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Just in; World Bank slams NNPCL over inconsistent revenue report to FAAC

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The World Bank has said that the reports submitted by the Nigerian National Petroleum Company Limited (NNPCL) to the Federal Account Allocation Committee (FAAC) were inconsistent, and lacked necessary details on its operations.

This was revealed in the bank’s Accelerating Resource Mobilisation Reforms (ARMOR) Report for May 17, 2024.

According to the WB, in addition to reduced net oil revenues, NNPCL’s opaque governance has significantly undermined the transmission of oil revenues to the federation.

“Non-transparent reporting to the Federal Ministry of Finance (FMF) and the Federation Account Allocation Committee (FAAC), make it difficult for the authorities to oversee NNPCL’s performance, calculate anticipated oil and gas revenues and determine the difference between revenues received by the Federation and NNPCL’s total revenue.

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“The reports submitted to FAAC by NNPCL are inconsistent and lack information such as details on pledged revenues, the tradeable value of crude oil, actual payments, and receipts from global trade, among others. As highlighted in the Nigeria Public Finance Review (2022),7 financial reporting is opaque due to quasi-fiscal activities such as in-kind revenues in the form of crude oil, and costs directly deducted from revenues that would have otherwise been transferred to the Federation Account,” the report said in part.

NNPCL is governed by the Petroleum Industry Act (PIA) 2021

The world’s apex bank cited a case where the NNPCL pledged 35,000 barrels of crude oil per day to the owners in exchange for a 20 per cent stake in the privately owned Nigerian Dangote Refinery.

WB said although the total value of the contractual investments for pledged oil revenues was estimated to be worth US$5.8 billion at end-2022, the amount eventually declared by NNPCL was below expectation.

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“All production sharing contracts signed by NNPC state that all fiscal payments shall be made in-kind by allowing the NNPC to lift tax oil, royalty oil, and profit oil. In joint venture operations, in which the Federation owns 55 per cent or 60 per cent of the equity oil and gas, the NNPC handles crude oil and natural gas receipts on behalf of the Federation.

However, the share of oil production in these contracts amounts to more than two-thirds of the total oil production in Nigeria.

“Nigeria’s dependence on oil and gas revenue is a source of fiscal vulnerability. During the commodity-price boom of 1996-2014, the revenue-to-GDP ratio was 12 per cent, (albeit considerably lower than the Sub-Saharan Africa (SSA) average of 21.5 per cent at that time), while a decade later, revenue-to-GDP was just 7.7 per cent in 2023.

“ Despite a 116 per cent increase in international oil prices between 2020 and 2022-2023, net oil and gas fiscal revenues transferred to the Federation fell in the same period from 2 per cent of GDP to 1.8 per cent of GDP due to falling oil production and the retention of fiscal transfers to finance the gasoline subsidy.

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“Oil production fell from 1.8 million barrels per day (mbpd) in 2020 to 1.4 mbpd in 2022-2023 due to insecurity and a lack of investment and adequate maintenance. The cost of the gasoline subsidy increased over this period from 0.9 to 1.6 percent of GDP, deducted directly by the Nigeria National Petroleum Corporation Limited (NNPCL)5 and reducing the net oil revenue transfers to the Federation Account.”

Additionally, WB said the NNPCL has retained oil and gas revenues for projects such as a gas pipeline to Morocco.

“NNPCL also entered contractual arrangements that pledge future oil and gas revenues to business partners in lieu of cash payments,” the report added.

FG Eyes Fresh $750m W’Bank Loan

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The Federal Government is also pressing for a $750m loan from the World Bank.

This loan project is a part of the broader $2.25bn approved by the World Bank for Nigeria on June 13, 2024, to bolster Nigeria’s economic stability and support its vulnerable populations.

The other second part of the loan package was for the Nigeria Reforms for Economic Stabilisation to Enable Transformation, Development Policy Financing Programme project.

Already, an agreement for the loan has been signed between Nigeria (through the Ministry of Finance) and the World Bank.

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The agreement document read in part, “The bank agrees to lend to the borrower the amount of $750,000,000 as such amount may be converted from time to time through a currency conversion (“Loan”), to assist in financing the programme described in Part 1 of Schedule 1 to this Agreement (“Programme”) and the project described in Part 2 of Schedule 1 to this Agreement (“Project”, and together with the Programme, hereinafter jointly referred to as the “Operation”).

