What’s The Sense in The Nigeria LNG-NIMASA Row?

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Nigeria as a country is full of absurdities specially perpetrated by people in authourity and this is typified by the ongoing row between the Nigerian Liquefied Natural Gas Limited (NLNG) and the Nigerian Maritime Administration and Safety Agency (NIMASA) over the issue of non-payment of mere levies and charges which NIMASA claims are due to it from NLNG.

Nigeria LNG is owned by four shareholders- the Nigerian Government represented by the Nigerian National Petroleum Corporation, NNPC (49 per cent); Shell Gas BV (25.6 per cent); Total LNG Nigeria Limited (15 per cent); and Eni International (Nigerian Agip) (10.4 per cent).

 NIMASA is a federal government agency. And the same federal government owns almost half of NLNG and therefore gets nearly half of its profit which runs into billions of Naira or even dollars. 

What is NIMASA trying to prove? And if actually this is a tax or rather revenue generation issue, are there no better ways to engage companies such as NLNG than this senseless muscle flexing?

This dispute between NIMASA and NLNG actually started as a result of perceived conflict in the enabling Acts establishing both organizations- The Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act on one hand and the NIMASA Act; Merchant Shipping Act; and Coastal and Inland Shipping Act on the other

What is the case? NIMASA is insisting that certain levies were applicable to NLNG but the company has refused to pay as it’s insisting it was exempted from such levies and charges by virtue of the NLNG Act.

According to Nigeria LNG Limited, the company is duly protected by the provisions of the NLNG Act against the payment to NIMASA of the Sea Protection Levy, the three per cent freight levies on cargo exports shipped by NLNG; and that the two per cent Cabotage Levy on LNG carriers is inapplicable because the company’s LNG vessels are not involved in coastal trade or cabotage.

NIMASA had filed a suit against NLNG in 2010 claiming entitlement to these levies. After preliminary proceedings were taken and concluded, and the matter was ready for hearing, NIMASA filed an application to withdraw the suit on May 3, 2013 and then resorted to self-help by blocking the Bonny Channel preventing entry and exit of NLNG vessels citing NLNG’s disregard and unwillingness to abide by the country’s maritime laws, especially the section of the NIMASA Act that mandates payment of levies based on the gross tonnage on exports and imports and the cabotage law.

On June 21, two NIMASA boats with 15 naval officers on board ordered that one NLNG vessel – LNG Imo, and one chartered vessel, Torm Thames, should remain at NLNG’s loading bay, while another NLNG vessel- LNG Oyo, should remain outside the Bonny Channel until further notice.

NIMASA subsequently issued ship detention orders on June 22, detaining three NLNG ships – LNG Enugu, LNG Oyo, and LNG Imo and also barred the three vessels from accessing or leaving the NLNG’s loading bay.

Does it not occur to NIMASA that denying NLNG vessels access to their loading points in Bonny Island would results in a huge loss of revenue to the federal government to such an extent it will dwarf the levies and charges NIMASA is pursuing? Preventing NLNG chartered vessels in and out access to their destination in addition to the  attendant huge financial losses, goes with very serious reputational damage to Nigeria as an unserious and unsafe country in the eyes of the international investors.

Due to the blockade, the gas company on June 28 declared force majeure on gas exports, an inability to fulfill contractual obligations to due to circumstances beyond its control.

Here is it: This unnecessary flex of muscle by NIMASA is said to cost the NLNG $22 million dailyin penalties for default, demurrage for chartered LNG vessels and the actual cost of the gas that would have been delivered. And so for the 18 days this blockade lingered, the NLNG lost about $396 million. And of this amount, the federal government will pay almost half of it.

Meanwhile, NIMASA said it decided to seal-off access to the Nigerian LNG Bonny facility because to collect the cumulative levies of few million dollars which the gas company allegedly refused to pay. Is it not funny?

 If the dispute between NIMASA and NLNG was over non- payment of taxes to the Federal Inland Revenue Service and all other relevant government agencies, that would have been okayed. But this case of NIMASA is that its demand is not an income tax or a derivative of income tax, but charges and levies which both parties are yet to establish in the court whether the enabling Act establishing the NLNG continuously exempted it from such.

The danger is that this sort of dispute creates avenues for corruption and manipulation of our national interests by the NLNG because whatever they claim they are losing as result of the blockade, nobody can contend with them.

It is very unfortunate that most of our people in top position in government and its agencies are so myopic in their views and cannot extrapolate how actions and pronouncements in their little niches can affect issues and projects across the economy. How can this dispute between the NLNG and NIMASA be allowed to degenerate to its current level especially now the country is on its knees begging stakeholders to rejig interest in the Brass LNG Project that has remained at eternal planning stage? If a federal government agency can treat the LNG Project we have on ground with such gaucherie, what signal are we sending to the now obviously- lukewarm and shale gas-distracted investors in the Brass LNG Project? Why should this dispute be allowed to degenerate to this level when our Gulf of Guinea neighbours, Angola and Mozambique are opening up their frontiers with mouth-watering incentives to LNG investors?

Why should the Nigerian government allow the misunderstanding between NIMASA and the NLNG deteriorate to the level of sealing-off egress and ingress of chartered LNG vessels and even detaining some vessels? What signal are we sending to the international community- that we are a nation that does not adhere to the rule of law?

Where were the supervising Ministers to the ministries/agencies in this dispute? Is the disagreement between NLNG and NIMASA so big that it was impossible for the Ministers of Petroleum Resources, Transport, and Justice (the Attorney General of the Federation) to sit down, if necessary, with the President to resolve without recourse to the ongoing very unnecessary court cases if for nothing, at least to avoid sending wrong signal to the would-be stakeholders in the Brass Project?

As the Nigeria LNG Limited has often claimed that the issues it has with NIMASA over payment of any levy, charge or impost has little to do with the amounts involved, but more with the principle of the rule of law, so that it can safeguard its international business which rests squarely on its reputation as a law abiding company, the Federal Government with its agencies should equally do well to protect its reputation in the global community as a country that has rules and obeys them.

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(IFEANYI IZEZE is an Abuja-based Consultant and can be reached on: iizeze@yahoo.com

 

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