The FG has finally announced the cancellation of joint cash with oil companies operating in Nigeria. The announcement came on a day the govt. said it had also uncovered heinous acts of frauds in the revenue generating agencies. Main reason for the cash call withdrawal was principally hinged on the paucity of funds arising from the drastic fall of crude oil prices in the international market, which had made it almost impossible for Nigeria to meet its cash call obligations. Cash calls is the counterpart funding which the FG represented by the Nigerian National Petroleum Corporation pays annually as its 60% equity shareholding in various oil and gas fields operated by international oil companies and indigenous oil firms.
The growth however is expected to bring about $15BN worth of investments. Briefing state house correspondents at the end of Nation Economic Council meeting at the presidential villa Abuja, the minister of state for petroleum resources Dr. Ibe Kachikwu alongside Governor Willie Obiano of anambra state and his counterpart from bauchi state, alhaji Mohammed abubakar said that Nigeria owed call areas of $6.8 BN over 5 years. President Buhari said that full implementation of the growth would start in 2017. Today, I made a presentation to NEC seeking endorsement for previous years proposal which was approved by FEC trying to change the financing configuration of JV for upstream companies. As you are know, current cash call arrears in the oil sector over the last 5 years up until December 2015 is about %6.8 BN unpaid in the 2016 period.
We also accumulated unpaid cash call arrears of over $2.5 BN. People sometimes get to ask how did this happen? Obviously in the year we earned a lot of money from oil, $110-120 per barrel, there really wasn’t any justification why these monies shouldn’t have been paid in terms of the 5 years arrears. Thus, one can understand why we have what we have: the effect of militancy, the drop in oil prices $110 to 40 has meant revenue coming to government has been unable to sustain our ability to meet our cash call obligations and what does that do when that happens. You find that your reserve begins to drain, your ability to maintain production at current level will begin to despair and cost of per barrel of production at JV continues to rise because of the very little volumes chasing the cost and at the end of the day, the investor’s confidence begins to wane. So, a lot of the projects that ought to have happened in this country were basically abandoned. Sometimes this year, we took on an initiative working with the folks in NNPC and the ministry to try and find a sustainable solution for financing JV cash calls. We have been able to find that solution.
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