According to the most recent data on cash call arrears payments provided by the national oil firm, as of July 31, 2022, the Federal Government has already paid $4.04 billion to five of its joint venture foreign oil businesses.
Joint venture operators may issue cash calls to non-operating partners in order to request payment in response to expected future capital needs, operational expenses, or the requirement for further capital contributions. Through the NNPC, the Federal Government has accumulated outstanding bills—known as cash calls—that it was required to pay the IOCs with which it had joint ventures for oil exploration and production over the years.
Mobil Producing Nigeria, Chevron Nigeria Limited, Shell Petroleum Development Company, and others are the government’s joint venture partners in this arrangement. The report showed that the government had completely cleared its cash call debts to Mobil and Chevron, while a total $925.4m had been paid to Shell, leaving an outstanding balance of $447.12m.
Total payments to date (July 31, 2022) to Total and Agip by NNPC were $545.86m and $634.22m, while outstanding balances to the companies were put at $65.11m and $140.44m respectively. The total renegotiated debt between the government and the five IOCs was 44.689bn, while $4.04bn has been paid so far, leaving a balance of $652.66m.
In 2016, the national oil company signed the cash call repayment agreements with the five IOCs to defray the cash-call arrears within a period of five years after many years of its indebtedness to JV partners.
Also, the government, through the Federal Ministry of Petroleum Resources, negotiated a discount with the five IOCs in December 2016.
The negotiations led to the reduction of the debt from about $5.1bn to $4.68bn, as the Federal Government, through NNPC, had since continued to reduce the debt payments in installments.
The government has received commendations for the repayment of the cash call arrears and has been encouraged to continue. Experts said the delay in settling the debts had contributed in slowing oil sector investments in Nigeria.
“You cannot owe me billions or millions of dollars and still want me to invest additional billions or millions in your country when I’m not sure of getting the money you owe,” a former President, Association of National Accountants of Nigeria, Dr. Sam Nzekwe, stated.
He, however, lauded the government for striving to clear the cash call arrears, adding that “this would mean well for the oil sector and would encourage investors to invest in the industry, though the sector has its own challenges at the moment.”
