The Nigeria Extractive Industries Transparency Initiative (NEITI) yesterday commended the Federal Government for terminating the cash call payments policy it adopted on its Joint Venture Agreements (JVAs) with major international oil companies for crude oil exploration and production in Nigeria, saying the practice had taken a lot of financial resources from the country’s pocket.
It said in a statement which was signed by its Director of Communications, Dr. Orji Ogbonnaya Orji in Abuja, that it was relieved the country finally decided to exit from this funding arrangement which it stated had lasted for over 40 years.
The agency equally noted that it was pleased with the endorsement of the Federal Executive Council on the development. The federal government on Thursday announced its exit of the cash call policy with major oil companies in the country, thus freeing itself of the financial obligation to jointly fund oil production activities.
Even though the government had often failed to meet its financial obligation in the arrangement, the NEITI stated that over the period of 2009 and 2013, the country spent N2.3 trillion in funding its joint venture cash call obligation. It stated that another $16.2 billion was also spent by the country on the same purpose at various times.
“NEITI applauds this landmark decision as most timely, bold, courageous, and a huge relief given the avoidable huge debt burden which JV (joint venture) cash payments have imposed on the nation over these years.
“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,” it said in the statement.
“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 $3.10 billion and $2.98 billion respectively,” NEITI added.
It further explained: “NEITI reports equally expressed concerns on the process lapses in the management of the cash call and the wider implications to huge revenue leakages.
“The decision of the Federal Government to terminate this funding arrangement with major oil companies is therefore a bold step in the right direction. One immediate benefit is that it will free the country from complex financial burden and allow the resources to be channeled to other national priorities.”
Commending the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu for taking up the initiative, NEITI said it was pleased that an important finding and recommendation outlined in its independent audit reports ignored over the years has been implemented as part of the on-going reforms in the oil and gas sector.
“We commend the Minister of State for Petroleum Resources, Ibe Kachikwu, and the management of the NNPC for responding adequately to this remedial issue in NEITI reports in the overall interest of the nation,” it noted.