“The borrower may withdraw the proceeds of the loan in accordance with Section IV of Schedule 2 to this Agreement. All withdrawals from the loan account shall be deposited by the Bank into an account specified by the Borrower and acceptable to the bank.”

According to the Disbursement Linked Indicators set out in the loan agreement, the loan will only be released upon achieving measurable progress in key areas.

These include raising VAT collection through improved regulations, increasing excise taxes on health and environmental products, and boosting corporate tax compliance through enhanced digital infrastructure.

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Central to the ARMOR programme is the government’s plan to increase VAT rates and expand taxpayer compliance.

Some of the loan targets include increasing VAT collections to 1.8 per cent of non-oil Gross Domestic Product, unlocking $105m of the loan.

The WB said despite recent reforms, Nigeria’s non-oil tax revenues underperform due to low tax rates, poor compliance, a narrow tax base, and high tax expenditures.

Reforms introduced in 2020-2021 increased non-oil tax revenues from 2.3 per cent of GDP in 2020 to 3.7 per cent of GDP in 2023 due to a rise in Value-Added Tax (VAT) rates, improvements in tax digitalisation, and the unification of the exchange rate in 2023.

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“Despite this increase, tax revenues in Nigeria remain very low compared to peers (Figure 2). Unlike most developing countries, Nigeria has yet to tap VAT (a federal responsibility to collect while sharing VAT revenues) as a significant source of revenue. In 2022, VAT revenues were only 1.2 per cent of GDP while VAT tax expenditures were estimated at 1.98 per cent of GDP in 2022 (latest available data).10 The current VAT rate of 7.5 per cent is the lowest rate in Africa, and well below the SSA average of 15.8 per cent. Under the VAT legislation, the tax operates like a sales tax, since firms are unable to recover input VAT on purchases of fixed assets, services, and general administration costs.

“Meanwhile, Corporate Income Tax (CIT) has a very narrow tax base, and although collections have increased in recent years, they represented just 1.6 per cent of GDP in 2023. By comparison, poorly designed and sometimes discretionary CIT expenditures were estimated to cost 0.4 per cent of GDP.11 Excise rates are exceptionally low by global standards, and revenues were less than 0.1 per cent of GDP in 2023.12 Personal Income Tax (PIT) is assigned exclusively to the States, where challenges persist in collection due to tax evasion and underreporting: only 13 per cent of the workforce is registered for PIT (2018) and only 2 per cent of those are reported as active.

The bank advised that the tax and customs administrations need modernising to improve efficiency.

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Why govs demanded further talks on tax bills – Makinde

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Oyo State Governor, Seyi Makinde, on Sunday, said the 36 state governors demanded wider consultation on President Bola Tinubu’s tax reform bills in order to carry the entire nation along, given the far-reaching implications of the reforms.

Makinde also clarified that he was not opposed to the tax reforms but only presented the reservations raised by the governors to the press.

In a statement issued by his Special Adviser on Media, Dr. Sulaimon Olanrewaju, Makinde made this clarification during a media chat on the Broadcasting Corporation of Oyo State on Saturday.

On October 3, 2024, President Bola Tinubu transmitted four tax reform bills to the National Assembly: the Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service Establishment Bill, and Joint Revenue Board Establishment Bill.

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These bills have sparked controversy, with many stakeholders opposing certain sections proposed by the government.

Makinde, who had briefed the media on the position of the National Economic Council regarding the bills, explained that the NEC unanimously agreed that the bills should be withdrawn from the National Assembly to allow for wider consultation.

“At the NEC meeting, we asked the Chairman of the Presidential Task Force about the status of the bills, and he confirmed they were already at the National Assembly,” Makinde said. “I asked, ‘If that’s the case, why are you just coming to us for approval?’ It amounted to putting the cart before the horse.”

He continued: “We agreed that the bills should be withdrawn, enabling broader consultations with stakeholders. This could lead to alignment, whether in their original form or with necessary adjustments based on stakeholder feedback.”

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Addressing criticisms that he was opposed to the reforms, Makinde stated: “I was asked to explain our decision to withdraw the bills for consultation, but some people chose to focus on the messenger rather than the message.”

Makinde described the Ibadan funfair tragedy, which claimed the lives of 35 children on Wednesday, December 18, 2024, as a monumental loss.

He noted that the incident, alongside the Bodija explosion in January 2024, could have been avoided if appropriate measures had been taken.

In the Bodija explosion, five people died, 77 sustained injuries, and 58 houses were damaged.

