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Nigeria: Onne Oil & Gas Zone in Rivers State is a Rip-Off-Pengassan
Let's take a critical look at the operations of the Onne oil and gas free
zone.
Let me start by reminding us that the Minister of Finance, Dr. Shamsuddeen
Usman, disclosed in 2007 that well over N135 billion that would normally
have accrued to the federal government as revenue, in the last four years,
was lost to Import Duty Waivers during the inauguration of the Presidential
Committee on Waivers, concessions and incentives.
That did not come to many people as a surprise. The incentives given to the
oil and gas companies that are located in the Onne oil and gas free Zone are
enormous and unnecessary, especially when you note that these incentives are
in addition to many other incentives given by Nigeria for oil and gas
activities.
For instance there is the MOU on incentives for encouraging investments in
exploration and production and for enhancing crude oil exports. There are
also incentives to encourage investments in LNG and other gas utilisation/development
projects. Remember that oil and gas business is hugely US$ denominated and
every year billions of US$ worth of transactions are carried out
It is not difficult to see these sharp practices the moment you figure out
the inappropriate use of the free zone. Almost all the oil and gas companies
operating in the Onne oil and gas free zone carry out their oil and gas
activities outside the free zone.
Up till today, more than 12 years after the Free Zone commenced operation,
virtually ALL oil and gas equipments, tools, technology, exploration,
drilling, production, sales and marketing take place outside the free zone.
In addition, there is no oil and gas fabrication facility in the Free Zone.
Meanwhile the over 100 companies in the free zone have been reaping 100 per
cent foreign company ownership, 100 per cent repatriation of capital and
profits, 100 per cent exemption from Value Added Tax (VAT) and Withholding
Tax, Zero Corporate Taxes and levies, Zero Personal Income Tax for
Expatriates, Zero Expatriate Quota, 100 per cent import and export tax
exemptions, duty on raw material only for manufacturing and 75 per cent duty
rebate on processing special product without any commensurate benefit to the
country. You will also notice that many of these companies with free zone
status just have their offices in the free zone, while they carry out
virtually all their oil and gas operations outside the Free Zone.
There is also no difference in operations and production between the
companies located in the free zone and those in the custom territory
excepting for that of location. What is more, there are many cases where
these same companies maintain multiple offices. One in the Free Zone and the
other in the custom territory. With the one in the free zone they are given
free zone status and hence qualified to reap all the numerous benefits as
listed above. All these complicate the administration of taxes and Import
duties, and create room for manipulations.
Unfortunately, there is basically no additional benefit to Nigeria for the
free zone status of these companies beyond that accruable to an industrial
area. All that is happening now is that Companies that are hitherto located
outside the Onne oil and gas free Zone area are now moving to the Free Zone
Area just to REAP the benefits as listed above without any commensurate
benefit to the country. A cursory look at the Approved list of the Companies
in the Oil and Gas Free Zone Area as at April 2009 indicate that many of
these organizations also exist outside the free zone area. In an environment
of corruption such as we have in Nigeria , it is not difficult to see how
the country is short changed in the process.
Nigeria obviously loses hundreds of billions of Naira in taxes and customs
duties from this inappropriate use of the Onne Oil and Gas Free Zone. The
loss appears to be more serious than we know. Only an investigation by the
Federal Government will reveal the extent of the loss we are talking about.
The investigations will also reveal whether indeed we need an Oil and Gas
Free Zone in Nigeria . Remember Nigeria is the only country in the world
with a free zone dedicated to oil and gas.
Another inappropriate use of the Oil and Gas Free Zone is that many of the
companies in the Free Zone are using their location in the free zone as a
cover to abuse the rights of their workers and avoid their corporate social
responsibilities. These companies refuse to recognize the right of their
workers to join a trade union as provided in the 1999 Constitution.
In fact let me state that majority of the companies in the Onne Oil and Gas
Free Zone do not respect the right of their workers and have refused the
workers the right to be unionized. These workers are first of all human
beings. They are fathers, mothers, sons and daughters and citizens of
Nigeria . They are not slaves and cannot be made slaves by reason of working
for a company located in the Oil and Gas free Zone.
It is a well-known fact that non-unionized workers are the greatest victims
of human rights abuses in the workplace. When you add to this, the inability
of these workers to bargain collectively since they are not unionized, you
will see that they also are poorly paid and miserable and hence would not be
able to defend their rights. Their predicament is simply because the
companies they work for are located in the Onne Oil and Gas Free Zone and
the Onne Oil and Gas Free Zone Authority Act of 1996 abridges their right to
freedom of association.
Unfortunately prior to the take-off of democracy in 1999 decrees reigned
supreme over all other laws, including the Constitution (i.e. During the
military era). However, with the advent of democracy in 1999, and the
reinstatement of the constitution, the supremacy of the constitution over
all other laws is no longer an issue for debate. In fact Sections 1 and 40
of the 1999 Constitution of the Federal Republic of Nigeria and Article 10
of the African Charter on Human and Peoples' Rights (Ratification and
Enforcement) Act give these workers the right to join a trade union for the
protection of their interest.
Expectedly, the courts have also ruled, for instance, in A.G. Oyo State vs.
NLC (2004 NLLR Pt 3), Okulate vs. Awosanya (2002 FWLR pt 25) and A.G Abia
State vs. A.G Federation (2007 FWLR pt 101) that as from May 29th 1999, the
constitution is supreme and all other legislations in the land take their
hierarchy from the provisions of the constitution.
It is also very clear that the hierarchy of our laws since May 29 1999 are
first and foremost the Constitution and then followed by Acts and /or other
enactments (such as Onne Oil and Gas Free Zone Authority Act) deemed to be
Acts of the National Assembly under section 315 of the 1999 constitution.
One would therefore expect that these companies and indeed the Onne oil and
gas free zone authority would honor the supremacy of the constitution over
the Free Zone Act and respect the constitutional rights of their workers to
join a trade union and bargain collectively. It is rather unfortunate that
they prefer to treat these workers as slaves in their fatherland.
