full payment”.
Malami berated the NNPC, saying as “contracting party on behalf of the Federal Government of Nigeria”, the state-owned oil company “has over the years been derelict in its responsibility and obligation to the Federal Republic of Nigeria in this regard”.
In his response, President Buhari rejected the two key prayers by the attorney-general on the grounds that the consent judgment entered into by the attorney-general violated the Constitution of Nigeria.
Before now, previous attempts to amend the royalty and revenue aspect of the Deep Offshore Act had been unsuccessful. Victor Nwokolo and Samuel Ikon, both members of the House of Representatives, introduced bills extending Nigeria’s royalty regime to areas in excess of 1,000 metres water depth and proposed a 3 percent royalty on explorations beyond 1,000 metres. In the Senate, Ben Murray-Bruce (PDP, Bayelsa) and Theodore Orji (PDP, Abia) have sponsored bills pushing for a 5 percent royalty in areas excess of 1,000 metres water depth.
Enacted in 1993, the fiscal policy stipulates a zero percent royalty from oil companies exploring deep offshore fields above 1,000 metres water depth. Since SNEPCO successfully drilled the Bonga field in 2005, deep offshore fields now constitute 35 percent of Nigeria’s oil exploration, according to latest figures from the NNPC.
ISAAC ANYAOGU
