The Nigeria Extractive Industries Transparency Initiative (NEITI) at the weekend commended the Federal Government’s decision to terminate its cash call payments on Joint Venture (JV) agreements with major international oil companies, which it said had become a huge debt burden to the nation’s economy.
According to NEITI’s reports, from 2009 to 2013, the Nigerian National Petroleum Corporation (NNPC) made a total payment of N2.4 trillion ($7.86bn) and another $16.2 billion as its cash call obligations for JV operations in the oil and gas industry, which amounts to $24.06 billion but will now be saved following the termination of JV funding mechanism.
NEITI applauded what it called “the federal government’s landmark decision” as most timely, bold, courageous, and a huge relief given the avoidable huge debt burden which JV cash payments have imposed on the nation over the years.
“We note that all NEITI’s independent audit reports on the oil and gas industry since the last ten years had alerted the nation that the management of JV Cash Call regime had constituted drain pipe to the country’s scarce oil and gas revenues,” the oil industry watchdog said in a statement signed by Orji Ogbonnaya Orji, its director of communications.
While equally expressing concerns on the process lapses in the management of the cash call system and the wider implications through huge revenue leakages, a breakdown of the reports shows that in 2009 alone, naira components of the payments cost the country N460.24 billion, while another N441.44 billion was paid in 2010 as Nigeria’s cash call obligation.
They also indicate that in 2011, the sum of N416.58 billion was paid, and in 2012, the figure rose to N612.93 billion, while in 2013, the sum of N492.81 billion was paid as cash call to JV operations.
A similar breakdown of payments in foreign currency shows that in 2009, the sum of $3.73 billion dollars was paid, which marginally increased to $3.78 billion in 2011, while $2.60 billion was spent by the nation on cash call.
Furthermore, total cash call payments for 2012 and 2013 were $3.10 billion and $2.98 billion respectively.
However, NEITI, in its statement, said it was relieved that the exit from this funding arrangement, which has lasted over forty years, has received the endorsement of the Federal Executive Council.
“The decision of the Federal Government to terminate this funding arrangement with major oil companies is therefore a bold step in the right direction. One immediate benefit is that it will free the country from complex financial burden and allow the resources to be channeled to other national priorities,” the statement read in part.
“We commend the minister of state for petroleum resources, Ibe Kachikwu, and the management of the NNPC for responding adequately to this remedial issue in NEITI reports in the overall interest of the nation,” it further read.
NEITI also said it was pleased that an important finding and recommendation outlined in its independent audit reports, which has been ignored over the years, is now being implemented as part of the on-going reforms of President Muhammadu Buhari’s government.
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