By Ediri Ejoh

There are indications that the Free on Board (FOB) charges imposed by LADOL is brewing crisis in the oil and gas free zones.

According to Operators, the crisis will in a long run hinder the efforts put in place by the Federal Government through the Vice President, Yemi Osinbajo, after the Executive Orders to improve Nigeria’s ranking on the global Ease of Doing Business signed in May 2017.

Vanguard gathered that the crisis was caused after LADOL imposed a levy of one percent Free on Board (FOB) charges for the Egina Floating Production Storage Offloading (FPSO) unit for SHI-MCI FZE, totalling about $33 million

Speaking to a Senior Management of an International Oil Company, IOC, who pleaded anonymity, he explained that the imposed levy was tearing the partnership apart and thus frustrating federal government’s efforts to make Nigeria the hub of FPSO integration in Africa and is also scaring potential investors.

His words: “We gathered that an alleged baseless demand by LADOL for SHI-MCI FZE to pay $33 million as one per cent Free on Board (FOB) charges for the Egina FPSO unit is already tearing the partnership apart and will frustrate federal government’s efforts to make Nigeria the hub of FPSO integration in Africa and also scare potential investors.

“If SHI-MCI FZE is levied $33 million, their finance capacity will not last and might face bankruptcy in extreme case, especially since the amount is far more than 10 per cent of its sales revenue from the sub-contracted works in terms of local fabrication and integration works for the Egina FPSO Project.”

Citing the case of Samsung Heavy Industries (SHI) of Korea, that has 70 percent stake in the SHI-MCI FZE, a joint venture company, which is currently integrating the $3.3 billion Egina FPSO, he said, “some privately-owned free zones are known for blind sighting authorities to raise their own revenue rather than raising public fund.”

However, another official of an IOC alleged that the free zone management company has usurped the powers of federal government agencies, adding that “we also doubt if the company wants to improve Nigeria’s economy or to increase its own revenue”.

“The free zone management company is refusing to grant SHI-MCI FZE’s, SHI Nigerian local joint venture company, operating license renewal without a clear legal basis. Further to this refusal, SHI, which invested over $300 million, has faced the risk of dooming their subsidiaries just after over four years of operation in Nigeria,” he said. He called on the federal government and its various agencies to intervene in the operations of the private free zones in the country to save foreign investments.

“At a time when foreign investments are highly desired, these investor-unfriendly policies have the potential to scare investors,” he added.

Meanwhile, a top management staff of LADOL, who preferred not to be named on print, faulted the allegations, saying, “All charges levied at the base are statutory and the enterprise is very much aware of them even before they take up their engagement. The one percent levy, pegged as imposed, are standards and from the Federal Government.

“We should be very careful of the foreign companies. Some of these Companies are operating in Nigeria and benefiting from the multi-billion dollars contracts and should not shy away from paying their levies.

“Foreign companies operating in Nigeria should not fail to adhere to statutory charges, as they think it was business as usual. Things are changing. Some of the IOCs seek special wavers which are not right for the industry. And when they are legally taxed, it amounts to flouting the laws of the country, which LADOL will not be part of.”