Court Affirms NMDPRA’s Powers To Impose And Collect Levies

By Clement Alphonsus
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In the first major judicial decision on the Petroleum Industry Act 2021, the Federal High Court has expressed approval over the power of the Nigerian Midstream and Downstream Petroleum Regulatory Authority to impose and collect levies on petroleum products sold in Nigeria.

In an action filed by IHS Nigeria Limited and INT Towers Limited against the NMDPRA, the plaintiffs disagreed that they were not liable to pay statutory 0.5 percent levies for the ‘Authority Fund’ and the ‘Midstream and Downstream Gas Infrastructure Fund’ on petroleum products they import, this was disclosed by NMDPRA in a statement issued in Abuja on Sunday.

The regulator also noted that they requested for the court to declare two key regulations for the implementation of the PIA void and illegal.

The regulations include the Midstream and Downstream Petroleum Operations Regulations 2023, which define the concept of ‘sold in Nigeria’, and the Petroleum (Transportation and Shipment) Regulations 2023, which sets out the information the NMDPRA may demand from a permit holder.

According to the statement, the plaintiffs argued that regulations be declared void and illegal on the basis that they overreached sections 47(2) and 57(7) of the PIA and amounted to a breach of the constitutional right to personal property respectively.

The NMDPRA said, “Delivering judgment in the suit on Monday, February 5, 2024, Justice Inyang Ekwo of the Federal High Court Abuja Division, agreed with the arguments of the NMDPRA counsel Dr Emeka Akabogu and affirmed the validity of the Midstream and Downstream Operations Regulations 2023, as well as the Petroleum (Transportation and Shipment) Regulations 2023.

“The court held that the regulations neither overreach nor conflict with sections 47(2)(c) and 57(7)(a) of the PIA which provide for payment of a one percent levy on petroleum products and natural gas sold in Nigeria.

“The court found that the definition of ‘sold in Nigeria’ covers three distinct situations – where the goods are sold ‘fob’ in Nigeria or its territorial waters, where they are loaded or offloaded for sale within a wholesale point in Nigeria, or where the transaction originates, occurs or is concluded in Nigeria."

On the implication of the judgment, the regulator noted that it has confirmed the wide discretion granted to the NMDPRA under section 33 of the PIA to regulate the sector through subsidiary legislation.

It said, “It also has a far-reaching impact on natural gas and petroleum products meant for export, which are automatically covered by and subject to the provisions of the MDPO regulations.

“Thus, petroleum producers who sell and export such products are liable to payment of the levies as a precondition for valid export operations."

The Nigerian Midstream and Downstream Petroleum Regulatory Authority, established in September 2021, has the mandate of providing a more efficient and effective regulatory framework for the Nigerian petroleum industry.