NIMASA Vs NLNG: As The ‘War’ Over Levies Continues…

BETWEEN the Nigerian Maritime Administration and Safety Agency (NIMASA) and the Nigerian Liquefied Natural Gas Company Limited (NLNG), it is about who throws the next dice. What started like a little dispute between the two institutions of equal substance has assumed a major conflict that could inflict severe damage on the economy if allowed to continue. The crisis over alleged refusal to pay statutory charges and levies deepened a week ago as NIMASA served detention notice to vessels belonging to/chartered by NLNG. While NLNG Niger described the action as violation of a court order, NIMASA said it was unware of any injunction and that it was enforcing extant laws, which empowers it to collect charges from maritime operators. A statement by the Deputy Director, Public Affairs, NIMASA, Isichei Osamgbi, read: “The Nigerian Maritime Administration and Safety Agency (NIMASA), has today in its enforcement of Nigerian laws, served detention notices/orders on vessels belonging to/chartered by the Nigerian Liquefied Natural Gas Company Limited (NLNG). “This course of action was forced on NIMASA by the NLNG’s subsequent refusal or/and failure to abide by the outcome of the negotiated settlement arrived at through the mediation process it willingly instigated and subscribed to after reaching agreement with NIMASA on its outstanding debt and paying $20m out of it and its continued flagrant disregard for Nigerian laws. “Contrary to NLNG’s position, NIMASA is not aware of any court order against it or any suit brought by NLNG against NIMASA. “By its action, the NLNG has trivialised the mediation process and the position of the Federal Government of Nigeria whose Nigerian National Petroleum Corporation owns and holds 49 per cent of the shares in NLNG and which endorsed the agreement reached that NLNG should pay its taxes/levies and observe all its obligations under the laws of Nigeria in which it is operating.” Spokesman of NLNG, Kudo Eresia-Eke, had described the action as a flagrant disregard for court order while disclosing NIMASA’s restriction of LNG Enugu, LNG Oyo and LNG Imo, were from leaving the company’s loading bay. “The potential implications of this current action by NIMASA on Nigeria LNG operations are enormous and would impact negatively on its international customers,” she said. NLNG said it paid about N3.2 billion in outstanding levies to NIMASA “under protest” and filed a suit on June 18 against the agency to seek judicial interpretation on the legality of the levies. On May 18, NLNG was directed to pay outstanding levies to NIMASA after an arbitration panel ruled that the liquefied gas giant was not exempted from the levies due to NIMASA. The presidency and the Ministry of Transportation, at different stages, had waded into the feud that dates back to the days of Dr. Ade Dosunmu. After a long-drawn negotiating process, the duo agreed to the payment of an estimated sum of about N26.8billion, out of the N32.8 billion NIMASA had estimated the arrears owed by NLNG from the period of the presumed expiration of the waivers granted the company by the Federal Government at inception. Dosunmu had moved to mine the obviously huge funding option via a letter dated August 20, 2007 and addressed to then Minister of Transportation (Water). The former NIMASA boss had informed the minister of the agency’s readiness to commence the collection of the three per cent “statutory levy on the Nigeria Liquefied Natural Gas (NLNG) Limited sale/commercial shipment of its gas and other hydrocation products. “At the inception of the NLNG project in 1988/89, the Minister may wish to recall that in recognition of its magnitude and in consideration of the huge investment to be made by the foreign joint venture partners, the Federal Government granted a package of incentives and tax relief through the NLNG (Fiscal incentives, guarantees and assurances) Decree No. 39 of 1990… “On duration or period of the relief granted section 2 provides: Notwithstanding the provisions of section 10 of the industrial (Income Tax Relief) Act 1971, the tax relief period of the company shall commence on the production day of the company and shall continue for a period of 10 years. Dosunmu explained that under the repealed National Shipping Policy Act 1987, attempts by the legacy National Maritime Authority (NMA) to collect the three per cent statutory levy in the early 1990’s made the NLNG Limited to compel the Federal Government to extend the incentives and relief to include exemption from the payment of the agency three per cent levy. According to him, this was done through the NLNG fiscal incentives guarantees and assurances Amendment Decree No. 113 of 1993. Dosunmu insisted that the period of incentives and tax relief granted