The humongous level of indebtedness of oil and gas companies to the Federal Government was clearly disclosed in the recently released 2020 Nigeria Extractive Industries Transparency Initiative (NEITI) audit report. The revelation of the report that as many as 51 oil and gas companies owe as much as $3.17 billion is quite disturbing. This is mind-boggling given that the Nigerian oil and gas industry is the cash cow and key mainstay of the economy. According to the report unveiled by the Executive Secretary of NEITI, Orji Ogbonnaya Orji, the indebtedness covers specific revenue streams such as royalty oil, royalty gas, concession rentals, petroleum profits tax, company income tax, education tax, value added tax and withholding tax among others.

One good thing about the report is that the number of defaulting firms fell from 77 in 2019 to 51 in 2020. That is something to celebrate. However, though the number of defaulting companies in the sector dropped, the preponderance crude oil theft and general low level of transparency in the sector cannot be wished away. This is a sort of indictment to the Department of Petroleum Resources (DPR), which is the main regulatory agency in the sector. In addition, the Federal Inland Revenue Service (FIRS) cannot be exonerated for the lack of adequate collection of taxes and levies from these defaulting companies. These agencies of government need to rise to the occasion in performing their statutory functions in the industry.

The NEITI report indicated that the country’s earnings from the oil and gas sector of $34.22 billion earned in 2019 declined by 40 per cent to $20.43 billion in 2020. Hence though the number of defaulting companies fell from 77 in 51 in 2020, the earnings from oil over the same period fell. This raises some questions in this regard. Does it mean that the improvements recorded in the reduction of defaulting companies to 51 had no effect of revenues accruing to the Federation from this source? The report also indicated that total crude oil production declined between 2019 and 2020 by as much as 12 per cent. Does this have to do with the reported overwhelming incidence of the largely undocumented crude oil theft in the oil sector? News about the pervasive theft of crude oil in the Niger Delta region of the country is quite rife and thus calls for concern.

This is particularly so when the Organisation of Petroleum Exporting Countries (OPEC) has increased the quota of production for member countries with Nigeria continually unable to meet its quota. The DPR needs to explain why this anomaly is allowed to persist for a long time. The other issue is the utilization of the domestic crude oil allocation and consumption by the Nigerian National Petroleum Company Limited (NNPC) under the Direct Sale Direct Purchase (DSDP) arrangement. Are these accounted for, given that the four refineries in the country are not producing at all? Has the NNPC forfeited this allocation or is this one of the channels of leakages in the accountability process in the oil and gas sector?

The public presentation of the report by NEITI, which has the semblance of a “name and shame” strategy, somehow exonerates it from the blame on the improprieties in the sector. The public presentation of the list of defaulters is value adding to the sanitization of activities in the oil and gas sector. According to NEITI, this public disclosure of companies’ liabilities to the Federation is in line with their national mandate in fulfillment of their obligation as a member of the global Extractive Industries Transparency Initiative (EITI) and not necessarily against the companies. Whatever be the case, NEITI needs to continue along this noble path as the Nigerian economy can do with much more revenue in servicing its budgets in the enhancement of national development goals. The assurance of NEITI to the defaulting companies is also reassuring, in that it will continue to support the companies in whatever means necessary so that they can meet up with their obligations in paying their taxes and levies among others

There are many questions that need answers in the sector and what the NEITI report has just done is highlight a few of these for public attention. One of the major problems in the management of the Nigerian economy is the poor management of the oil and gas sector with so many leakages present both in the upstream and downstream segments of the industry. Some of these issues are what the new Petroleum Industry Act seeks to address but the question is to what extent the operators in the sector, starting from the NNPC would allow the Act to be fully operational. Overall, Nigeria needs more revenue to sustain its economy and leakages clearly identified need to be blocked to assist.

With lots of public indebtedness both locally and externally spiralling particularly since the onset of the Buhari administration, debt service burden on the economy can be ameliorated with more revenue being harvested from the sector.

In recent times, the International Monetary Fund (IMF) has mandated the Federal Government to pay a total of $3.51 billion between 2022 and 2026 to offset its recent $3.4 billion loan to the country. If leakages and lack of remittances to the Federation Account from the oil and gas sector persist, it would be more difficult for the country to meet these obligations. In a nutshell, the NEITI needs a pat on the back for raising these issues that have tremendous implications for the country’s economic well-being.