The Revenue Mobilisation, Allocation and Fiscal Commission has asked the Federal Government to widely consult stakeholders before deciding whether to heed calls for the conversion of Nigeria’s Joint Venture contracts in oil operations to an Incorporated Joint Ventures Companies.
The commission, in a statement made in Abuja on Wednesday by its spokesperson, Mr. Ibrahim Mohammed, said there were pros and cons for each option, adding that wide consultation would ensure the protection of the different stakeholders.
Investment banker and former Chairman, Technical Committee, National Council on Privatisation, Mr. Atedo Peterside, had in an article entitled: ‘Letter to my countrymen’, advocated the replication of the successful Nigerian Liquefied Natural Gas model in the divestment of assets in the Joint Venture contracts.
Peterside said the JVs should be converted to an Incorporated Joint Ventures where the federation’s stake would be capped at below 50 per cent across all the oil producing JVs.
Explaining the merits and demerits of the two business models, the RMAFC explained that revenue inflow into the Federation Account and its timing could change significantly if and when the government decides to transit from the JVC to the IJVC, noting that the JVs were currently being managed professionally and profitably.
Mohammed said, “Under the JVC arrangement, the federation receives its share of equity crude, which represents 100 per cent revenue; and the federation pays JV Cash Call, which represents the cost of production. Equity crude received less JV Cash Call is gross profit, which is 100 per cent profit; Petroleum Profit Tax, which is presently at 85 per cent, will still be paid from the 45 per cent or 40 per cent shares owned by the IOCs, while payment of royalties as required by law is common in both models.
“In the case of the IJVs, equity crude will no longer be received. Equity crude, which is 100 per cent profit, will be lost as the IJVs will only pay taxes at 65 per cent of operating profit since the IJV will be registered in Nigeria.
“The federation will only receive dividends at the end of the financial year of the IJV companies commensurate with the federation’s holding, which will be less than 50 per cent. Interim dividends may or may not be paid during the financial year. Furthermore, there is no guarantee that the federation will be receiving dividends regularly as in the JVC, which comes monthly.”
“In the case of the IJVs, the federation will no longer make Cash Call payments, which have always been a burden on the annual Federal Government budget. The IJV companies will source for funds to finance their programmes.”
In view of the sensitive nature of the issue at stake, especially its implications on the nation’s political economy, Mohammed added that the commission strongly advised that before a final decision would be taken on the matter, wider consultations with critical stakeholders should be made to carefully examine the two options before transiting from the JVC to the IJV.
…says non-oil sector contributes 50% of govt revenue
since the nation slipped into recession, the non-oil sector has been contributing over 50 per cent of revenues accruing to the Federation Account, the Revenue Mobilisation, Allocation and Fiscal Commission has said.
A Commissioner of the RMAFC, Mr. Sanya Omiri, revealed this when officials of the agency paid a courtesy call on the Bayelsa State Governor, Seriake Dickson, a Government House statement said on Wednesday.
The RMAFC officials were received by the Deputy Governor, Rear Admiral John Jonah (retd.), on behalf of Dickson.
Omiri said the sector was expected to contribute more with the ongoing efforts of the Federal Government to diversify the nation’s economy.
He said Bayelsa got N1.2m as its share of the 13 per cent derivation from the non-oil sector (solid minerals) as the state currently occupied the 36th position on the table of non-oil remittances to the Federation Account as of June this year.
Omiri, however, noted that the state could move up to an appreciable position and increase its share of the 13 per cent derivation from non-oil revenue if all leakages were blocked, with illegal miners captured into the tax net.
He said, “The team is in the state to verify and ascertain all the mining companies, as well as the number and duration of mining leases issued to each operator.
“We are also here to determine the means of increasing revenue generation from mining and solid minerals exploration, among other terms of reference.”
In his remarks, Dickson described the ongoing nationwide exercise embarked upon by the commission to ascertain the sources of revenues accruable from the non-oil sector to the Federation Account as a step in the right direction.
The governor, who implored the team to do a thorough job, expressed optimism that the exercise, if properly conducted, would open new vistas of opportunities for all the state governments to discover and harness alternative sources of revenue.
While expressing the belief that every state was endowed with mineral resources, the governor said the current economic recession was worsened by the long period of over-dependence on revenue accruing from the oil sector.
He also said the lack of political will to explore and exploit other natural endowments, including agriculture, to boost the nation’s economy was another factor.
Dickson assured the team of the state’s support, urging the members to engage the appropriate government ministries, agencies and departments, as well as other stakeholders in the course of the exercise.