A Review of the Nigerian Energy Industry

NLNG pays NIMASA $140m, continues legal suit

Nigeria LNG tanker12 July 2013, Sweetcrude, Port Harcourt – Nigeria Liquefied Natural Gas Ltd, NLNG, has agreed to pay to NIMASA, on an “under protest” basis, various levies which NIMASA claims are overdue statutory payments by NLNG. Total amount involved is $140m to cover arrears in these levies as claimed by NIMASA, having earlier made an initial payment of $20 million. In addition, NLNG has agreed to pay, again “under protest”, the levies as they become due until a judicial ruling on whether these payments are justified can be obtained.

Despite a court order to the contrary, NIMASA undertook a blockade of NLNG operations since 21st June 2013 causing production to cease. This has now led to colossal losses to NLNG, and more importantly to Nigeria.

Owing to the NIMASA blockade which persisted in spite of court orders, the company has lost revenues of over N76 billion ($475 million), 65% of which belongs to the Federal Government, which has thus lost about N50b in dividend, taxes, etc.

The blockade had also led to scarcity of cooking gas with attendant spiraling cost and worsening hardship on the populace, reduction of domestic gas to power, shutdown of offshore and onshore production facilities, etc. In addition it has caused huge reputational damages to NLNG and Nigeria.

As a result of NLNG agreeing to make these payments, albeit under protest, NIMASA has agreed to lift the blockade of NLNG ships immediately. NLNG is working to resume operations as quickly as possible.

“We feel we have no other option than to now make these payments under protest,” said NLNG Managing Director, Babs Omotowa. He said, “In doing this, we have taken into account the overriding national interest; in particular to stem the huge financial and reputation loss the country has suffered as a reliable LNG supplier, a destination for foreign investment and a nation of the rule of law.”

NLNG still strongly believes that it has a very strong case to be exempt from the NIMASA levies under the terms of the NLNG Act and will continue with its substantive case in court to obtain a judicial determination of whether or not such levies are due to be paid. It is for this reason that the payments that NLNG is making will be made on an “under protest” basis.

NLNG has always insisted that as a Nigerian company involved in a global business it must always act in conformity with the law, at all times. It had often clarified that the dispute with NIMASA has absolutely nothing to do with tax as misconstrued in some quarters, but with levies which the laws explicitly exempts it from paying.

According to Mr Omotowa, “Our position has nothing to do with how much NLNG is being charged by a relevant agency but with the legality or otherwise of such a charge or levy, in order for us to ensure that all our payments are made within the ambit of what is lawful”.

“As a law abiding company, NLNG has always paid its taxes, including those due after its tax holidays since 2009. It therefore has no issues with legally required tax payments but with levies, from which it is clearly exempt by virtue of the NLNG Act,” he added.

NLNG has paid to the Federal Government since inception over $16 billion in dividend, taxes, etc, as well as paid the upstream gas suppliers over $15billion of which the Government’s share is over 55%.

NLNG is owned by four shareholders, namely, the Federal Government of Nigeria, represented by the Nigerian National Petroleum Corporation, NNPC (49%), Shell Gas BV (25.6%), Total LNG Nigeria Limited (15%), and Eni International (N.A,) N. V. S. a. r. l (10.4%).
*NLNG press statement

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