JV funding swallows government oil revenues
To show its commitment to treating Joint Venture (JV) funding as a first line charge, the Federal Government deployed almost 100 per cent of its revenue earnings to JV Cash Calls (JVCC) in the last one year.
For instance, the Federal Government recorded a total export crude oil and gas revenue of $3.42 billion for the period of July 2015 to June 2016, out of which the sum of $3.41billion was transferred to JV Cash Call in line with 2016 Approved Budget.
In June alone, the Federal Government transferred $241,378,900 to JV to augment the persistent funding shortfall in line with the 2016 appropriation Act.
Already, there is a backlog of joint venture cash call debt, which stands at about $6 billion, which is a heavy toll on the country’s economy.
The Nigerian National Petroleum Corporation (NNPC), which made this known in its June 2016 monthly report, noted that amount falls short of the calendarised Appropriated amount of $712.46 million.
Also, of the N102.68 billion receipt from domestic crude oil sale, the sum of N49.78 billion was transferred to JV cash call being a first line charge and to guarantee continues revenue stream to Federation Account.
The JVCC funding is a first line priority statutory provision in the 2016. Funding approved JVCC commitments is necessary to protect current and future production and the vice versa is detrimental and unlawful.
NNPC insisted that the funding approved JVCC commitments are necessary to protect current and future production.
Besides NNPC has continued to operate at loss as it recorded a total loss of N65.83 billion between January and May 2016.
The June report disclosed that the corporation’s revenue in the first five months was N588.46 billion, while the expenses incurred was N654.29 billion.
The report, however, stated that the national oil firm recorded a profit of N274 million in the month of May 2016, while its three refineries posted losses in the period under review.
It stated: “This report indicate a deficit of N26.51 billion as against trading surplus of N274 million reported in May, 2016.
This trading surplus does not represent net profit, as there are other expenses that should ordinarily have been captured.
“The deficit in the month of June 2016 was majorly due to decrease in revenue generation as a result of decline in PPMC petroleum products sales by 13.30 per cent or ₦14.9 billion and increase in products distribution costs.
“Also June 2016 operations witnessed the major impact of incessant vandalism, during the month more than 261 vandalized points were recorded.
“In Nigerian Petroleum Development Company (NPDC) a substantial portion of crude oil sales for the month estimated to be in excess of the deficit could not be realized due to Force Majeure declared by SPDC as a result of vandalized 48-inch Forcados export line”.
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1 Comments
JV should be made publicly traded companies, so they can source for funds from the capital market. It would also force more operational and financial transparency on them. we are wasting money funding this JV.
We will review and take appropriate action.