LCCI Cautions FG Against Hasty Removal of N6trn Waivers in Oil and Gas Sector

*Tasks government to reposition sector by implementing PIA

Dike Onwuamaeze

The Lagos Chamber of Commerce and Industry (LCCI) has called on the federal government to tread cautiously with its plan to save over N6 trillion by removing tax waivers and exemptions granted to some large enterprises in the oil and gas sector.  

The LCCI also told the government that the oil and gas sector required sensitive regulatory environment to avoid disrupting investments in that sector. It advised that the government should reposition the industry by steeply implementing the Petroleum Industry Act (PIA) in order to pave way for new investments and also encourage indigenous companies to reflate the sector with required investments.

The chamber expressed these views in a statement titled, “LCCI Comments on the 2022 Finance Bill.”
It noted that President Muhammadu Buhari withheld his presidential ascent to the proposed legislation in order to subject it to further review.
The statement signed by the Director General of the LCCI, Dr. Chinyere Almona, stated, “With the plan to exit some large enterprises from the Pioneer Status Incentives, the government can save about N6 trillion tax expenditure (waivers, exemptions, incentives granted by the government), according to the Minister of Finance, Budget and National Planning in her 2023 Budget presentation.

“But on the path of caution, we urge the government to tread conservatively in raising tax rates, since there are new ways of rescuing some tax expenditures to add up to government revenue in 2023. Leaving rates at their levels will not lead to a loss of revenue.

“The oil sector’s contribution to GDP through 2022 was just around 5.0 per cent but this sector accounts for over 85 per cent of foreign exchange earnings and about 50 per cent of total government revenue. This suggests that this sector requires a sensitive regulatory environment to avoid disruptions to investments in the sector.”

The LCCI noted that with the divestments by some international oil companies from the oil and gas sector, Nigeria needed to “reposition the industry through a steeply implemented PIA to pave way for new investments and also encourage indigenous companies to reflate the sector with required investments.”

It said industry statistics revealed that indigenous companies contributed about 30 per cent of crude oil and 20 per cent of the country’s gas production, as well as 40 per cent and 32 per cent of oil and gas reserves, respectively.
The LCCI also made recommendations to the government based on the feedback it gathered from operators in the oil and gas sector and the wider business community.  

It said, “We suggest retention of the Tertiary Education Tax (TET) rate at 2.5 per cent, since it was just recently increased from 2.0 per cent to 2.5 per cent. At the proposed rate of 3.0 per cent Nigeria’s corporate income tax rate would rise to about 36 per cent, which is one of the highest rates in the world, according to available research.

“Retain the 30 per cent Company Income Tax for all oil and gas companies; consider amending the Petroleum Profit Tax Act with the same provision in the PIA Section 104.

“Gas flares-out projects should be incentivised to ensure monetisation of the resource for the benefit of Nigeria.”
The LCCI also recommended that Finance Bills should be presented for extensive stakeholders’ consultations before being passed by the National Assembly. It pledged to continue to work to mobilise the private sector to support the implementation of the 2023 federal budget.

It, however, said, “On achieving revenue targets for the budget, the MDAs and Government Owned Enterprises (GOEs) can intensify their revenue mobilisation efforts in an enabling environment where the private sector thrives.

“To achieve the laudable objectives of the 2023 budget, we urge the government to sustain current efforts toward the realisation of crude oil production and export targets by creating an investment-friendly oil and gas industry. Public-Private Partnerships (PPPs) are the best models to fast-track the pace of our infrastructural development.”