Oil producers, NMDPRA disagree over 0.5% wholesale levy collection

•Operators ask regulator to take up responsibility
•Spot lacuna in Petroleum Industry Act

Oil producers and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) yesterday disagreed over who should collect the 0.5 per cent wholesale levy.

While NMDPRA said the oil producers should collect the money and remit the same into its account, the players said the regulator should collect it to avoid putting an additional burden on them.

The Chief Executive of the NMDPRA, Farouk Ahmed, at a stakeholders sensitisation held in Lagos, said the objective of the engagement was to address issues and concerns raised during the first phase of the NMDPRA sensitisation and reach an alignment that would enable the effective implementation of the wholesale supply operations.

Ahmed, who was represented by the NMDPRA Legal Adviser, Joseph Tolorunse, said the Petroleum Industry Act (PIA) came into existence in August 2021, introducing licences for wholesale supply operations as prescribed in sections 142 and 197 of the Act.

According to him, the licences are the appropriate instrument for entities engaged in, or wishing to engage in, the sale and delivery of natural gas and petroleum liquids, for domestic use or exports. He said the benefits of wholesale supply operations include fostering investments across the petroleum value chain, enhancing transparency in hydrocarbon measurement, providing tools for enforcing domestic obligations, ensuring arm’s length dealings for a level playing field and acting as a pathway for willing buyer-willing seller transactions of hydrocarbon resources.

“However, due to unresolved issues, NMDPRA has been overwhelmed with disagreements regarding the implementation of wholesale supply operations. And so, at this stakeholder sensitisation workshop, your issues and concerns will be discussed and NMDPRA’s position on these concerns will be provided, in an interactive manner.

“Once again, as stakeholders in this industry, it is important to note that it is our collective responsibility to ensure that current and future wholesale gas and petroleum liquids supply demands are met. This is not only critical to our national economy but also integral to the global energy market,” he said.

Ahmed appealed to working collaboratively to enable the operationalisation of the guidelines that would pave the way for optimised midstream and downstream oil and gas operations, energise the development of infrastructure and foster collaborations that will contribute to the growth of the nation’s energy sector.

The PIA stipulates that 0.5 per cent of the wholesale price of petroleum products sold in Nigeria, which shall be collected from wholesale customers, will be part of revenue meant for the NMDPRA.

There were arguments about whether the money should be charged separately as in the case of value-added tax (VAT). But the regulator emphasised that the phrase, ‘0.5 per cent of’ was used instead of ‘0.5 per cent on’, arguing that the levy should be deducted from the wholesale price. A representative of Oando PLC, Emmanuel Cofie-Spiff, said the oil producers are not against the law but spotted a lacuna in the PIA as it did not specify who should be the collector.

He noted that industry players have no issues with the regulation, acknowledging that the PIA is the law. However, he explained, the operators have identified certain gaps in the law, which is why they are engaging with the NMDPRA and industry stakeholders to reach a consensus on the way forward.