Nigerians have raised concerns over alleged surreptitious moves by the National Assembly to repeal the Nigeria Liquefied Natural Gas Limited Act, which took more than 30 years to come into fruition. The NLNG is part owned by the Federal Government of Nigeria, represented by the Nigerian National Petroleum Corporation (49 per cent); with Shell Gas BV (25.6 per cent); Total LNG Nigeria Limited (15 per cent); and Eni International (10.4 per cent) as the other shareholders who together own 51% equity.
The NLNG Act has been pivotal to the commencement of the gas company from which Nigeria had raked in over $33bn from its initial investment of $2.5bn. The Act enabled the company to grow from its original two trains to six trains, creating an asset base of $19bn, 49 per cent of which the Federal Government owns. The Central Bank of Nigeria governor, Godwin Emefiele, was the first official to propose disposal of part of government equity holding in some national assets to raise about $10 billion funding for infrastructure development.
His pronouncement followed a kite flown by businessman, Aliko Dangote, in which he urged the Federal Government to sell some national assets, including the NLNG. But various groups opposed the proposal and raised the alarm over the detrimental impact of this move on the economy and investors confidence in the country. They argued that Nigeria, as a country, would be faced with litigations from NLNG investors and shareholders, which would negatively affect the reputation of the nation at the international level.
The repeal of the Act, may also lead to capital flight worth billions of dollars and a loss of more than 18,000 jobs both in the upstream sector and other areas of the economy. The NASS may think that repealing the Act in order to make it easy to sell this critical national asset is the right thing to do to as part of measures to bail the economy out of recession, but economists and other stakeholders are insisting that selling the NLNG would not solve the problem. This, they argued, was a myopic solution to the economic challenges facing the nation.
The out-gone NLNG Managing Director,Babs Omotowa, sounded a warning to the nation about the implications of selling this golden goose, when the nation could continue to enjoy its precious golden eggs for years to come. According to him, tinkering with the Nigeria LNG Act of 2004 will violate bilateral agreements with international investors as well as cost the country a huge $25 billion in foreign direct investment and fines potentially running in billions at the International Courts.
Omotowa, who managed the company for five years, handed over to his successor, Tony Attah on September 1, 2016. Speaking during an address to top executives in the oil and gas industry in Nigeria, Omotowa said NLNG, through its expansion growth programme, which involves the expansion of production capacity of the LNG plant in Bonny, Rivers State with a Train 7 and 8, could attract $25 billion, create 18,000 construction jobs, help to further reduce gas flaring and generate between $1 billion and $2 billion additional revenue to the country in taxes and dividends.
He said, “In a period of huge youth unemployment and need for more revenue, this should really be a cause we should have all hands on deck for, especially as NLNG has demonstrated its pedigree having attracted $15 billion in foreign investment, grown from a 2 Train to a 6 Train plant in record time, contributed to reducing gas flaring from 65% to below 20 per cent, delivered $33 billion to Nigeria from a $2.5 billion investment. “ This potential $25 billion in investment, creation of 18,,000 jobs, reduced gas flaring, etc. is being put in jeopardy by attempts to renege on promises that Nigeria gave to foreign investors that enabled the historical $15 billion investment historically attracted.
“Whilst the Executive has demonstrated full commitment to the need to keep the sanctity of the NLNG Act, the attempt by the Legislature to amend the clear promises made to investors will cost the country quite a lot. “Apart from the relocation of investments in excess of $25 billion to other countries, Nigeria will also be opened to fines running into billions of dollars in International Courts for reneging on agreements. Such incentives in the NLNG Act are normal in the LNG world including in Qatar, Oman, Malaysia, Angola, etc. Even in Nigeria, more generous incentives are contained in legislation such as the Oil & Gas Free Trade Zone Act. “This period of low oil price is not a time to jeopardize Nigeria’s long term interests by showing Nigeria as a place not to be trusted, and projecting our business environment as not conducive for investments.”
Omotowa, further averred that the intervention of the NLNG, more than any other single factor, led to the progressive decline in Nigeria’s gas flaring profile over the years, from well over 65 per cent in the 1990s, to less than 20 per cent today. “Therefore, aside from the fact that the company is earning revenue for the Federal Government and its other shareholders, it is cleaning up the Niger Delta environment in the process,” he added.
Also supporting the retention of the Act was the Revenue Mobilization Allocation and Fiscal Commission, which frowned on proposals by some prominent Nigerians for the federal government to sell the multi-billion dollar firm to raise funds to reflate the economy. Citing the Nigeria’s oil and gas industry 2013 Nigerian Extractive Industries Transparency Initiative audit and financial report, the Commission said about $12.9 billion was received by the NNPC from the NLNG, warning that assets like the NLNG and other strategic national resources should not be sold to meet short-term financial obligation.
Rather than accept the proposal, the Commission said in the alternative, it was strongly in support of borrowing from international financial institutions like the International Monetary Fund and others. It said, “The revenue from these assets could be used to amortize the loans over an agreed period; it should be noted that after the amortization of the loans, those assets would still be owned by the Federation in addition to their regular dividends and revenue.”
The Commission further said rather than selling off such vital asset generating huge funds for the federation, wealthy Nigerians, like billionaire businessman, Aliko Dangote, should be encouraged to set up their own LNG projects, considering the huge reserves of natural gas in the country.
Nigeria’s natural gas is regarded as one of the best in the world with low hydrogen sulphide or carbon dioxide impurity levels.
The Nigeria Labour Congress President, Ayuba Wabba, also opposed the calls for the disposal of the NLNG and other national assets, describing it as a calculated attempt to appease political cronies and business moguls close to the government. He said, “Investment in the NLNG and Joint Venture oil upstream operations are profitable and represent potential sources of revenue in the future”. For example, it was the accrued dividend payments from NLNG shares that provided the resources for the first bailout to states when many states could not pay salaries under this present regime. It is on record that dividends, in excess of $1 billion have accrued annually to the national coffers from the gas company over the past 12 years. “These calls are more worrisome when one considers the history of sovereign assets divestiture in the past. Where are the proceeds from sales of the assets in the power sector for instance?”
Wabba, who queried the manner the proceeds from the power sector sales was spent, said the proposed sale of the NLNG, was meant to benefit favoured individuals and surrogates of the ruling elite without any appreciable benefits to Nigerians. “While we recognise that there is need to take urgent steps to stem the dwindling fortunes of the national economy, we are convinced that the proposals in question will further weaken the revenue capacity of government in the future and weaken the economic base of the nation,” he stated.