…As Oando Plc incurred $650m loan from Afreximbank to finance acquisition of Agip Oil
By Charles Ebi
Nigerian National Petroleum Company Limited ,NNPCL, has deducted a total of $262.55 million from its remittances to the Federal Inland Revenue Service ,FIRS, as part of the Road Infrastructure Tax Credit Scheme ,RITCS.
This is according to a report from a FAAC Post-Mortem Sub-Committee ,PMSC, meeting held in August 2024 and seen by our correspondent.
According to the report, NNPCL made monthly deductions of $52.51 million from the amount due to FIRS for Joint Venture ,JV, Gas and Company Income Tax ,CIT, between February and June 2024.
These deductions have been earmarked for the RITCS, a scheme designed to enable private companies to invest in critical road infrastructure and offset their tax liabilities.
The report read: “Members may recall that the Sub-Committee reported that the NNPCL had made deductions in respect of the Road Infrastructure Tax Credit Scheme from the amount due to FIRS JV Gas and CIT taxes. So far, a calendarized sum of $52,509,484.28 was deducted each for the months of February to June 2024 totalling $262,547,421.40″.
However, the state representatives at the meeting expressed concerns, emphasizing that the responsibility of road construction lies with the Federal Government.
They argued that their share of the $262.55 million deduction should be calculated based on the existing revenue allocation sharing formular and refunded accordingly.
However, representatives from the NNPCL clarified that the deductions were preliminary estimates, with a reconciliation process set to occur at the end of the year to determine the exact amount due.
To address these concerns, the Chairman of the Revenue Mobilization Allocation and Fiscal Commission ,RMAFC, formally requested detailed information from the FIRS on the tax credits granted to NNPCL and other organizations involved in the scheme.
The report noted: “The Sub-National position was that it is the responsibility of the Federal Government to construct roads; hence, the share of the Sub-National from the $262,547,421.40 deducted should be computed based on the existing Revenue Allocation Sharing Formulae and refunded to them.
“However, the NNPCL representative explained that the deductions for the Road Infrastructure Tax Credit Scheme are estimates and that there will be a reconciliation with FIRS at the end of the year to ascertain the actual amount due.
“In order to resolve the issue, the Chairman of the Commission wrote to the Management of FIRS requesting the detailed Tax Credit granted to NNPC Ltd and other organizations. The Sub-Committee awaits FIRS’s response”.
The Road Infrastructure Tax Credit Scheme ,RITCS, enables companies with high tax profiles to construct roads in a negotiated agreement with the federal government to provide the infrastructure instead of taxes.
Last year, the Nigerian Government approved N1.535 trillion under Phase 2 of the NNPCL tax credit scheme.
This was after the national oil company announced that it would spend N1.9 trillion in the second phase of the tax credit scheme for infrastructure development.
However, the Federal Inland Revenue Service ,FIRS, recently said that it would meet with the Central Bank of Nigeria ,CBN, and Ministry of Works to review about N2.59 trillion tax credit scheme meant for road repairs and construction in the country.
Zacheus Adedeji, the Chairman of the FIRS, expressed strong disapproval of the N2.59 trillion tax credit scheme initiated under the administration of former President Muhammadu Buhari. This scheme, aimed at facilitating road construction across Nigeria, was under scrutiny.
The critique came as the NNPCL said it spent about N664 billion towards refurbishing roads across Nigeria’s six geo-political zones.
However, Adedeji argued that the tax credit scheme is “unlawful” and advocated for its termination, stressing that the FIRS should strictly involve tax collection and remittance rather than funding road projects through executive orders.
The NNPCL incurred a total of N2.69 trillion as tax in the full year 2023. However, the total taxes paid by the NNPCL in 2023 was N1.17 trillion, which included N497.26 billion in income tax and N669.09 billion in royalties.
meanwhile, African Export-Import Bank, Afreximbank, has announced that it provided a $650 million lending facility to Oando Plc as part of the $783 million acquisition of Nigerian Agip Oil Company ,NAOC.
The bank made this announcement on its official website on Friday, adding that the loan included both senior and junior reserved-based lending facility.
Last week, Oando Plc completed the acquisition of NAOC for the sum of $783 million from Italian oil major Eni.
Accordingly, the deal was partly facilitated by Afreximbank with a senior credit facility of $500 million and a junior reserve-based lending facility of $150 million.
“African Export-Import Bank (Afreximbank) has successfully arranged a senior US$500-million and a junior US$150-million reserve-based lending facility for Oando Petroleum and Natural Gas Company Limited. The facility was used to finance Oando’s acquisition of the 20% participating interest held by Nigerian Agip Oil Company Limited ,NAOC, in the NEPL/NAOC/Oando Joint Venture in Nigeria.
“The joint venture, with significant oil and gas assets, including oil mining licenses 60, 61, 62 and 63, has produced 4.4 billion barrels of oil and 12 trillion cubic feet of natural gas to date, with 1.2 billion barrels of oil and 10.7 trillion cubic feet of natural gas remaining”, the bank said.
In addition, the bank announced that it was retained as the mandated lead arranger for Oando’s transaction.
It also served in multiple roles, including bookrunner, coordinator, underwriter, escrow agent, facility agent, and security trustee. It said It also participated in and underwrote $350 million of the facility.
Haytham Elmaayergi, Executive Vice-President of Global Trade at Afreximbank, remarked that the facility represents a significant milestone in the Bank’s efforts to enhance local content within Africa’s oil and gas sector.
“By supporting the acquisition of key energy assets by an indigenous company like Oando, the Bank is fostering economic empowerment, enhancing regional trade, and contributing to the sustainable development of Africa’s natural resources”, he said.
On his part, Wale Tinubu, CON, Group Chief Executive of OANDO, expressed that the announcement is the culmination of a decade of hard work, perseverance, and a strong belief in realizing the company’s ambition, which began with their 2014 entry into the Joint Venture through the acquisition of ConocoPhillips Nigerian Portfolio.
“We thank Afreximbank for its unwavering leadership in bridging the trade finance gap in Africa and ensuring that Oando can consolidate its stake in the Joint Venture via the acquisition of NAOC’s 20% stake”, Tinubu added.
Recall that Oando PLC successfully acquired the Nigerian Agip Oil Company ,NAOC, from the Italian energy conglomerate Eni for a total of $783 million.
This acquisition is poised to strengthen Oando’s position in Nigeria’s oil and gas sector by expanding its operational footprint and enhancing its upstream capabilities.
As a result of the deal, Oando’s participating interest in Oil Mining Leases ,OMLs, 60, 61, 62, and 63 has increased from 20% to 40%.
This expansion broadens Oando’s ownership across all NEPL/NAOC/OOL Joint Venture assets, which include 40 discovered oil and gas fields, 24 of which are currently producing.
Additionally, Oando now holds stakes in key infrastructure assets, including approximately 1,490 kilometres of pipelines, three gas processing plants, the Brass River Oil Terminal, and the KwaleOkpai power plants with a combined capacity of 960 MW.
