The Lagos Chamber of Commerce and Industry (LCCI) has asked the Federal Government to consider amending the Petroleum Profit Tax Act with the same provisions in the Petroleum Industry Act (PIA) section 104.
The chamber made the remark following the 2022 Finance Bill as approved by the National Assembly and as it awaits the assent of the president.
Director General of the chamber, Dr. Chinyere Almona, noted that in recognition of the potential impact of the 2022 Finance Bill on the operations of its members in various sectors of the economy, LCCI has reviewed the Bill and made its recommendations.
Almona recommended that with the divestments by some IOCs from the oil and gas sector, the government needs to reposition the industry through a steeply implemented PIA to pave way for new investments and also encourage indigenous companies to reflate the sector with required investments.
She said gas flares-out projects should be incentivized to ensure monetization of the resource for the benefit of Nigeria. The DG also suggested that the 30 percent CIT for all oil and gas companies be retained. She empahssied the need for Finance Bills to be presented for extensive stakeholders’ consultations before they are passed by the National Assembly. On the 2023 budget, the DG promised that the Chamber will continue to work towards mobilising the private sector to support the implementation of the 2023 Federal Budget.
“On achieving revenue targets for the budget, the MDAs and Government Owned Enterprises (GOEs) can intensify their revenue mobilization efforts in an enabling environment where the private sector thrives.”
To achieve the laudable objectives of the 2023 Budget, she urged the government to sustain current efforts toward the realization of crude oil production and export targets by creating an investment-friendly oil and gas industry, saying Public-Private Partnerships (PPPs) are the best models to fast-track the pace of the nation’s infrastructural development.
According to her, recent statistics reveal that Nigeria has struggled to attract investments into the oil & gas industry and that investments in the sector have declined significantly in the last 7 years. “The operations overheads of oil and gas companies remain above 40% above the global benchmark.
“ In line with FGN priorities and ongoing initiatives to incentivize gas production, several sections of the PIA clearly show the determined efforts by the government to limit gas-flaring and contain very steep penalties. Also, gas flare fees/costs are treated as a penalty and as such a non-tax-deductible item. And oil and gas companies in Nigeria have reduced flaring by 70% since 2000 while nearly doubling overall gas production and commercialized volumes in four-folds.
“The oil sector’s contribution to Gross Domestic Product (GDP) through 2022 was just around 5% but this sector accounts for over 85% of foreign exchange earnings and about 50% of total government revenue. This suggests that this sector requires a sensitive regulatory environment to avoid disruptions to investments in the sector.
“With the plan to exit some large enterprises from the Pioneer Status incentives, the Government can save about N6 trillion tax expenditure (waivers, exemptions, incentives granted by the government), according to the Minister of Finance, Budget and National Planning in her 2023 Budget presentation. On the path of caution, we urge the government to tread conservatively in raising tax rates, since there are new ways of rescuing some tax expenditures to add up to government revenue in 2023. Leaving rates at their levels will not lead to a loss of revenue.
“The chamber suggests a retention of the Tertiary Education Tax (TET) rate at 2.5%, since it was just recently increased from 2% to 2.5%. At the proposed rate of 3%, Nigeria’s corporate income tax rate would rise to about 36% which is one of the highest rates in the world, according to available research.”