NLNG: National Assembly think again!
The House of Representatives on May 9 passed the bill seeking to compel the Nigerian Liquefied Natural Gas Limited (NLNG) to pay 3 percent of its annual budget into the coffers of the Niger Delta Development Commission (NDDC). The bill, sponsored by Minority Leader, Leo Ogor, sought to unilaterally and illegally amend Section 7 of the principal act by inserting a dubious section 7b which provides that “Notwithstanding section 7 or any other provision of this Act, the Nigeria Liquefied Natural Gas Limited shall pay 3% of its total annual budget to the Niger Delta Development Commission Fund as required by section 14 subsection 1 and 2b of the NDDC Act establishment Act, 2000”. The House will now transmit the bill to the Senate for concurrence.
To be sure, this is expressly against the contract willingly entered into by Nigeria and the other stakeholders of the NLNG covered by Bilateral Investment Treaties (“BITs”) with France, The Netherlands and the United Kingdom. It basically involves incentives, concessions, guarantees and assurances by the Nigerian government and reaffirmed in Letters of Assurance to lenders for the Nigeria LNG Trains 4 and 5 expansion to retain agreed fiscal and security regimes of the investment and not to levy any tax inapplicable to companies nationwide. Nigeria also agreed not to amend the NLNG Act without the express agreement of the other stakeholders. Since then, the agreement has been adhered to by all Nigerian governments.
To be sure, the NLNG, which was incorporated after over 35 years of unsuccessful efforts by successive Nigerian governments to attract foreign investors in the LNG sector, has been an outstanding success. “From the initial investment of US$6.0 billion at its incorporation on May 17, 1989, the NLNG now has an asset base of over $11 billion, generated over $90 billion in revenues and has contributed over US$15 billion to the Nigerian government in dividends over the last 12 years,” according to a source. The company has also paid over US$5.5 billion in taxes comprising Companies Income Tax, Tertiary Education Tax, WHT, VAT and other payments to government including PAYE, state and local government taxes, as well as regulators’ levies and fees totalling over N51 billion. Despite its international shareholder base, the NLNG is a wholly Nigerian company with 100 percent Nigerian management, 95 percent Nigerian workforce and is the fourth-largest supplier of LNG in the world.
My thinking is that we should be proud as a country that at least one of our enterprises is working and really flourishing as a business. But no, we are not! We are more concerned about our immediate pecuniary interests than about business sustainability, investments and good image. As I argued on this page sometime in February, “Regrettably, it is always the case in Nigeria that once investors come in and their investments begin to flourish, Nigerian regulatory agencies or even governments begin to heckle these businesses seeking to extort money or subject them to hitherto unknown, un-agreed, hurriedly-enacted and ultimately unjust laws and regulations in the name of protecting national interests. This is giving us a bad name, making the country unpredictable and thus, unattractive for investments. Yet the song on the lips of every government – and they are known to travel to the ends of the earth soliciting for it – is that of seeking for foreign investments. How tragic!”
The dispute over the payment of the 3 percent annual budget to the NDDC has been a long-standing one. The NDDC and the National Assembly are aware that the BIT setting up the NLNG expressly forbids the Nigerian government from levying the company any tax inapplicable to companies nationwide. If they desperately want a review, they should call all the shareholders together to seek a review. But no, they want to do it the Nigerian way.
Just so we know the history, the NDDC went to court in 2005 to challenge the legality of the exemption. From 2005 to 2011 the NDDC traversed the courts right to the top (Supreme Court) and in all instances, the courts affirmed the right of the NLNG not to pay the levy. But like in all cases Nigerian, politicians and special interests are trying to get through legislative fiat what they failed to get through the courts. More like going through the window when the door is closed to you.
But their actions are only endangering the continued survival of the NLNG and future investments in Nigeria. Perhaps the National Assembly needs to be reminded that any amendment to the act will inadvertently mean a potential loss of foreign investment of US$25 billion in respect of Train 7 and 8 of the NLNG (US$15 billion by the upstream, and US$10 billion for construction). This is not to talk about the 18,000 construction jobs that will be lost in the process.
The bigger picture that should be uppermost in the minds of the legislature, beyond mere pecuniary interests, is the larger role the NLNG plays in ensuring environmental health and sustainable development in the region. The NLNG purchases gas which would have otherwise been flared and has almost single-handedly led to the reduction of gas flaring from about 65 percent in 1999 to about 20 percent currently. With the required investment, NLNG is capable of reducing that figure even further with the completion of the Train 7 Project. Halting investments and harming the continued existence of the NLNG, like the legislature is planning to do, will exacerbate the problem of gas flaring with the attendant negative impact on the environment in the region.
At a time other oil and gas producing countries are crafting investment-friendly policies and competing to attract badly-needed investments in LNG, Nigeria is in the process of uncoupling one of the most successful investments it has ever made and received just to satisfy some selfish pecuniary desires of some individuals and groups.
CHRISTOPHER AKOR