First quarter 2019 offshore operations VAT contribution decreases by 50%

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In the first three months of 2019, value-added tax contribution from offshore operations comprising exploration and production decreased by as much as 50 percent compared to the same timeframe last year showing a reduction in production activities.

Offshore operations contributed N797 million in the three months to March 2018 and in the first quarter of 2019 it remitted N529 million to the Federation Account, data published the National Bureau of Statistics (NBS), show. Three months to June 2018, the sector had contributed N547 million. In the third quarter, it contributed N549 million and in the three months to December 2018, it contributed N668 million.

Experts have continuously said that uncertainty over fiscal terms in the Petroleum Industry Governance Bill and volatility in oil prices contributed to the delay in final investment decisions (FID) by investors. This delay is rearing up its head in the falling VAT contribution of offshore operations to the basket. Decreasing offshore operations means Nigeria’s oil-driven economy is faced with a future of diminishing oil reserves and daily production.

“Our oil reserves today are a thirty-year reserve so technically unless there are new serious finds, in 30 years your oil should be dwindling. Gas is in 60 years, although luckily it’s seen as a cleaner fuel. Our issues have been our ability to harness it quickly, put infrastructure and replicate its usage” Ibe Kachikwu, former Minister of State for Petroleum Resources said in a recent interview with BusinessDay and other journalists. “We need to quicken our ability to produce.”

Delay in reaching a final investment decision on $13.50 billion Zabazaba deepwater project, which was supposed to have happened in December 2018 has stalled the creation of 10, 000 jobs experts have estimated.

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