In recent times, the management of Nigeria’s oil and gas logistics giant and port concessionaire, Intels Nigeria Limited (INL) has been tackling the country’s Oil and Gas Export Free Zone Authority (OGFZA) over refusal to renew its licence, alleging that the action of the Authority has something to do with politics of 2019. But in this exclusive interview with LEADERSHIP, Chief Umana Okon Umana, Managing Director of the Authority charged with the responsibility to License, regulate, supervise, manage, control and co-ordinate the activities of Oil and Gas Export Free Zones in the country reveals why Intels is staging what he described as media war against OGFZA, with a view to misleading the public. He also speaks on other issues relating to Oil and Gas Export Free Zones in Nigeria.
What is the OGFZA doing to break the monopoly in the oil and gas free zones by some companies?
Our mandate as the regulator of Oil and Gas Free Zones is to ensure that the free zones are run on the basis of the extant laws of the organisation and since I took over as the managing director/ chief executive officer of Oil and Gas Free Zone Authority (OGFZA), that has been our primary focus, to ensure that we provide the level playing field for the operators and stakeholders in the zones. We are strictly guided by the extant laws of the Authority and I believe that until we do that, we cannot properly regulate the operators in the zones.
I can give you example with the issue of tariffs. The laws already provide that tariffs, as applicable to the free zones, shall be approved by the Authority. The OGFZA shall approve tariffs for the free zones, which all licencees and operators shall comply with. That is the position of the law. It was not enforced before I was appointed in September 2016 as the managing director of OGFZA. So, I am taking necessary steps to ensure that that aspect of the laws and regulations guiding the Authority is faithfully implemented. When that is done, the issue of monopoly will not arise. There have been complaints by operators in the zones about high tariffs and we are currently working to ensure that the tariffs are reviewed downwards, in line with the provisions of the law.
Does Nigeria really need oil and gas free zones?
Yes. You must understand the essence of free zones. Free zone, by definition, is a segmented geographical area where laws that apply to customs are suspended. The reasons why countries have embraced that is to create special conditions that will attract direct foreign investments, create jobs, generate revenues and to ensure transfer of technology and skills. Countries create free zones to serve as vehicles to drive economic growth and development. There are over 4,000 free zones around the world and many of them have been very successful and impacting. For example, the RAK free zone in Dubai has over 5, 000 companies and accounts for up to 25 per cent of the GDP of the United Arab Emirates. The benefits of free zones in terms of economic benefits to the country have been quite enormous.
Taking into consideration that oil and gas is the mainstay of the Nigerian economy, it was imperative to take that step to provide the necessary support for that sector. I believe that the OGFZA, which is the flagship of free zones in the country, has done very well in terms of the support and logistics provided for smooth operation in the sector. Whatever requests that pertain to operation and customs are treated expeditiously within the timeline of 48 hours by the OGFZA. So, I believe that the decision by the federal government to create specialised economic free zones in the oil and gas sector has handsomely paid off. At some point, the OGFZA licenced up to 200 companies from 45 countries. In terms of investments, the oil and gas free zone has attracted over $8 billion direct foreign investments, creating over 150,000 direct jobs. Between 2010 and 2015, revenue to NPA from the oil and gas free zones was in excess of $2 billion. I believe it was a good decision to create special free zones for the oil and gas sector; other countries have also done the same.
Recently, the OGFZA was in the news, with companies like Intels alleging that the purging of the free zones by the Authority is because of 2019 politics. How are you handling the disagreement between OGFZA and Intels?
It is unfortunate and totally misleading. The work of the Authority is anchored on laws, rules and regulations and as a regulator, we can only be guided by the laws as enshrined in the Act establishing the Authority. Our operation has nothing to do with politics. I can assure you that there are conditions and procedures for the renewal of licences. These conditions are contained in the extant laws of the Authority.
For example, if you have to renew your licence, you have to meet several conditions, which include payment of prescribed fees, payment of any outstanding amount due to the Authority, submission of audited accounts and annual returns, other relevant information that the Authority may require and submission of appraisal reports. These conditions have to be met before any licence can be renewed.
We have several companies, which for one reason or the other, their licences have not been renewed. So, it is wrong to single out Intels to say its licence hasn’t been renewed because of 2019 politics. We have to treat all companies the same way. The companies also have a choice to renew or not to renew their licences. So, at the beginning of this year, some companies wrote to us to say they were not renewing their licences and were deregistering. But some others have not written to the Authority to say they are deregistering, or not renewing their licences. Intels is one of those companies.
We wrote to them in February to say that ‘you are yet to renew your licence. I personally met with the managing director of Intels on the renewal of their licence. They asked for an extension of time and we gave them up to April. April came, they still had not renewed their licence and by June when they had still not renewed their licence, we again wrote another reminder.
