Despite the existence of laws guiding Mergers and Acquisitions (M & As) in Nigeria, an investigation by the Committees on Justice and Finance of the House of Representatives has revealed sharp practices by multinational oil companies operating in the country.
The report on the investigation said the oil majors fleeced Nigeria of over $10 billion (N16 trillion) in revenue due from mergers and acquisitions that were consumated in the country in the last ten years. The companies mentioned in the committees’ report are Chevron and Texaco which formed ChevronTexaco; Total, Elf and Fina which formed TotalFinaElf and Exxon, which merged with Mobil to form ExxonMobil. The report speaks volumes of the penchant of oil companies for evading the payment of due taxes and fees and the laxity, and sometimes compromise, of government officials who neglect to enforce the laws or prosecute those who flout it.
Although the affected oil companies reportedly assigned their assets to the successor companies after the completion of the M & As, the report said they all failed to pay the statutory fees required to regularize their new status in the country. This is contrary to Nigeria’s Company and Petroleum laws, and international best practice procedures. Equally shocking is the aspect of the report which said that unscrupulous government officials were willing collaborators in the deals, as they failed to demand monies due to Nigeria from the oil companies.
It is unfortunate that the agencies and government officials that ought to have ensured that the concerned companies complied with the laws of the land neglected to do so. Although the concerned companies explained that it is their parent companies that were involved in the M&As, and not the local subsidiaries in Nigeria, the report said that some of mergers actually involved the Nigerian subsidiaries.
We agree with the House of Reps report that the explanation of the oil companies is nothing but a ploy “to avoid payment of required fees.” Therefore, their insistence that they complied with all extant laws in Nigeria in relation to the M&As should be thoroughly investigated. It is also necessary to investigate the claim that the oil companies also claimed capital allowances and investment tax credit that were meant for newly established companies as incentives.
Every company operating in Nigeria should be compelled to comply with the laws of the land. Under our laws, merging oil production companies are required to apply for assignment of interest in each oil block, pay a sign-on or signature bonus in respect of each block and do a fresh registration of the new entity at the Corporate Affairs Commission (CAC). There should also be a re-evaluation of all the books being operated by the merging companies. The affected oil companies were found to have breached relevant provisions of the Petroleum Act 1969, in particular, paragraphs 14-16. Strict compliance with the nation’s laws is required.
In addition to non-compliance with the laws on M&As, it has also been found that many oil majors in Nigeria evaded payment of taxes. A recent audit by the Nigeria Extractive Industries Transparency Initiative (NEITI) indicates that oil companies defaulted in taxes to the tune of N1.3 trillion between 1999 and 2004.This is economic sabotage that must be stopped.
Overall, it is necessary to strengthen our laws and develop the political will to enforce them. Individuals and corporate organisations which flout them should be brought to justice.
