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NEITI to recover $553 million underpayments from oil firms — NEITI Boss

By Yemie Adeoye & Luka Binniyat
As a fallout of the just concluded 2005 audit of the oil and gas sector by the Nigerian Extractive Industry Transparency Initiative (NEITI), Nigeria will this year recover $553 million from oil firms who underpaid various oil taxes in 2005.NEITI said it would prosecute any firms that refuses to pay.

In an exclusive chat with Vanguard yesterday in Abuja, the Executive Secretary (ES) of NEITI, Mallam Haruna Sa’eed, said that the underpayment was not as a result of deliberate default by the oil firms, but by erroneous assessment of their taxes by government agencies responsible for collecting this revenue from the 16 oil companies.

“We have discovered in the 2005 Audit report of the oil and gas sector”, he said, “that the Department of Petroleum Resources (DPR) and the Federal Inland Revenue Service (FIRS) wrongfully assess the Royalty and Petroleum Profit Tax (PPT)  to be paid by 16 oil companies based on the volume of the crude oil production for 2005”, he said.

“The companies have underpaid the Federal Government by $243 million in Royalty and $310 in PPT”, he told Vanguard.
“If they had deliberately defaulted in the payments, NEITI would have prosecuted them”, he said, “but it was as a result in errors of computation from our government agencies”, he said.

“We have began the process of recovering this money”, he said, “and if any oil company refuses to pay, then it would surely be prosecuted according to the powers conferred on us by the NEITI Act of 2007”, he said.

Sa’eed a former Accounts lecturer with Ahmadu Bello University, Zaria, said that NEITI had in 2004 discovered in the audit of the oil and gas sector for the period of 1999 to 2004 how Nigeria was losing about $1 billion yearly as a result poor handling of oil measurements by regulating government agencies. He said the mistake has been fixed

“That means that Nigeria has been making a cumulative saving of $1 billion yearly since 2004 by the closure of  that loophole”, he said.
According to Sa’eed, also a  former Commissioner of Finance of Kaduna State, with the thorough audit of the oil and gas sector todasy, it has become very unattractive for any producing firms to offer bribe to government officials so as to dodge full payments of taxes.

“If for example, a company is to pay a tax of $1 billion”, he said,  “then it connives with an official of government and ended up paying only $5000 million. After an audit, if it comes to light that such underpayment exists, the company would have no choice than to pay. So a wise company would say rather than take a risk and bribe and get caught, for which it must pay, but cannot recover the bribe, isn’t it better to just pay?”

“So NEITI has made the prospect of paying bribes bleak, and as such increasing the level of collection”, he said.
Asked why NEITI is not paying attention to the solid mineral sector, he said, “that is an area that gives us a lot of concern because what we see and are trying to eliminate in the oil and gas industry, is very pervasive in the solid mineral sector”. According to him, a full audit of the solid mineral sector would be carried out next year.

“While, the 13% derivative principle is easily applied to the oil and gas sector, it has been impossible to do with the solid mineral sector, for many reasons”, he said.

“But, we hope to take care of that next year. And that is quite imperative as government is doing its best to reposition that sector and we hear that a lot of foreign investors are already showing interest. “We have started holding talks with miners, mining experts, mining communities and mining associations and the outcome has been superb”, he said.NEITI is mandated by law to promote transparency and accountability in the management of revenues from oil, gas and mining sectors.


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