Nigeria hopes to gain extra $1.5bn in oil revenue from new law
A new bill signed into law by the Nigerian President is set to add $1.5bn to the Nigerian government’s purse annually in two years.
The Nigerian President, Muhammadu Buhari on Monday signed a bill amending the 1993 Deep Offshore and Inland Basin Production Sharing Contract into law from his home in London.
The 1993 law was a series of production and revenue sharing agreements mandating an amendment in the revenue split if oil prices climbed over $20 per barrel.
This new bill adds two revenue streams for the government:
- a flat 10% royalty on all projects over 200 meters deep
- a 7.5% royalty on frontier and inland basins
Last month, Nigeria’s federal government claimed multinationals oil companies owed the country around $62bn in revenue, a claim oil companies dispute. Oil companies operating in Nigeria already received requests for cash in February.
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But Nigerian oil minister Timipre Sylva does not expect to recoup the $62 billion. “Nobody can bring out that kind of money,” he said to reporters after a cabinet meeting in Abuja.
- Sylva urged the government to quickly pass amendments to underlying law to ensure it did not miss out on more revenue.
The Senate passed amendments to the bill on Tuesday last week. This new act gives certain incentives to oil companies operating in the Deep Offshore and Inland Basin areas of the country.
According to the twitter account of the President, “Nigeria will now receive its fair, rightful and equitable share of income from our own natural resources for the first time since 2003”.
But experts argue that the increased revenue might cost the government future investments as it is very likely to increase the operating costs of oil and gas companies operating under PSC arrangements.
There are uncertainties for businesses operating in Nigeria and following a recent slump in oil prices this year, a drop in the revenue of the government has led increasing pressure by the governments and its agencies to raise funding to run the country.
- According to the Debt Management Office (DMO), the total external debt stands at $27.16 billion, while Domestic debt climbs to $56.72 billion.