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The explosion, which occurred on Dejo Oyelese Street on January 16, was reportedly caused by explosives stored by illegal miners.

Eleven months later, 35 children died, and six others were critically injured in a crowd crush at a funfair held at Islamic High School, Basorun, Ibadan.

The funfair was organised by the foundation of Naomi Silekunola, a former queen of the Ooni of Ife.

Makinde observed a minute of silence for the victims during the media chat.

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He assured the public that the legal process was ongoing, though slow.

Addressing allegations of land grabbing linked to the Circular Road project, Makinde said his administration was taking bold steps to break the limitations faced by previous governments in economic expansion.

“Some people have described me as a land grabber,” he said. “Ironically, those under investigation for land grabbing are the ones making these accusations. The Circular Road is not just another road; it will be the first motorway in Nigeria. The 32km stretch from Technical University to Badeku will have only two exit points, ensuring structured development along the corridor.”

Makinde emphasised that his government was committed to initiatives that would benefit residents, even if such decisions seem harsh in the short term.

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“To break the cycle of poverty, we need to seize opportunities for lasting impact. Our state’s founding vision is one of prosperity, not poverty,” he said.

Makinde pledged a major overhaul of Oyo State’s education infrastructure in 2025, noting that his administration had consistently exceeded the United Nations Educational, Scientific, and Cultural Organization benchmark for budgetary allocation to education.

“We’ve rearranged resources to prioritise education because it’s critical to our development,” Makinde said. He acknowledged that despite significant investment, much work remains, estimating that N60 billion is needed to address the sector’s challenges.

“For tertiary institutions, we are doing well, and I am satisfied,” he added.

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Outrage as four men murder Nigerian man in South Africa

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The Nigerian Citizens Association in South Africa (NICASA) has condemned the alleged murder of 37-year-old Nigerian, Mr Julius Chukwunta, by four South Africans.

Chukwunta, a native of Aninri Local Government Area in Enugu State, was reportedly attacked on December 7, 2024, while driving to his residence in Midrand Protea Estate.

NICASA President-General Dr Frank Onyekwelu, in an interview with the News Agency of Nigeria (NAN) on Saturday, said Chukwunta was blocked by the four men while approaching his residence.

According to him, after attempting to pass through, he was met with resistance, prompting him to seek help at the security office.

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“At that moment, the four men allegedly attacked him, leaving him severely injured with a head wound.

“His female companion, who was sitting in the car, rushed to the security office and discovered him bleeding on the ground.

“In spite of attempts to call for help, the security office and residents did not assist in calling the police or an ambulance.

“After an hour, Chukwunta’s partner contacted her father, who, along with other family members, took him to Tembisa General Hospital.

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“Chukwunta was placed on life support but later succumbed to his injuries and died at the Tembisa General Hospital on December 10, 2024.”

Onyekwelu confirmed that the case, reported by Chukwunta’s partner, had been registered at the Midrand police station under file number 262/12/2024.

He said the four suspects, aged 20, 24, 27, and 28, were arrested, and the case was presented in Alexandra Magistrate Court on December 13, 2024, where they were charged with murder.

“The court proceedings on December 18, 2024, saw three of the suspects granted bail of R10,000 each, while the fourth had not yet applied for bail. The case was adjourned to February 3, 2025.”

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Onyekwelu expressed disappointment at the proceedings and vowed that the Nigerian community would continue to demand justice for Chukwunta and support his family.

He emphasised that the community would not rest until justice was served and the value of Nigerian lives was upheld in South Africa.

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Why Christians Shouldn’t Stay Away From Active Politics – Kumuyi

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The General Superintendent of the Deeper Christian Life Ministry, Pastor Williams Kumuyi, has expressed concern over Christians’ low participation in active politics.

He submitted that they have no right to complain over policy direction if they fail to make themselves available for nation-building.

The General Superintendent stated this during a press briefing to herald the ministry’s annual retreat, tagged; ‘Power for present possession’ and the ‘Global Crusade with Kumuyi’ slated to commence today, at the campground in Ogun State.

He said, “So, if the Christians don’t take part in politics, first off, it means that this side alone without any Christian, will determine the direction we go and will determine what the country becomes.

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“And the Christians have no right to complain if they are not available to make things better,” he said.

He urged elected leaders across various helms to consider the plights of the citizens, saying they were entrusted with the responsibilities to bring out the dividend of democracy.

“We all see the condition and what is going on. Our leaders are elected leaders, whether we are thinking of the local government, state and whole nation, or the federal government.”

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