By Samuel Olukunle
The legal tussle between Nigeria LNG Limited (NLNG) and the Nigerian Maritime Administration and Safety Agency (NIMASA) has revealed a dysfunction at the heart of Nigeria’s political economy and is an indicator of its perennial underperforming status.
NLNG, in which the Federal Government holds 49% of the equity, has been such a worthwhile economic success story that the model should be the operating standard in public-private partnerships. This is irrefutable from the empirical evidence available.
It has generated over $100 billion in revenue, paid over $16 billion in dividends to the Federal Government through the Nigerian National Petroleum Corporation (NNPC) and has been an outstanding pioneering example of corporate social responsibility.
Had this proven model been adopted right across the board, the country’s fiscal landscape will have been in better shape.
On the other side of a contrived divide, NIMASA, operating within the mindset of the bureaucracy of a rentier state, is involved in a turf war.
On May 3, 2013, at about 4.20pm, a tugboat blockaded at the instance of NIMASA acting through Global West Vessel Specialists Limited, LNG Adamawa, an NLNG chartered vessel.
The blockade was a self-help effort to extract levies purportedly owed NIMASA by NLNG. According to NIMASA, these include shipping levies based on gross freight on exports and imports.
The NLNG Act exempts Nigeria LNG from payment of the Sea Protection Levy, the 3% freight levies on cargo exports shipped by NLNG, and the 2% Cabotage Levy.
NIMASA eventually lifted the blockade on May 5, 2013 after a meeting between the management of NLNG and NIMASA, in which it was resolved for lasting solutions to be sought under the rule of law.
On June 21, 2013, and in flagrant disregard of a subsisting court order barring it from further blockade of the Bonny Channel, NIMASA effected another illegal blockade of the Bonny Channel, preventing NLNG vessels and vessels belonging to its buyers from accessing or leaving the NLNG terminal.
After a three week, during which NLNG was compelled to start making the disputed payments “under protest”, NIMASA ended the illegal blockade.
Owing to the illegal blockade which persisted in spite of court orders, NLNG lost revenues of over $355 million.
In June 2013, NLNG filed a case at the Federal High Court, Lagos, seeking judicial clarity and interpretation on the legality or otherwise of the various levies imposed on NLNG by NIMASA.
In October 2017, the Federal High Court sitting in Lagos, delivered judgment in favour of NLNG against NIMASA, over applicability of the NIMASA levies. According to the court, NLNG was not liable to make the said payments to NIMASA, and all such payments already made by NLNG to NIMASA “under protest” should be refunded to NLNG forthwith. The court further held that NIMASA was wrong in blockading the Bonny Channel for the purpose of enforcing the payments against NLNG and went further to restrain NIMASA from taking or continuing any steps to block, restrain, seize, detain or restrict NLNG (or its shareholders or subsidiary vessels or chartered vessels).
The said judgment of the Federal High Court was however reversed on March 29, 2019, following an appeal filed against the same by NIMASA, with Justice Garuba Lawal of the Court of Appeal directing that the case between the two parties be remitted to the Federal High Court for a rehearing.
This decision gives the parties right to either go back to the Federal High Court for a rehearing or appeal the decision to the Supreme Court.
NLNG argues that where the case is to be heard afresh, the position of the parties would revert to what it was as at the time the case was filed, in which case no payments of the levies in dispute would be made by NLNG to NIMASA pending the re-hearing and determination of the suit. Where on the other hand the right of appeal to the Supreme Court is exercised, the status quo as of the date of the Court of Appeal judgment will be maintained, which is to the same effect.
In spite of these challenges, NLNG says it continues to live up to its name and vision of “helping to build a better Nigeria”.
In addition, NLNG remains a good and responsible corporate citizen, committed to conducting its business in accordance with the laws of the Federal Republic of Nigeria, and abides with all applicable laws including those that confer exemptions on and grant fiscal/other incentives to businesses, as a way of sustaining its operations and growing the economy.
By doing so, NLNG has recorded several feats in helping to build a better Nigeria:
NLNG has monetised over 6.37 Trillion Cubic Feet of Associated Gas to Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGLs), thus helping to reduce gas flaring by upstream companies from over 60% to well under 20%.
From the monetisation of gas hitherto being flared, NLNG has generated over $100 billion revenue since inception; paid over $36 billion to Shareholders as dividends, of which 49% of that total has gone to the Federal Government by virtue of its shareholding stake.
$28 billion paid to Joint Ventures (JVs) feedgas suppliers. 55% to 60% of that amount has gone to the Federal Government courtesy of its stake in the JVs
NLNG is by far the highest individual payer of Companies Income Tax in Nigeria. In 2018, the company’s corporate income tax paid to the Federal Government amounted to about $864 million, over 40% of what was paid in 2017.
World Class Operations at NLNG, ranked number 1 in Plant Reliability in 2018 with the achievement of 98.4% Plant Reliability, projecting Nigeria’s image positively.
Ranked fourth LNG Company worldwide by market share.
NLNG is arguably number 1 in CSR in Nigeria. It has spent over N25 billion on community projects over the years; spent over N2 billion on building world-class engineering laboratories in six Nigerian Universities through the University Support Programme; spending N120 billion on the construction of Bonny-Bodo Road in Rivers State. Furthermore, the company signed an MOU with the Bonny Island community to provide N3 billion each year for 25 years for the overall development of the Kingdom.
NLNG’s planned expansion with the construction of Train 7 will increase plant production by 35%, attracting huge Foreign Direct Investment (FDI)- $2 billion in upstream investment; some $5 billion in construction; creating over 10, 000 jobs during construction etc. The 35% increase is expected to significantly impact on revenue, dividends, taxes profiles and CSR contribution in Nigeria.
Reacting to the Appeal Court ruling, Director General of the Nigerian Maritime Administration and Safety Agency (NIMASA), Dr. Dakuku Peterside, said, “NIMASA and NLNG are neither foes nor competitors. We are corporate cousins working together for the common good of our great country.”
Unfortunately, NIMASA has its role rather muddled up. It should be a trade facilitator which earns ever-increasing revenues by transforming itself into a world-class facilitator as opposed to an investment stifling toll operator.
Here, the country is advertising its ineptitude. Ease of doing business emphasis the sanctity of contracts and the availability of a solid corrective arbitral mechanism rather than a never-ending adversarial system.
The continuing damage to the country’s commercial reputation must be halted. Overall it is hoped that valuable lessons will be learnt about how not to disrupt trade.
- Olukunle, a public commentator, wrote in from Lagos
