FGN JOINT VENTURE: Reps Investigation reveals Shell Has Been Claiming Capital Allowance Without CAFA Certificate …As Shell Begs Lawmakers For Leniency

Njideka Ozoalor

The House of Representatives ad-hoc Committee investigating Nigeria National Petroleum Company (NNPC) Limited’s joint venture (JV), from 1990 to 2022 on Tuesday stated that Shell Petroleum Development Company limited has been claiming capital allowances from the federal government without having the Certificate of Acceptance on Fixed Assets (CAFA).

The committee chaired by Hon. Abubakar Hassan Fulata (APC, Jigawa) made this known while grilling the management of Shell led by its Chief Executive, Mr Osagie Okunbor who having been faced with enormity of his company’s infraction pleaded with the committee to withold judgement to allow the company management sort out the anomaly.

Hon. Fulata in reaction to an earlier assertion by Shell that it’s claiming capital allowances as a way of reducing production losses arising from oil thefts affecting the company’s income from the joint venture said “a company’s policy can never supersede an Act of the National Assembly which provides for capital allowance and for Shell which has operated in Nigeria for many years even before independence, not to comply is a major infraction.”

He told the company that he deliberately asked the question regarding CAFA Certificate because he is in possession of the comprehensive list of companies with the certificate in Nigeria and that Shell is not one of them.

“Most companies rely on subsidiary issues to evade primary issues. Just like the National Assembly enacting a law which contradicts the constitution. Once you enact a law which contradicts the Constitution. That law is dead on arrival. Neither the company nor a country itself can enter into an agreement that violates its laws. An agreement with a company can never supersede an act of the National Assembly. What you need to do once you enter the agreement, you obtain the certificate that would guarantee you compliance. Once you have it you are covered. But if you go ahead enjoy capital allowances without the CAFA certificates, you have completely violated Nigerian tax laws which is a gross misconduct as far as we are concerned. Especially for Shell that has operated in Nigeria for many years, I think even before Nigeria got independence. So I think it is a very serious infraction.

Reacting, the MD of Shell pleaded: “What I have tried to clarify is as you have explained. There is a basis of statute and law that enables you to make those claims. What I am saying is that as a law abiding organization, we have applied the basis of that law. Whether there is an actual certificate, because 500,000 for our kind of business for assets, is a pretty low threshold.

“If you would allow us to present what we have in this respect. I am appealing that you withhold judgment pending when we present.

After much grilling from members of the panel, the chairman ruled saying: “Avail us of details of all the assets on the basis of which you have been claiming capital allowance on the next adjourned date.”

The committee also called on the Managing Director of New Cross Petroleum Limited to make himself available to the Panel or risk being declared wanted and produced by the police in handcuffs.

Chairman Fulata gave the ruling after grilling the MD of New Cross Exploration and Production, Sodje Victor over it’s joint venture business with the NNPC and why it has not been paying Petroleum Income Tax (PPT) to the federal government since inception.

The company which said it couldn’t pay PPT because it has been running at a loss in the JV business was reminded of the consequences of lying on oath, a reminder which reminder which prompted the MD to recant, saying that “we are making small small profits.”.

Hon. Mark Gbilah, a member of the Panel had moved that the company be asked to provide Its statement if accounts with a view to corroborating the cash inflow from the JV account based on Its 45 per cent equity.

Gbilah told the MD that his idea of losses was based on what it invested into the joint venture, and not the actual profits accruing from the sale of crude oil it produced, adding that as Nigerians, it’s not the business of government whether a company is making profit or incurring losses as taxes must be paid so long as the business still exists.

Regarding capital allowance claims, the company said it has never made any since it is yet to achieve stability in the industry, adding that its assets have not been primed for CAFA Certificate.

The company said capital allowance is only computed on qualifying assets per annum, but the coy has been running Its operations at losses over time.

Shown a document from the FIRS showing application of capital allowance, the MD said the name there belongs to a sister company, New Cross Petroleum.

At this point, the committee chairman urged the MD of the sister company to comply by appearing before the Panel, saying that it’s “refraining from declaring him wanted after two invitations”, and asking the police to produce him in handcuffs.