Nec Endorses Alternative Oil And Gas Joint Venture Funding Regime, Eliminates Cash Calls
SAN FRANCISCO, November 17, (THEWILL) – The National Economic Council (NEC) has endorsed a new funding regime for the oil and gas industry, eliminating the onerous cash call regime which has dragged the industry in about a decade, stalling growth.
This is one of the highlights of NEC's meeting, on Thursday , which is the constitutional body set up to advice the president on the economic affairs of the federation. Chaired by the Vice President, while the governors of all 36 states of the federation and the Central Bank governor are statutory members.
The alternative funding stream had been approved earlier this week at the Federal Executive Council meeting on Wednesday and then presented today to NEC, as the body mandated to come up with “measures necessary for the coordination of the economic planning efforts or economic programmes of the various Governments of the Federation.”
Minister of State for Petroleum Resources, Dr. Ibe Kachikwu stated that the current upstream Joint Venture arrangement in the Nigeria's oil and gas industry is unincorporated Joint Venture (UJV) meaning that NNPC and the International Oil Companies (IOCs) partner in each Joint Venture as unique and separate legal entities.
He noted that while the NNPC pays the entire Oil and Gas revenues realised from the JV operations into the Federation account, the production costs are appropriated, calendared and paid monthly as Cash Calls to the JV operations from the NNPC and IOCs.
According to the Minister, January – November 2016 underfunding of the NNPC Cash Calls is estimated at US$2.3 billion. This is in addition to the inherited arrears estimated at USD$6.8 billion for year ending 2015.
However he disclosed that through negotiations the $6.8B past due Cash Calls burden on the Federation has now been reduced to $5.1B, which would be paid based on an improved oil production output.
Under the new funding stream, the JVs would become incorporated and source for their own financing, freeing-up the FG from the budgetary obligations of coming up with the cash calls already put at $2.3B so far this year alone.
According to Laolu Akande, Senior Special Assistant on Media and Publicity, Office of the Vice President, NEC received a presentation from the Ministry of Industry, Trade and Investment and relevant agencies on energizing the MSMEs sector as a major Economic Growth Drive.
The Ministry informed the Council that the total estimated number of MSMEs is 37,067,416 MSMEs in Nigeria, and their contributions to employment is 84.02%, 48.47% to GDP, and 7.27% to export.
Of the total number, micro enterprises account for the majority, (99.8%) of the MSMEs in Nigeria, with 36,994,578 enterprises, 68,168 small enterprises, and 4,670 medium enterprises.
The Governor of CBN made a related presentation to the Council on financing opportunities critical for MSMEs development reporting that the reason for the CBN's involvement in MSMEs is to increase lending, provide access to affordable credit facility, and diversify the country's economic base, create jobs and improve microeconomic stability.
He stated that the CBN has a fund for such purposes in excess of N200B meant to provide affordable loans to MSMEs, adding that for instance in about three states the Bank has helped 120, 290 small holder farmers under the Anchor Borrowers Programme launched by President Muhammadu Buhari, creating more than 500,000 jobs.
Story by Oputah David