the NLNG had since elapsed, which makes it one of the agency’s sources of funding under section 17 of NIMASA Act 2007.” The NIMASA boss had written previously: “Following the expiration of the incentives and the relief period, the agency is notifying the Minister that there is need to put the necessary logistics in place for the collection of our statutory three per cent levy on NLNG/BGT gas sale as it is done to all other commercial shipments in or out of Nigeria.” A report said a reply from the ministry endorsed by Dr. Aliyu Jimada and dated September 26, 2007, said: “I have been directed to refer to your letter Ref. No. NIWA.1937/DG/FMOT/C.63 dated August 20, 2007 and to convey the Minister’s approval for you to commence action for the collection of the three percent statutory levy on the NLNG commercial shipments. You are, however, to engage outside consultants in the collection of this levy through due process and to forward your recommendation for approval. Yet, another letter was issued to the NIMASA DG from the Minister of Water Transportation On March 3, 2008. Signed by Mrs. P.G. Bajoga, the letter stated: “I am directed to refer to a letter addressed to the Chairman, President Committee on Grant of Waivers and Tax Exemptions, Abuja dated 5th of November 2007… a copy of which was forwarded to Minister of Transportation (Water) and to inform you that the Minister … is in support for your request to demand for the statutory three per cent levy from NLNG as empowered in your Act”. Dosunmu was said to have also on September 21, 2007, written NLNG Managing on the matter. He explained in the letter that the waivers the company enjoyed had elapsed and that the agency had been cleared by the Government to commence the collection of the said the statutory levies. “The management of the Agency will appreciate a meeting with the management of NLNG with a view to sorting out the modalities for the commencement of the discharge of this statutory responsibility. On April 21, 2008, Dosunmu wrote a remainder letter. He wrote subsequently detailing the transaction data of NLNG. A response from the NLNG Managing Director/Chief Executive Officer, Mr. Chima Obineche, on July 24, 2008, argued that the company had not achieved the threshold upon which it the government said its tax holiday would elapse. “The foregoing notwithstanding, we respond to each of your specific requests as follows: Commencement date of production Trains one and two – September 15, 1999, Train three – November 28, 2002, Train four and five – November 2005 (note that Train five start-up was actually achieved in February 2006),” the NLNG boss noted. She also insisted that the date of first shipment was October 9, 1999 for Train one and two, December 17, 2002 for Train three, January for Train four and five, noting that “NLNG maintains an integrated operation” while vessels are nominated and scheduled on the basis of “availability and other necessary considerations… “It might interest you to know that the Federal Inland Revenue Service (FIRS) the only body or institution in Nigeria statutorily charged with the determination, assessment, computation and collection of corporate income tax from entities subject to Federal Government taxation, recently advised from the results of their computation that the $3/mmbtu threshold as far back as 2003 and re-affirms our painstaking explanation … that that the assertion was totally incorrect… As you may be aware, the next calculation date falls due on October 9, 2008 and we now request with this confirmation from FIRS that we be allowed to continue our business without further issues being raised on this matter through your persistent demands for payments not due to you.” In another letter, the company noted: “Nigeria LNG Limited’s business (including its shipments) cannot be subjected to the provisions of the NIMASA Act, such law not being of general application to all companies incorporated in Nigeria, especially as much as it relates to the payment of the three per cent levy.” Many expected Dosunmu’s successor, Temi Omatseye, to pick the gauntlet but for whatever reason he was rather quiet on the matter for the two years he was in charge of the volatile maritime sector. As the battle of wits between NIMASA and NLNG continues, the former, in a recent advertorial, claimed that as a self-finding body, the action of the gas company is incapacitating its operations, arguing that the blatant refusal to honour its liability is instigating non-compliance from other operators. Apart from paying the charges nine after the grace was said to have expired, NIMASA accused NLNG of rejecting demands that vessels used by its subsidiary, contractors and customers pay the stipulated two per cent cabotage of the contract sum. Courtesy: Guardiannews