Deputy Managing Director of the NLNG, Mr. Isa Mohammed Inuwa, has said that the organisation was not afraid of probe as its records are clean. In this interview with DGossip247, Inuwa explained NLNG’s involvement in the bail-out money given to states by the Federal Government.
Why did NLNG pay $1.6bn to government recently?
First of all, let me say that what we paid was statutory; statutory in the sense that it was mandated by the law. Before you make the payment, there are elements of timing and approval. The payments that we made essentially had to do with tax. The tax laws provide for payments at certain times.
This is where the timing consideration comes in, but before you make that payment, there must be an approval and that approval comes from our Board of Directors. The Board will give approval on the basis of an initial approval from them for the accounts themselves on which the tax is based. Let me explain in another way. We pay for tax on the basis of approved accounts, which accounts are only approved by the Board. The Board approves the accounts for the shareholders and then they now approve that we go ahead and make tax payment.
The second side is the timing. I can’t pay tax before it is due and I can’t pay tax until I know how much my earnings are, apply the tax laws or rules, come out with what are my accessible profit and my tax liability and then pay that tax. When we paid the tax was when we were statutorily allowed or demanded to pay that tax. It has absolutely nothing to do with anybody, any event or any other consideration, apart from what I mentioned, namely, approval and timing.
Is the $1.6 billion NLNG payments used to bail out the states dividend or tax?
What we paid was tax and that, to the best of our knowledge, is what the Federal Government of Nigeria monetised and used to bail out states and, of course, the Federal Government itself. Dividend is another matter; dividend is payment you make out of appropriation of retained earnings.
In other words, investors expect benefits from their investment, which comes out primarily and in monetary terms in the form of dividend. We pay dividend as and when due and we pay to our shareholders, which includes NNPC that is the custodian manager of Federal Government’s assets with NLNG. To restate, what we paid and what has become an issue of contention as it were is tax and not dividend.
The opposition party, the PDP, in one of its statements, claimed that the NLNG has been on tax holiday for 10 years. How true is this?
It is not so much about 10 or 12 years or whatever. NLNG is a peculiar organisation, in the sense that I think it is probably the only incorporated company that has its own laws and a whole Act passed or legislated upon for it. For a reason, when it was time to make the investment for NLNG, I suppose the shareholders perceived so many risks.
They convinced government to mitigate those risks by coming up with certain provisions of legislation and, therefore, we had NLNG Act. One of the things the Act specifies is our fiscal liabilities, in other words, what are we able to pay and when. Just like we have the Free Trade Zones’ tax holiday periods to encourage investors to invest. It so happened that it was also applicable to NLNG. So, we have come to the end of the tax period and that is why we are paying the tax now.
The president said that he would consider calls by the APC to probe tax and other remittances by the NLNG to the previous government. How is the NLNG taking this?
Government has a right to probe into statutory matters and tax is one of them, but the Federal Government of Nigeria, for example, cannot come and probe what I signed here or what I did not sign here, but they can probe things that relate or are elements of relationship between NLNG and government itself and one of them is tax payment. Another one is our compliance with environmental laws; they can come and investigate us. But they cannot come and investigate my Board of Directors on how do we meet, what we say when we meet, no, the Federal Government cannot do that.
How was NLNG able to pay $1.6bn despite a decline in its revenue?
There is what is known as time lag when you pay tax; there is financial year, the day that you open your books and the day that you close. Our financial year is January 1 to December 31. The part that we paid this year 2015 relates to our earnings in 2014.
I would love that we will be able to even pay more tax in 2016 on the basis of our 2015 performance. However, the market and the environment have changed and I don’t want to pre-empt what we will come up with. We are doing fairly okay, but we are just saying that our performance is not as good as 2014 and it therefore follows that our tax payment, maybe, will not be as high as we made in 2014.
What was the significance of the visit to the president by NLNG board?
We went to the president to pay our respect; he deserves our respect and support. The Board of NLNG, along with the management and staff, went to pay our respect to him. But we also used the opportunity to intimate him of what has happened to his baby between when he was Minister of Petroleum Resources in the 70s and now.
It was amazing because instead of us educating him, he ended up educating us about NLNG and told us things that we didn’t even know. For example, he told us that when the feasibility study for NLNG was brought, it was for 12 trains and he was amazed that we were still at six and that by their plan at that time, the first cargo was supposed to be shipped in 1983. We ended up shipping the first cargo in 1999. That is a difference of about 16 years. It was really gratifying to hear commitment of support coming from him. We are looking forward to taking him up on those commitments, particularly with respect to two areas. One, our growth plans, particularly Train 7. Secondly, the streamlining of regulations that affect our business and, of course, our bottom-line.
They (the regulations) are several; they range from environment to weight and measures, issues relating to maritime facilities and levies. What we face is a situation where various organs of government are chasing us for different fees and we are subjected to a lot of regulations, some of which are at cross roads and he promised to look into them.
What is your take on the controversy over the role of NLNG in the dry dock project?
NLNG decided some time ago to build six new ships in Korea and as part of the Nigerian content drive, it was agreed as part of the contract commitments, that the two companies will facilitate the development of a dock yard. In other words, the two companies building the ships will facilitate the establishment of a dock yard. At that time, we were looking at primarily their technical expertise, their names and their international network, to be able to bring that project into fruition. It was never ever the intention of NLNG to be an investor or a shareholder in that company. Our role was simply to facilitate and to promote it.
So, essentially, we are lending our organisational capabilities and our name to a project that was going to be owned, built, managed and run by other people. We started the process, first as our own contribution, we appointed a consultant to do feasibility studies, which we paid for.
The second thing that we did was to organise a road show and develop investors’ selection criteria that were applied and we chose through a very transparent process some investors that are willing to invest in that project and run it. We did that successfully and we are very proud of what we were able to do to the extent that we can say that the project now has investors and the investors are working to attract money and drive the project.
Some of the NLNG contracts would be expiring in 2021. What are you doing to ensure that you negotiate new contracts for NLNG?
Yes, the first contract that will expire will be in 2021 and we have contracts expiring in 2023, 2026 and so on. I am glad that you understand how we operate. Obviously, we have long time contracts with the minimum of 20 years and it means that we just have to start the re-marketing (that is what we call it) in good time before the actual expiration. As at today, we have developed a re-marketing strategy and defined what customers we are going to chase, what volume we will be selling to them and what elements of negotiation we will bring to bear, among others. For us, the re-marketing would not be of too much challenge for a very simple reason.
We are one of the most reliable LNG supplies in the world. We have held our customers, we manage them, but most importantly, we carry out our own bargain of our supply contracts. In the last two months, two of our buyers, one in Spain and the other in Turkey, have been asking when are you coming with draft contracts so that we can sign. This is because we are reliable and we take this business as something that is of much benefit. We give, we take. It is not that we must get 100 per cent and you get nothing. No. We see it as a partnership and l have absolutely no doubt in mind that it is the same kind of response that we would be getting from our existing buyers.
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