Recession: FG considers alternative funding with JV partners

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(Last Updated On: 2016-09-17)

The federal Government is bent on reviewing its funding options with oil firms as it grapples with recession ignited by low oil price and militancy in the Niger Delta.

Government is seriously considering how to get out of paying cash calls to joint ventures with oil and gas companies to stand a chance of pulling its ailing economy out of recession, Finance Minister Kemi Adeosun said.

The minister said the Nigerian National Petroleum Corporation (NNPC) had spent N110 billion ($360 million) on cash calls this month, which dwarfed the country’s N41 billion income from oil production over the same period.

NNPC also owes several billion in back debt to oil companies from unpaid cash calls, which oil worker unions say is stalling the creation of jobs and investment.

“We are already working to see how we can get out of the cash calls. And that is very fundamental to the economy,” Adeosun said.

“We are working with the Ministry of Petroleum Resources and NNPC that’s a long-term plan: To allow those joint ventures to borrow money that they need rather than taking money out of the federation account.”

The federal government is trying to boost tax revenues and the non-oil income to fund a record $30 billion 2016 budget aimed at reviving Nigeria’s economy that has been hit by lower oil prices.

Adeosun in April said the government was thinking of forcing the cash calls, which are for international and local joint venture partners, out of budget funding and into so-called modified carrier arrangements.

Modified carry agreements are loans provided by large international oil companies to the NNPC for investing in oil exploration and production projects.

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