ABUJA—THE
Federal Government has finally announced the cancellation of joint cash call
with oil companies operating in Nigeria. The announcement came on a day
the
government said it had also uncovered heinous acts of frauds in the revenue
generating agencies.
Main reason for the cash call withdrawal was principally
hinged on the paucity of funds arising from the drastic fall of crude oil
prices in the international market, which had made it almost impossible for
Nigeria to meet its cash call obligations.
Cash calls is the counterpart
funding which the Federal Government, represented by the Nigerian National
Petroleum Corporation, NNPC, pays annually as its 60 percent equity
shareholding in various oil and gas fields operated by international oil
companies and indigenous oil firms.
The development, however, is expected to
generate about $15 billion worth of investments. Briefing State House
correspondents at the end of National Economic Council, NEC meeting at the
presidential villa, Abuja, yesterday, the Minister of State for Petroleum
Resources, Dr. Ibe Kachikwu, alongside Governor Willie Obiano of Anambra State
and his counterpart from Bauchi State, Alhaji Mohammed Abubakar, said Nigeria
owed call arrears of $6.8 billion over
five years.
He said full
implementation of the development would commence in 2017. He said: “Today, I
made a presentation to NEC seeking endorsement for previous years proposal
which was approved by FEC, trying to change the funding configuration of JV for
upstream companies. “As you are aware, current cash call arrears in the oil
sector over the last five years up until December 2015, is about $6.8 billion
unpaid in the 2016 period.
‘’We also have accumulated unpaid cash call arrears
of over $2.5 billion. Persons sometime get to ask how did this happen? Obviously in the year we earned a lot of money from oil, $110-120
per barrel, there really wasn’t any justification why these monies shouldn’t
have been paid in terms of the five years arrears but it is what it is, if that
is what the arrear is.”
“Thus, one can understand why we have what we have: the
effect of militancy, the drop in oil prices $110 to 40, has meant revenue
coming to government has been unable to sustain our ability to meet our cash
call obligations and what does that do when that happens.
‘’You find that your
reserve begins to deplete, your ability to maintain production at current level
will begin to despair and cost of per barrel of production at JV continues to
rise because of the very little volumes chasing the cost and at the end of the
day, the investor’s confidence begins to wane. So, a lot of the projects that
ought to have happened in this country were basically abandoned.
“Sometimes
this year, we took on an initiative working with the folks in NNPC and the
ministry to try and find a sustainable solution for funding JV cash calls. We
have been able to find that solution.
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