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 February 2, 2016 - 6:18 PM EST
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Country Ends Oil Swap Deal in March

The minister of state for petroleum resources, Dr Ibe Kachikwu, has disclosed that the federal government would save $1 billion from the Direct-Sale-Direct-Purchase (DSDP) arrangement which will replace the crude-for-refined products exchange arrangement popularly referred to as crude swap, a policy that would take off next month.

The minister also disclosed that the price modulation policy had rid the federal government of the burden of subsidy on imported petroleum products in January 2016.

Also, the Federal Inland Revenue Service (FIRS) is targeting N4.95 trillion revenue in the 2016 fiscal period to help fund the federal government budget.

Kachikwu made these disclosures yesterday when he appeared before the House of Representatives Ad-Hoc Committee set up to investigate the Corporation's offshore processing and crude swap arrangement for the period between 2010 to date at the National Assembly.

He explained that the DSDP was adopted to replace the Crude Oil Swap initiative and the Offshore Processing Arrangement so as to introduce and entrench transparency in the crude oil for product transaction by the Corporation in line with global best practices.

Under the old order, crude oil was exchanged for petroleum products through third party traders at a pre-determined yield pattern.

But Kachikwu, in a statement issued yesterday by the NNPC spokesman, Ohi Alegbe, noted that the DSDP option eliminates all the cost elements of middlemen and gives the NNPC the latitude to take control of sale and purchase of the crude oil transaction with its partners, adding that the initiative would save $1 billion for the federal government.

He said, "When I assumed duty as the GMD of NNPC, I met the Offshore Processing Arrangement (OPA) and, like you know, there is always room for improvement. I and my team came up with the DSDP initiative with the aim of throwing open the bidding process. This initiative has brought transparency into the crude-for-product exchange matrix and it is in tandem with global best practices."

According to Kachikwu, the DSDP initiative whittles down the influence of the minister in the selection of bid winners, as it allows all the bidders to be assessed transparently based on their global and national track record of performance before the best companies with the requisite capacities are selected.

Clarifying the need for the introduction of the DSDP, the minister told the committee that the policy is aimed at reducing the gaps inherent in the OPA and the losses incurred by the NNPC in the past.

He stated that the new arrangement would help the Corporation to grow indigenous capacity in the international crude oil business and generate employment opportunities for indigenous companies that are selected.

Kachikwu further informed the committee members that the DSDP initiative gives other government agencies such as the Bureau of Public Procurement (BPP) and Nigeria Extractive Industry and Transparency Initiative (NEITI) the opportunity to be part of the bidding process in order to ensure due process.

Speaking on some of the reported misgivings by some federal agencies over the alleged non-transparent nature of past crude-for-products exchange arrangements, the minister assured that the reconciliation process was ongoing.

He added that, going forward, the ministry would deploy technology to track cargoes and transhipment at the reception depots in order to forestall any incidence of round tripping.

FIRS targets N4.95trn revenue in 2016

Meanwhile, FIRS executive chairman, Mr Babatunde Fowler, has given a breakdown of how the tax agency would collect the N4.95trn revenue it is hoping to generate this year.

Speaking at the opening session of its corporate strategy retreat yesterday, the FIRS boss said a total of N2trn is expected from Value Added Tax (VAT); N1.87trn from Companies Income Tax, N800bn from Petroleum Profit Tax, N180bn from Education Tax and N20bn from the National Information Technology Development Fund.

He said, "We have proposed a revenue target of N4.957trillion for 2016. This target is largely dependent on non-oil collections; in particular, VAT will account for N2trn and CIT is expected to account for N1.87trn.

"Between them, these two taxes are expected to provide almost 80 per cent of our collection in 2016. We therefore have our work cut out and there is no room for complacency."

On the revenue performance of the service for the 2015 fiscal period, the FIRS boss said the service was able to generate a total of N3.74trn out of its target of N4.57trn.

For VAT, he said the sum of N767.33bn was generated out of a revenue target of N1.28trn.

He said out of a target N1.48trn for PPT, the service was able to generate N1.28trn while in the area of CIT, the service collected N1.29tn from the target of N1.51trn.

He said, "The above performance is clearly unacceptable and is not a reflection of our capacity. I am particularly not pleased with the very poor VAT collection, which, based on my previous experience at the state level in the administration of tax similar to VAT, should be high yielding and easy to collect.

"Even the relative good performance of CIT is buoyed by the fact that an initiative directly overseen by my office in the last three months of 2015 accounted for a collection of over N122bn, without which the performance for CIT would have been less than 85 per cent."

He said owing to the fact that the level of voluntary tax compliance was still low, the service had introduced a number of initiatives aimed at improving compliance to about 90 per cent.

He said that, as part of efforts to reduce complacency, the service had introduced a performance management strategy to ensure that it meets its target.

He said, "As part of this enhanced performance system, we have increased the threshold for payment of performance bonuses from 60 per cent to 70 per cent.

"It is our expectation that you will not only meet, but surpass this 70 per cent threshold because if we meet only 70 per cent of our target, then government will be unable to fund the 2016 budget."

In his remarks at the event, the minister of Budget and National Planning, Udo Udoma said the reforms being carried out in agencies of government had provided a platform to generate additional revenue from non-oil sources.

He said the country had yet to take advantage of its size as the largest economy in

to generate enough revenue from non-oil sources, as
tax to Gross Domestic Product ratio is still below global average.

Specifically, the minister stated that

tax revenue performance is 7.4 per cent of GDP compared with 27.4 per cent in
South Africa
, 18.7 per cent in
and 19.5 per cent in

Reps Probe: Kachikwu's responses on oil swap anger lawmakers

Members of the House of Representatives Adhoc Committee on Crude Oil Swap have expressed reservations over the capacity of the present managers of the nation's oil and gas sector to reposition the sector for optimal benefit.

The lawmakers' position followed the failure of the Minister of State for Petroleum Resources and group managing director of the Nigerian National Petroleum Corporation (NNPC), Ibe Kachikwu, to provide it with satisfactory answers to questions during an ongoing investigative public hearing on crude oil swap arrangement.

The minister drew the anger of the Committee following his repeated attempts to evade questions by providing vague answers on how beneficial the oil swap arrangement was to the nation.

The Committee also asked the minister to inform it on the extent to which due process was adhered to during the bidding process, in addition to what might have led to the determinant circumstances for the agreements.

The Committee however lost its patience with the minister when he asked his subordinates not to commit themselves to figures they were not sure about.

The minister was reminded that he was on oath and needed to take responsibility, and that as he was new on the job, his posture might not help the Committee in its assignment.

He was also told that he had the advantage of subordinates at his disposal to assist in furnishing him with necessary information rather than put the Committee in a tight spot.

Kachikwu, who disclosed that the country had stopped paying subsidy for petrol from over N1 trillion in 2015, however insisted that he could only offer what he was sure of.

He said: "I was invited here without adequate preparation and without notes. There is nothing I have said here that does not show cooperation. Being under oath, I won't give you what I don't have fact about. What I expect you to ask from us are documents that we can provide."

At this point, the Committee reminded him that the invitation letter was explicit about the issue on the table.

The Committee however mandated the Federal Inland Revenue Service (FIRS) to find out whether Trafigura, a non-resident oil trading company, complied with

tax laws, after it was said to have lifted crude oil in the swap arrangement without paying relevant taxes.

The Committee was surprised that Nigerian companies that were involved in the same arrangement paid their taxes while a foreign company was allowed to short-change the country where it was doing business.

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Source: News (February 2, 2016 - 6:18 PM EST)

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