The Revenue Mobilization Allocation and Fiscal Commission ( RMAFC ) has commended the Federal Government on the approval given by President Muhammadu Buhari to the Nigerian National Petroleum Corporation ( NNPC ) to enable it undertake a review of all Production Sharing Contracts ( PSCs ) between it and its various partners to reflect the current realities in the industry.
In a press statement signed by Mr. Ibrahim Mohammed, RMAFC’s Spokesperson, the Commission recalled that it had earlier thrown its weight behind the proposed review of the PSCs approved by the Federal Executive Council ( FEC ) at its meeting held on Wednesday, 13th December, 2017.
The statement quoted the RMAFC Acting Chairman, Shettima Umar Abba Gana stressing that “the Commission viewed the move by the FG as a welcome development and commendable as the Commission, that has the constitutional responsibility of monitoring revenue accruals into and disbursement of revenue from the Federation Account had been consistently calling for the review of these contracts for the past seven (7) years adding that these contracts had not been reviewed nine (9) years after both conditions stipulated in the relevant provision of the Act have elapsed, thereby leading to the huge revenue loss of about $21 billion by the Country in the last 20 years”.
It would be recalled that the Minister of State for Petroleum, Dr. Ibe Kachikwu, recently announced that the government had approved steps to amend Section 17 of the Deep Offshore and Inland basin Production Sharing Contracts Act, 1999 which specifically provides that the 1993 PSCs should be reviewed once the price of crude oil exceeds $20 a barrel or fifteen (15) years after the contracts i.e. 2008. To this end, the Commission advised that Government should take appropriate steps to ensure the review of these agreements with due diligence.
Similarly, RMAFC recalls that in April, 2016, it drew the attention of Government to the fact that three (3) main contract types namely Joint Venture, Production Sharing and Service Contracts were in use in the Nigerian Oil and Gas Industry. Having carefully examined the fiscal terms of each contract and the associated revenue inflow into the Federation Account therefrom, the Commission lamented that the PSCs as represented by the 1993 PSC’s which should have been renegotiated as far back as 2008 has yet to be done, thus causing the Federation Revenue losses due to the unfavourable terms of the contracts.