The attention of Nigeria LNG Limited (NLNG) has been drawn to a report by ActionAid, an NGO, which focused on the alleged impact of tax breaks on social services in Nigeria. The report makes several references to Nigeria LNG Limited and purported tax losses to the government totaling $3.9 billion as a result of tax break granted to the company.
NLNG wishes to state that this claim is false and misleading. It is most instructive to note also, that ActionAid itself admits inits report that its figure is a ‘hypothetical’ one.
Contrary to ActionAid’s claim, the reality is that the Federal Government’s initial investment of US$2.5billion, bolstered by the associated tax incentives, has so far yielded over US$ 33 billion in the form of dividends, taxes and feedgas purchases for the country over the past 16 years, with an additional US$ 5 billion accruing through corporate spend on local goods and services during the same period. The company paid $3.6 billion in Company Income Tax and Education Tax between 2014 and 2015.This is in line with NLNG’s corporate vision to help build a better Nigeria.
Nigeria LNG Limited was established at a period when the LNG technology was still very new in Africa. Indeed, the establishment of NLNG made Nigeria the first country in Sub-Saharan Africa to possess such new technology and the second such country in all of Africa. Considering the pioneering nature of such a company in Nigeria, as well as the huge investments required, running to several billions of dollars in foreign investments, NLNG was granted a 10-year tax holiday by the Government of the Federal Republic of Nigeria under the provisions of the Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act, CAP. N87, Laws of the Federation of Nigeria, 2004 (“NLNG Act”).
The concept of tax holidays are not unusual practice in the global business community. Indeed Angola has notably offered as much as 12 years tax holidays to encourage investments in their LNG industry, while other countries like Oman, Malaysia, Qatar and Trinidad have offered up to 10 year tax holidays to attract LNG investments.
Additionally, more generous tax incentive schemes currently exist in free trade zones in Nigeria where participants are granted absolute exemption from all forms of taxes and levies chargeable by any level of government, in perpetuity. Several well-known corporations in the country have and are currently investing in these zones (in logistics, infrastructure and refineries, to name a few of such ventures) on the basis of such perpetual and overarching tax incentives.
NLNG’s tax holiday period was from 1999 to 2009 and, contrary to the observations in the report, is expressly provided for under Section 2 of the NLNG Act, an Act of Parliament.
During that period, NLNG grew from an initial investment of two trains to 6 (six) train facility, as the construction of the additional trains was funded, mainly, by approximately US$3billion of returns generated from the project during the tax break period. The current total valuation of the now 6- (six) train plant is US$16billion.
At the expiration of the tax holiday period for NLNG, the company did not have taxable profit for the 2010 to 2012 financial years due to unrelieved Capital Allowances on qualifying fixed assets acquired during the pioneer period. The Capital Allowances were duly applied in line with the provisions of the NLNG Act and Companies Income Tax Act, CAP C21, Laws of the Federation of Nigeria, 2004.
Regardless, NLNG paid Education Tax in the sum of US$65.08million, US$107.04million and US$118.59million for the 2010, 2011 and 2012 financial years, respectively.
NLNG is a good corporate citizen and believes in the payment of applicable taxes. This belief drives its commitment to dutifully discharge that obligation in accordance with Nigerian law.
In addition to this, NLNG has contributed to the socio-economic wellbeing of the country, impacting positively on host communities and the larger society it operates. Over the years, NLNG has, among other things, invested in the provision of amenities (24 hours electricity, roads and pipe borne water) to thousands of households and businesses in our primary host community on Bonny Island, where its plant facility is located. In addition, the company supports the improvement of infrastructure, health and educational facilities and encourages local enterprise, facilitating knowledge exchange and reinforcing local capacity in the sustainable use of resources.
NLNG has continued to support education in Nigeria through several capacity building initiatives and the sponsorship of The Nigeria Prize for Science and The Nigeria Prize for Literature worth $100,000 each in annual value to the winners.
A recent addition to NLNG’s corporate social responsibility portfolio is the University Support Programme formally announced in 2014 and valued at $12 million. The programme involves the building/refurbishment and equipping of ultra-modern engineering laboratories in six (6) carefully selected universities from across Nigeria, as part of the company’s targeted support towards the development of teaching and research.
NLNG is owned by four shareholders, namely, the Federal Government of Nigeria, represented by the Nigerian National Petroleum Corporation, NNPC (49%), Shell Gas BV, SGBV, (25.6%), Total LNG Nigeria Limited (15%), and Eni International (N.A,) N. V. S. a. r. l (10.4%).
Kudo Eresia-Eke
General Manager, External Relations Division
