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‘Why Senate may remove DPR from 2021 budget’

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Nigeria has, over the last three years, generated more than N5.4 trillion into the federation account from oil and gas royalties, signature bonuses, rent, gas flare penalty and others, through the Department of Petroleum Resources (DPR).

This was as The Guardian gathered, yesterday, that the Senate is currently backing a move, which could see the DPR left without budgetary allocations and to run independently.

In the event that the move is implemented, some stakeholders have, however, raised concerns about the current structure of the department. While noting the absence of financial autonomy and legal backing for the DPR, they expressed the fear that such move could compound the challenges facing the industry regulator, and undermine government’s attempt to improve ease of doing business in the country.

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Senate Committee on Finance and National Planning, led by Olamilekan Adeola, at a session on the 2021 – 2023 Medium Term Expenditure Framework and Fiscal Strategy Paper (FSP), had insisted that the DPR was generating enough to run independently, adding that there was need for revenue generating agencies to run independently of budgetary allocation in the face of the pressure on government revenue.

Data obtained by The Guardian showed that from 2018 to July 2020, Nigeria generated as much as N4.4 trillion from oil and gas royalty with over N1.8 trillion generated in 2018, N1.7 trillion in 2019 and N835.6 billion so far in 2020.

About N156.5 billion was realised from gas flare penalty in the years under review as the country earned a meagre N4.8 billion in 2018, raked in N94 billion in 2019 and N57.6 billion in the first seven months of 2020.

In terms of concession rent, DPR generated N3.2 billion. In 2018, N734.5 million was raised, N793.7 million in 2019 and N1.6 billion in the first seven months of this year.

Miscellaneous oil revenue for the period stood at N18.6 billion as N5.4 billion was generated in 2018, N5.7 billion in 2019 and N7.4 billion in seven months.

Revenue from good and valuable considerations was N15.3 billion in 2018, it went to N129.6 billion in 2019 and in the first seven months of 2020 stands at N19 billion, bringing the figure to about N164 billion in the period under review.

Earnings from signature were N1.5 billion in 2018, N44 billion in 2019 and N70.4 billion so far in 2020. The total earning from 2018 to date stands at N116.8 billion.

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The country earned N336.7 billion from lease renewal bonus in 2018, N107 billion in 2019 and N144.5 billion so far in 2020 as the figure stood at N588.4 billion for the total period.

Reacting to the Senate’s stance, industry experts noted that while DPR collects revenue, which is expected to be paid directly into the federation account through the Central Bank of Nigeria (CBN), seeing the agency as a revenue-generating agency that should fund itself would lead to multiple taxation and deviation from regulatory activities.

While the Senate raised concern over statutory four per cent collection fee deducted by the department, mineral and energy resource economist, Professor Wunmi Iledare demanded a legal basis for which autonomy could be granted.

Iledare stated that the department needed legislative act to ensure structural autonomy, financial autonomy, as well as governance autonomy considering that the body is only a department of the petroleum resources ministry.

A former President of Nigerian Association for Energy Economists (NAEE), Iledare said: “Financial autonomy without structural autonomy and independent governance is worthless and may lead to inefficiency and pre-bendalism, which rocks other agencies of government.

He advised that the move to allow the department fund itself be deferred until the reforms of the sector were implemented.

For former management staff of the Nigerian National Petroleum Corporation (NNPC), Dr. Diran Fawibe, the department is not designed as a commercial organisation whereby it could provide fund to run its operations.

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The implications of such decision, according to Fawibe, who is the Chief Executive Officer at International Energy Services Limited (IESL), would be seen in arbitrary charges on licences and permits, a development he feared could undermine government’s move to reduce cost of doing business.

“That will create a lot of challenges for oil companies. Currently, there are increases in the number of licences needed in areas of operations, which ought to be less. If DPR does not get fund anywhere else, you will see an escalation in the various fees being demanded,” he stated.

While agencies such as the Nigerian Content Development and Monitoring Board (NCDMB) survive on its own, Fawibe noted that the one per cent contribution it gets from projects in the sector serves as a good buffer, stressing that the DPR may need a stable income stream backed by legislation.

“I don’t support the idea of allowing DPR to run on its own. There should be allocation or fund and they should identify various means of fund for the agency. We used to have contributions from oil companies going into various sectors, especially education. There has to be a percentage contribution from companies to create enough fund,” he said.

Fawibe added that DPR collections are usually paid to the government, adding that its exit from budgetary allocation could force the department to tamper with such fund.

To him, beyond the 4 per cent cost of collection fee, government may consider raising fund for the department from the fund it collects for the federation.

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