Nigerian Government Pays $3.7bn Debt To Oil Firms

The Nigerian government has reportedly paid five oil firms a total of $3.72bn on cash call arrears leaving an outstanding balance of $971.8m.

The five companies include Shell Petroleum Development Company, Mobil Producing Nigeria, Chevron Nigeria Limited, Total Exploration and Production Nigeria, and Nigeria Agip Oil Company.

The federal government have over the years accrued debts referred to as cash calls which are to be paid to the IOCs. This is because these companies have joint ventures for oil exploration and production.

Figures from NNPC showed that the national oil company had cleared its total negotiated debts with both MPN and CNL, which were put at $833.75m and $1.097bn respectively.

The oil firm’s total negotiated debts with SPDC, TEPNG and NOAC were outlined as $1.37bn, $610.97m and $774.66m respectively, out of which the total payments to date by NNPC to the three IOCs were $777.4m, $458.91m and $550.01m respectively.

Reacting to the government’s payment, industry analysts commended the action, maintaining that it was a step towards the right direction as the debts had served as a barrier to oil and gas investment across the country.

He said, “I think we should commend the government and NNPC on this because I know that the cash call arrears are normally far more than what it is now. So for them to have cleared them to the level that we are now talking about it being under $1bn is something to be commended.

“However, it is important to point out that this issue of cash call arrears has been a major bottleneck to the growth of our oil and gas sector, because each time that the private IOCs and other oil producers put their money down, most times the government is not able to put its own cash call in terms of the counterpart funding.

“And these things have a way of slowing down the growth of investments in the sector. So the fact that this has been cleared significantly is something for which we must commend the government and NNPC. But the bigger reform is actually to get the government to exit completely and allow this sector to run as a purely private enterprise.”