Marketers Groan over Effects of Finance Act 2020, VAT on Diesel Cost

•Ex-NNPC, Agip GMs, others say Senate’s unwarranted order to NLNG will discourage FDIs into Nigeria 

•Advise National Assembly to focus on making business enabling laws

Peter Uzoho

The Executive Secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Olufemi Adewole has decried the impact of the 0.5 per cent corporate tax in the Finance Act 2020 and the introduction of 7.5 per cent Value-Added Tax (VAT) to the cost of diesel.

This was just as the immediate-past Group General Manager, Group Public Affairs Division of the Nigerian National Petroleum Company Limited (NNPC), Dr. Kenny Obateru and former General Manager, Nigerian Content at Nigerian Agip Oil Company Limited, Mr. Tajudeen Adigun have faulted the Senate for meddling into the affairs of the Nigeria LNG Limited and its host communities.

They all spoke at the Platform Africa Continental Forum held yesterday in Lagos. The theme of the forum was “Legislation and Business Survival in Africa: A Review of Nigeria’s 9th Parliament and Agenda for the 10th National Assembly.”

Speaking on the legislations that have helped the downstream business and those that have not helped the sector, Adewole said the Finance Act 2020, has not helped petroleum marketers’ business, citing the 0.5 corporate tax provided by the Act, which will take effect by the end of 2022.

Arguing that petroleum marketers operate on very low margins with huge turnover and that their margins do not correspond to the turnover, the DAPPMAN executive secretary warned that allowing tax to remain the way it is presently might lead to marketing companies folding up or having to borrow to pay tax.

“We are engaging government on how to resolve this because it’s unimaginable to think that probably half of the petroleum marketing companies that are in existence now will go under just because we cannot pay the tax, because the margins are very small.

“I had an opportunity to face the Senate Appropriation Committee once and they were pleasantly shocked when I told them at that time that we sell petrol at N40, the same margin we are getting at N40 is the same margin we are getting at N160, it’s the same margin we are getting at N200. They were shocked, and I said these are records that are available for everybody to check.

“And except the regulator, which is now NMDPRA approves the review of the margin for marketers, but the Finance Act as it is presently, has an adverse effect our businesses,” Adewole said.

He also lamented the effect of the introduction of 7.7 per cent VAT on diesel cost, saying it would also have an adverse effect on both the marketers as well as companies and other Nigerians using diesel to power their generators.

To find solution to the challenge, he said marketers were working jointly with other members of National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Lagos Chamber of Commerce and Industry (LCCI) and other industries.

Meanwhile, the ex-NNPC and Agip officials have said the October 2022 order by the Senate that NLNG should pay N18.4 billion compensation to 73 communities of Obiafu, Soku and Bonny in Rivers State within 60 days for acquiring their land was unwarranted and will discourage further foreign direct investments (FDIs) into the country.

They advised the National Assembly to rather focus on making laws that will enable businesses to thrive rather than taking actions that will kill businesses.

The Senate has been under fire over its last month’s directive that the NLNG Limited should pay N18.4 billion compensation to the 73 Rivers communities on the claim by the communities that the liquefaction firm acquired their land and deprived the people the right of way through the communities due to pipelines.

The resolutions were adopted after the Senate considered the report of its Committee on Ethics, Privileges and Public Petitions that investigated a petition by the communities.

In a swift reaction, the NLNG had said it was evaluating the Senate resolution and circumstances surrounding the N18.4 billion compensation approved for the said communities, adding that it “has always conducted its business responsibly and in accordance with the laws of the Federal Republic of Nigeria, including in this specific matter.”

However, dissecting the substance of the matter in their interventions at the forum, Obateru and Adigun argued that the Senate or the National Assembly lacked the powers to meddle in a matter that involves a company like NLNG and its communities.

Specifically, Obateru said such interference and unnecessary order by the Senate would send wrong signals to prospective investors and discourage further FDIs inflows into the country.

He argued that if at all NLNG must be questioned on such matters, it must be the executive arm that gave it the land and not the legislature.

Obateru said, “Government has the ownership for lands and government has the responsibility for allocating lands in public interest and that is why most of the companies that are operating in Nigeria either as IOCs or independents, they engage government, it is government that gives them land.

“So if government gives you land in public interest, which the Nigeria LNG is, any other thing that the company is doing by way of reaching out to those villages is just CSR, it is not mandatory. So because of that, it is government that can question the Nigeria LNG -government as the executive arm like governors who can give out land and it is a business transaction that has been in place.

“So for me, I think the 9th National Assembly and the 10th Assembly should not engage in anything that will discourage foreign direct investment”.

Adigun on his part, said the business of the Senate and the National Assembly was to be settling disputes between companies and communities, adding that they leave that for the governors of the various states to handle.

He further said the lawmakers’ focus should be on making laws that will improve business instead dwelling on matters they do not have powers to, adding that there are Memorandum of Understanding (MoUs) that bind companies and their host communities.

He said, “I mean, these companies and the communities have an agreement, they have MoUs, let them go to court or arbitration to sort out their grievances. In our industry for instance, we see community relations as licence to operate actually, being a good neighbour to your community is a licence to operate for us because without being friendly with them you can’t operate in the first place.

“So communities see companies as friends. But of course, there will always be disagreements. Those disagreements should not lead to a situation where you go and petition the National Assembly, let us settle those things among ourselves and progress.”

Partner, Bloomfield Law Practice, Dr. Ayodele Oni, who spoke from Houston, Texas, declared that the Senate’s power guaranteed by the constitution was enormous but does not include giving an order to a company to pay money within a stipulated time.

The Keynote speaker and constitutional lawyer, Mr. Jide Ologun said, “The Senate is not a Court. That right to order resides solely with the Court.”