They have only met one of the conditions for renewal of licence; they have only paid the prescribed fees for renewal of licence. They still have some other outstanding fees that they have not paid to the Authority relating to other items. They have not submitted their audited account, even though we have written to them since December 2016. So, they have not met the conditions for the renewal of licence. We wrote reminders severally; not only to Intels, but all others who have not met the conditions for renewal of licences.
Some of the companies that have met the conditions, but have not defrayed their prescribed fees and administrative fees, wrote back to the Authority to say they would like to meet with us to discuss how to defray their outstanding liabilities. And they came with a payment plan of two, three months and we were able to restore their operations and when they completed payments and their licences were issued.
Intels also started the process of reconciliation of their outstanding indebtedness, but even though they started that process, they failed to pay the prescribed administrative charge to the Authority. They also have not submitted their audited account. In October, we wrote another reminder to them that the year was coming to an end and they had not renewed their licence. We were rather surprised that instead of completing the process of engagement which they started and asked for time to regularise the conditions, they went to the press with a different story and wrote to us, giving us a five-day ultimatum to release their licence or they would go to court. They said they had paid the prescribed fee to NPA and so were not liable to pay the administrative charge due to OGFZA, when indeed they had made commitment to pay the outstanding liability to the tune of $3 million. They misled the public into thinking that the matter was political. It wasn’t political; it simply had to do with compliance with extant laws and conditions for renewal of licence. We have nothing to do with politics. We are doing our work as a regulator in accordance with the law. In the letter we wrote back to Intels, we clearly stated those areas where they have not complied with the law. They have not written back to say that ‘no, you are wrong; we have complied with the relevant provisions of the law’.
We also raised other issues- if you enjoy incentives, you don’t pay taxes, you don’t pay customs duties on the equipment you bring into the free zones for operation; anytime you deregister and you are leaving the free zones, you have to pay duties to the federal government. That is why we have a regulator within the free zones, so that there will be appropriate charges and the federal government is not shortchanged. We realised that some of the equipment that were brought into the free zones based on zero import duties have been taken out, and we queried that they be returned and evaluated so that duties can be paid on them. We cannot treat one company in a manner that is different from the way we treat other companies. We will never operate in a manner that any company will think that they have been discriminated against. It is all about compliance with the law. So, if other companies are complying with the law, we see no reason why Intels cannot comply with the law. All licences must have physical presence in the free zones; you must have an office and must be visible. Intels argued that they are liable to pay because they are concessionaire, but they forget that they are also licencee. We are charging them as licencee and not concessionaire. So, where is politics in all of this? It is unfortunate that Intels and some individuals have attempted to politicize the entire issue. It strictly has to do with the extant laws and operations.
You are championing the amendment of the Act establishing OGFZA. Is it that you noticed some fundamental flaws in the course of implementation or why the amendment?
Thank you for the question. I believe that our principal extant Act of 1996 has some flaws, which have led to some ambiguities and conflicts among agencies of government. So, we commend the efforts of the National Assembly to amend our principal Act.The process is ongoing and at the end the exercise, our legal framework will be adequately strengthened.
What changes has your leadership brought to bear on the operations of OGFZA?
When I took over in September 2016, one of the steps we took was to organise a management retreat, which was held in January this year. Arising from the management retreat, we came up with a new roadmap, in which a new vision and mission statement were developed. And of course, we also set goals for the Authority, part of which includes the need to grow our direct foreign investment by 50 per cent, the need to ensure that the Authority will be run professionally and the need to ensure that the capacity of the Authority is strengthened to ensure compliance. Our roadmap was officially launched and shared to stakeholders in February. Thereafter, we took steps to implement the key aspects of the roadmap, one of which is to automate operations.
In that regard we signed a contract with Oracle to ensure that we operate at the same level with other organisations, which have embraced such technology and application. Aside automating our processes, we have also gone ahead to ensure that operations are easily accessible and less cumbersome. Where it would take 28 days to obtain a new licence, we reduced it to 14 days. Where it would take 14 days to renew licence, we reduced it to three days.
To process official request, we reduced it to 48 hours. We took these steps even before the Executive Orders. We took all of these steps to ensure that our licencees get the best global practices and as you may be aware, the essence of the Executive Orders and the measures we have put in place is to ensure ease of doing business in the country. The Authority will ensure that the free zones are managed in a very professional way. We have taken a number of steps to ensure the visibility of the OGFZA in the free zones. Our key achievement is the fact that we have been able to reposition the Authority to enforce compliance with extant laws and regulations.
Some of the licencees forget that the incentives they enjoy are founded on the law, and that licencees also have obligations which they must meet to qualify them to enjoy the incentives. We have taken steps to ensure that there is a level playing field for all the operators in the free zones and that there will be strict compliance with the law.
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