The Nigeria Extractive Industries Transparency Initiative (NEITI) has commended the
Federal Government’s decision to terminate cash call payments on Joint Venture
Agreements with major international oil companies.
According to the Executive Secretary Waziri Adio, “NEITI is relieved that the exit from
this funding arrangement which has lasted over forty years has received the
endorsement of the Federal Executive Council. NEITI applauds this landmark decision as
most timely, bold, and courageous and a huge relief given the avoidable huge debt
burden which JV 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”.
NEITI Reports equally expressed concerns on the process lapses in the management of
the Cash Call and the wider implications to huge revenue leakages. For instance, the
Reports disclosed that from 2009 to 2013, NNPC had made 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. 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 $3.10billion and $2.98billion
respectively.
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. Also, with the Federal
Government’s decision, an important finding and recommendation outlined in the NEITI
independent audit reports ignored over the years has been implemented as part of the
on-going reforms. The Minister of State for Petroleum Resources, Ibe Kachikwu, and the
management of the NNPC also received NEITI’s commendation for responding
adequately to this remedial issue in NEITI Reports in the overall interest of the nation.