NLNG: Trying to kill the goose that lay the golden egg

Our capacity to self-destruct in Nigeria is legendary. It is as if our national philosophy is: Why should anything be allowed to work seamlessly if it can be impeded. Nothing exemplifies this more than the attempt by the National Assembly to surreptitiously amend the Nigerian Liquefied Natural Gas (NLNG) Act primarily to force the company to remit 3 percent of its annual budget as funding to the Niger Delta Development Commission (NDDC). Meanwhile, this is a battle the NDDC has fought since 2005 at the courts and lost right up to the Supreme Court. Interestingly, the NDDC, lustful politicians and special interests are now trying to gain through the back door what they legitimately lost at the Supreme Court. This is tragic and will come with severe consequences for the country.

True, the NDDC establishment act, specifically section 14 (2) (b), stipulates that 3 percent of the total annual budget of any oil producing company operating onshore and offshore in the Niger Delta area, shall be paid into the funds of the Niger Delta Development Commission for the development of the Niger Delta region. However, the Nigeria LNG (Fiscal incentives, Guarantees and Assurances) Act clearly exempted the NLNG from such contributions or payments and that has been established in all the court judgements up to the Supreme Court in 2011. Why the National Assembly and the NDDC keep insisting the NLNG, a gas company that only buys gas from upstream companies, must pay the levy even after all the parent companies of the NLNG dutifully comply with the law remains a mystery.

NLNG largely succeeded due to the provisions of the NLNG Act, which gave investors the confidence to invest in the country. Why the lawmakers want to unilaterally amend the Act to compel the NLNG to pay the levy remains unclear. Already, all upstream companies, including the parent companies of the NLNG pay this levy.

Any attempt to force the NLNG to compulsorily pay this levy via an amendment of the NLNG Act will go 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. Consequently, the agreement has been adhered to by all Nigerian governments since inception and that has accounted for the huge success of the NLNG.

But like in all cases Nigerian, politicians, in cohort with special interests, are attempting to thwart the judgements of the courts by rushing an amendment to the NLNG Act and endangering the continued survival of the NLNG and future investments in the process.

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.” The company has also paid over US$5.5billion 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. Despites its international shareholder base, the NLNG is a wholly Nigerian company with 100% Nigerian management, 95 percent Nigerian workforce and is the fourth largest supplier of LNG in the world.

Perhaps, the legislators championing the amendment of the Act need to realise that any amendment to the act will inadvertently mean a potential loss of foreign investment of US$ 25 billion in respect of Train 7investment (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 legislatures, beyond the 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% in 1999 to about 20% 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 legislatures are planning to do, will exacerbate the problem of gas flaring with the attendant negative impact on the environment in the region.

Our leaders cannot be junketing round the world claiming to be seeking for foreign direct investments and the moment such investments arrive, we do everything to sabotage the investments through greed and an unhealthy desire to benefit financially from every successful endeavour in Nigeria. the National Assembly must end this charade immediately.