LCCI Warns FG Against Removing N6 Trillion Waivers From Oil, Gas Sector

The Lagos Chamber of Commerce and Industry (LCCI) has urged the federal government to proceed cautiously with its intention to save nearly N6 trillion by eliminating tax waivers and exemptions given to some significant oil and gas sector businesses.

The LCCI also informed the government that in order to prevent investment disruptions in the oil and gas sector, a responsive regulatory environment was essential.

It suggested that the government reposition the sector by vigorously enforcing the Petroleum Industry Act (PIA) in order to make place for fresh investments and to incentivize domestic firms to refuel the industry with necessary capital expenditures.

The chamber stated these opinions in a news release titled "LCCI Comments on the 2022 Finance Bill."

It was stated that in order to give the proposed legislation more time for examination, President Muhammadu Buhari deferred his presidential endorsement.

According to the statement made by Dr. Chinyere Almona, Director General of the LCCI, "With the plan to exit some large enterprises from the Pioneer Status Incentives, the government can save about N6 trillion in tax expenditure (waivers, exemptions, and incentives given by the government), as stated by the Minister of Finance, Budget, and National Planning in her presentation of the 2023 Budget.

“But 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 oil sector’s contribution to GDP through 2022 was just around 5.0 per cent but this sector accounts for over 85 per cent of foreign exchange earnings and about 50 per cent of total government revenue.

"This suggests that this sector requires a sensitive regulatory environment to avoid disruptions to investments in the sector.”

The LCCI stated that Nigeria needed to "reposition the industry through a steeply implemented PIA to pave the way for new investments and also encourage indigenous companies to reflate the sector with required investments" in light of some international oil companies' divestments from the oil and gas sector.

According to industry figures, domestic businesses produced 20% of the nation's gas and 40% and 32% of the crude oil reserves, respectively, and contributed around 30% of the country's output of crude oil.

Based on the feedback it obtained from operators in the oil and gas sector and the larger business community, the LCCI also provided recommendations to the government.

It said, “We suggest retention of the Tertiary Education Tax (TET) rate at 2.5 per cent since it was just recently increased from 2.0 per cent to 2.5 per cent.

"At the proposed rate of 3.0 per cent, Nigeria’s corporate income tax rate would rise to about 36 per cent, which is one of the highest rates in the world, according to available research.

“Retain the 30 per cent Company Income Tax for all oil and gas companies; consider amending the Petroleum Profit Tax Act with the same provision in the PIA Section 104.

“Gas flares-out projects should be incentivised to ensure monetisation of the resource for the benefit of Nigeria.

"The LCCI also recommended that Finance Bills should be presented for extensive stakeholders’ consultations before being passed by the National Assembly.

"It pledged to continue to work to mobilise 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 mobilisation efforts in an enabling environment where the private sector thrives.

“To achieve the laudable objectives of the 2023 budget, we urge the government to sustain current efforts toward the realisation of crude oil production and export targets by creating an investment-friendly oil and gas industry. Public-Private Partnerships (PPPs) are the best models to fast-track the pace of our infrastructural development.”