STAKEHOLDERS in the oil and gas industry have scored the Federal Government high on oil and gas sector reforms which the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has introduced.
Speaking at a Tax Breakfast Meeting at the weekend organised by a leading global financial and consultancy firm, KPMG Nigeria, the Managing Director/Chief Executive Officer, Seplat Petroleum Development Plc, Mr Austin Avuru, stated that reforms introduced by the government, especially in areas of Joint Venture Funding is a good step in the right direction.
The Federal Government had entered into negotiation with stakeholders on how to discard the former JV funding scheme by abolishing the scheme and agreed on a new framework which is more efficient than the JC funding scheme. Government was owing about $7 billion and the inability of the government to pay its counterpart funding has stalled financing of some oil and gas projects.
Avuru opined that the government should partner with private and development capital to,leverage and catalyse resources for growth.
He said with production forecast of 2.2 million barrels per day, an oil benchmark of $42.5 per barrel, government’s average daily revenue would be $93.5 million per day. He also said the new governance and fiscal framework will drive efficiency and promote ease of doing business in Nigeria.
Avuru, however, urged the government to promote efficiency in other sources of additional funding which include royalty recoveries, early license renewals and marginal field licenses. He also urged the government to stop throwing money at problems that are structural. According to him, “the N56 billion budgeted for three power projects should have been channeled to build other infrastructure. N20 billion was budgeted for rural electrification in universities, N18.7 billion for Mambilla Hydropower and N7.1 billion for power evacuation from Kashimbila Hydropower.
Avuru blamed liquidity crisis for shortage of private capital in power sector. He stated that gas projects have been stunted over payment uncertainty, 2000MW of power plants have been shut in, new power projects stunted and existing 6GW capacity only delivering 3GW.
On the way forward, he urged the Federal Government to minimize spending in oil and gas sector, deregulate the downstream sector, sell non-performing assets, minimize capital spending in power sector, solve liquidity problems in the economy and attract private capital.
He said if government had sold the refineries in 2007, the country would properly have made $2 billion, adding that if they are sold today, the country “will be lucky to make $1.5 billion. But if you put them up for sale after the Dangote Refineries have been commissioned, you won’t make $300 million and they would be worthless. So, when people are that we shouldn’t sell those assets, I don’t understand what they mean.”
Earlier, the National Senior Partner, KPMG in Nigeria and Chairman, KPMG West Africa, Mr Kunle Elebute, bemoaned the delay in passing the national budget yearly, saying that the way and manner the executive and legislature go about the budget defeats the essence of having the document.
On his part, a partner and the Head, Tax, Regulatory and People Services, KPMG Nigeria, Wole Obayomi, opined that for the government to have budgeted 2.5 per cent Gross Domestic Product (GDP) growth rate, it implies that only 4.05 per cent actual growth would be achieved out of recession. Obayomi said 2017 budget policies and strategies fall short of ambitious growth rate and the tax administration in Nigeria is in dire need of reforms.
He said time has to use annual budget as instruments of fiscal reform to achieve the revenue objectives of the government. He opined that timely presentation of the budget by the Executives to the National Assembly and speedy passage of the budget cannot be over-emphasised.