NEITI lauds FG over proposed exit from Joint Venture cash call.
The Nigeria Extractive Industries Transparency Initiative (NEITI) has applauded the decision of the Federal Government to terminate cash call payments on Joint Venture Agreements with major international oil companies.
Recall that in his 2017 budget speech, President Buhari made it clear that the Federal Government will no longer fund JVs from the Budget from January 2017.
Buhari said, “In addition, we will continue our ongoing reforms to enhance the efficiency of the management of our oil and gas resources. To this effect, from January 2017, the Federal Government will no longer make provision for Joint Venture cash-calls. Going forward, all Joint Venture operations shall be subjected to a new funding mechanism, which will allow for Cost Recovery. This new funding arrangement is expected to boost exploration and production activities, with resultant net positive impact on government revenues which can be allocated to infrastructure, agriculture, solid minerals and manufacturing sectors.”
In a statement in Abuja The Director of Communications Dr. Orji Ogbonnaya described NEITI as an organisation saddled with auditing the activities of agencies in the extractive industries and while he endorsed the new funding template, said that the proposal to abandon the Joint Venture cash call which has lasted for over forty years will get the blessings of the Federal Executive Council.
NEITI went further to state that the new arrangement will be a relief for the nation’s financial system, and applauded it as a timely, bold, courageous and landmark decision that will reduce the debt burden imposed on the of the Federal government over the years.
The statement reads, “We note that all NEITI 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.
“For instance, NEITI Reports disclosed that from 2009 to 2013, NNPC had made a total Cash Call payments of N2.4 trillion and another $16.2 billion respectively as Cash Calls obligations for Joint Venture operations in the oil and gas industry.
“NEITI Reports equally expressed concerns on the process lapses in the management of the Cash Call and the wider implications to huge revenue leakages.
“From NEITI Reports, a breakdown of the naira components of the payments alone shows that in 2009, the country paid N460.24 billion while Cash Call for 2010 stood at N441.44 billion. 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 N492.81billion 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. This marginally increased to $3.78 billion in 2011 while $2.60 billion was spent by the nation on Cash Call. The total Cash call payments for 2012 and 2013 were $3.10billion and $2.98billion respectively”.
They described the latest move by government as a right step in the right directions which has been a major recommendation from NEITI over the years, adding that it will free the country from complex financial burden, seal the conduit pipe where the countries resources are drained and allow the resources to be channelled to other national priorities.
