You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App
Join our mailing list to receive top business news every weekday morning.

Nigeria starts talks with oil majors to end $62bn dispute

Nigerian government says it is entitled to a greater share of income from oil companies since the oil price exceeded $20 a barrel.
Workers climb scaffolding surrounding a storage tank at the under-construction Dangote Industries oil refinery outside of Lagos, Nigeria. Image: Tom Saater/Bloomberg

Nigeria began preliminary talks with international oil companies to settle a dispute over revenue.

The government, citing a 2018 Supreme Court ruling, says it’s entitled to $62 billion from the companies after they failed to comply with a 1993 law that hands the state a greater share of income when oil exceeds $20 a barrel. The companies are challenging the claim.

“We have opened up a process of engagement between the parties,” Justice Minister Abubakar Malami said at his office in Abuja late on Saturday. “Whether those discussions will eventually translate to settlement, whether it will translate to opening up of a full-blown negotiation process, is what we wait to see.”

President Muhammadu Buhari is trying to bolster government funds after crude output and prices dropped. Nigeria relies on oil for at least two-thirds of state revenue and more than 90% of foreign-currency income. While oil is the country’s main export, it has also targeted other foreign companies in the past, fining mobile operator MTN Group $5.2 billion in 2015, and eventually settling for less than $1 billion after months of negotiations.

Most of Nigeria’s crude is pumped by Royal Dutch Shell, Exxon Mobil, Chevron, Total and Eni SpA, who operate joint ventures with state-owned Nigerian National Petroleum. Under production-sharing legislation, the companies agreed to fund the development of deepwater oil fields on the basis that they would share profit with the government after recovering their costs. Crude was selling at $9.50 a barrel when the law became effective 26 years ago, and is now trading above $60 in London.

Oil companies including Shell have gone to the Federal High Court to challenge the government’s claim that they owe the state any money, arguing that the Supreme Court ruling doesn’t allow the government to collect arrears. They also contend that because the companies weren’t party to the 2018 case, they shouldn’t be subject to the ruling.

“Taking into consideration the government’s need to attract investments, no possibility can be out-ruled,” Malami said. “The possibility of settlement is not out of sight.”

© 2019 Bloomberg L.P.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.


You must be signed in to comment.


Here we go again. First MTN, now the oil majors. The Nigerian government is going to learn the hard way that in order to attract foreign investment one needs to behave at international standards. 90% of foreign currency comes from oil revenue yet they choose to misbehave with the oil giants! The logic!

There is a lot of competition for investment and the track record of Nigeria leaves a lot to be desired. 200 million people( France, Germany and Italy combined) and a GDP of 20% of the smallest ie Italy! A fair reflection on Nigeria s management!

End of comments.



Follow us:

Search Articles:Advanced Search
Click a Company: