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Nigeria Is Going After Major Oil Firms For $20 Billion In Back Taxes

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Nigeria Seeks $20 Billion In Back Taxes From Major Oil Firms

The government of Nigeria is asking some foreign oil firms to pay nearly $20 billion backlog tax and royalties. According to Reuters, the affected oil firms include Chevron, Eni, Equinor, ExxonMobil, Shell, and Total. The letter from the debt-collection arm of the Nigerian National Petroleum Corporation (NNPC) is asking the defaulting companies to pay between $2.5 and $5 billion. In confirmation and response to the letter, spokesman for Norwegian Equinor said,

“Several operators have received similar claims in a case between the authorities in Nigeria and local authorities in parts of the country. [However] Equinor sees no merit to the case.”

A spokeswoman for ExxonMobil said the U.S. Company “is reviewing the matter”. Chevron, Eni, Shell, and Total have remained silent. Likewise, the NNPC declined requests to comment on the issue.

The source of Nigeria $20 billion tax crisis

The source of the tax crisis remains unclear. This is partly because of the silence from the presidency and the NNPC. However, reliable sources claim the federal government and host states recently reached an agreement on the distribution of proceeds from oil and gas. Consequently, the federal government agreed to pay billions of US dollars to host states. A source at an oil and gas company believes the tax is an attempt by the government to shift its responsibility to the oil companies.

“This looks like an internal dispute between the federal and local governments. The central government is simply trying to shift to the IOCs (International Oil Companies) money it owes.”

How the tax dispute can affect Nigeria’s economy

Oil contributes to about ninety-five percent of Nigeria’s export earning according to the International Monetary Fund. Production sharing and the establishment of joint ventures are the most popular partnerships between the federal government and oil firms. In addition to providing the state with oil and gas, the companies also pay royalties and taxes to the government.

ALSO READ: Rwanda Makes Remarkable Strides In Its Economy Just 2.5 Decades After A Devastating Genocide

The Royal Dutch Shell company said the tax claims can delay the Bonga South West’s Final Investment Decision (FID) from 2019 to 2020. The oil field at the Bonga Southwest deepwater is one of the nation’s largest with a production capacity expected to reach 180,000 barrels per day (bpd).

Dr. Emmanuel Kachikwu, Nigeria’s Minister of State for Petroleum Resources said defaulting companies may lose their license. Shell is the largest oil investor in Nigeria. According to OPEC, Nigeria’s crude oil production reached 1.792 million bpd in January 2019 from 52,000 bpd in December 2018. Accounting for the bulk of the country’s foreign exchange earnings, a drop in crude oil will definitely have a huge impact on the nation’s economy.

How revoking of licenses will affect oil firms

Accompanying the threat of revocation of license by Dr. Kachikwu is the revelation of the huge amount of recovered royalties. Dr. Kachikwu revealed that earlier in February 2019, the Federal Government recovered 1.2 trillion unpaid royalties from the sale of crude oil. According to the NNPC, Nigeria has a production capacity of 2.5 million bpd which ranks the country as the largest producer in Africa and sixth in the world. The loss of license would be a loss of production capacity for the impacted IOCs.

In December 2018, a prosecuting witness for the Economic and Financial Crimes Commission (EFCC), Mr. Emefun Etudo alleged that Trafigura PTE Ltd and Trafigura Beheer BV owed the Federal Government unpaid taxes amounting to $1.6 billion. IOCs have been guilty of breaching Memoranda of Understanding (MoU) signed with host communities. This is often the cause of conflict between the IOCs and their host communities.

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Business and Development

Tanzania Electric Train Commence Trial In July

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Tanzania electric train

Tanzania is reaching for another economic milestone. The government announced that it was it will be testing its maiden self-funded electric train. The train which will run at 160 km/h will be one of Africa’s fastest high-speed trains. The train will also provide a cheaper means of transport to the citizens.

Further details show that the phase running from Dar es Salaam to Morogoro which has 6 in between stations and stretches 300 kilometers will commence operation in December. The trial trains in phase one will be three passenger trains. However, these trains will conduct daily round trips covering the two cities. Each passenger train will be making a minimum of 9 trips per day.

Difference between Tanzania electric train and regular train

The speed train will make use of concrete sleepers. This allows the railway network to carry as much as 35 tonnes of load per axle and increase its durability. Consequently, the rails should be able to last up to 40 years before any major repairs. However, the train bridge can last up to 100 years.

Speaking at the historic launch of the flash butt welding of the Standard Gauge Railway (SGR) at Soga, outside Dar es Salaam in Coastal region, Eng. Issac Kamwele, the Minister for Works, Transport and Communications said the trial of the speedy electric train will happen in July. However, the trial will only cover a section of the SGR. In comparison to other country’s SGR, Tanzania’s will be fasters. Kenya and South Africa’s SGR can only reach a speed of 120 km/h

The impact this project will have on the economy

Tanzania government is making great strides to boost the economy of the nation. Recently, the government proposed plans to build cable cars for Mount Kilimanjaro. This is projected to double the current 50,000 annual tourists. However, not many think it is a good idea. A few groups think it will lead to the loss of thousands of jobs.

ALSO READ: Tanzanian Government Considering Cable Car For Mount Kilimanjaro And Here Is How People Reacted

The $1.9 billion (Tshs 4.3 trillion) project has already created over 26,000 job opportunities. However, the government is optimistic that the second and subsequent phases will create more opportunities once fully functional.  The first railway lines in Tanganyika (previously German East Africa) were built after Zanzibar’s first tramway. The Ethio-Djibouti SGR project is currently the longest and first trans-boundary electric railway in Africa.

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Tanzanian Government Considering Cable Car For Mount Kilimanjaro And Here Is How People Reacted

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In a bid to boost the number of tourists visiting the East African nation, the Tanzanian government is considering putting cable car on Mount Kilimanjaro. Consequently, the government is currently in talks with a Western and Chinese company to actualize this project. Mount Kilimanjaro holds the record as Africa’s tallest mountain.

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According to the deputy minister for tourism, Constantine Kanyasu, the current 50,000 tourists that climb Mount Kilimanjaro could double with a cable car. This is because children and the physically challenged will have a chance to climb the mountain too. However, the Tanzania National Parks Authority (TANAPA) is carrying out a feasibility study on the possible routes. In a report on Reuters, Kanyasu said,

“We are still doing a feasibility study to see if this project works. There are two companies, one from China and another from a Western country that have shown interest. This won’t be the first time in the world, cable cars are there in Sweden, Italy, [and] the Himalayas.”

Impact of tourism to Tanzania’s economy

Tourism is Tanzania’s major source of foreign exchange earnings. Tanzania witnessed a 7.13% increase in tourism in 2018, particularly those visiting Mount Kilimanjaro. Consequently, Tanzania earned $2.43 billion in 2018. This is a boost from the country’s $2.19 billion earning in 2017. Mount Kilimanjaro is nearly 5,000 meters high and has three volcanic cones. Other tourist attractions in Tanzania are wildlife safaris and beaches.

The Tanzanian government is still reviewing business plans, profits and potential investors. There are lots of options for the routes and the length is yet to be finalized. The tourism mister said the government will also be looking at cost and engineering issues as well as environmental impact assessment.

Not everyone is happy with the idea of Mount Kilimanjaro cable car

Not everyone is in support of the idea of having a cable car on Mount Kilimanjaro. Spearheading the anti-cable car idea is the Tanzania Porters’ Organization. Guide groups and porters who accompany tourists up the mountain fear that the building of a cable car will reduce the number of climbers. There are nearly 20,000 porters working between Meru and Mount Kilimanjaro. Throwing more light to the harm this innovation would cause was the head of Tanzania Porters’ Organization, Lioshiye Mollel. Mollel said,

“One visitor from the U.S. can have a maximum of 15 people behind him, of which 13 are porters, cook and a guide. All these jobs will be affected by a cable car. We are of the view that the mountain should be left as it is.”

On Twitter, @AndyTraenkner said, “I’ve been fortunate to summit that amazing mountain twice, so far. Scarring its natural beauty with a cable car is a crime”

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Kuwait Based NAS Expands It’s Pledged $50 Million Africa Operation Into Mozambique

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GLS-NAS Managers

GLS-NAS Managers

The National Aviation Services (NAS), an aviation services provider based in Kuwait, has added Mozambique to its network. This is part of the company’s initiatives to expand in emerging markets. Starting from July 2019, NAS will start offering cargo and ground handling services in Liberia and Mozambique. NAS together with its local JV partner, GLS, has already started building a cargo terminal in Monrovia, Liberia.

NAS Investments in Africa

The addition of Mozambique and Liberia to its network shows NAS’ commitment in its investments in Africa. The company has stated that it plans to invest 44 million Euros—an equivalent of US$50m—in Africa. The $50m investment in Africa will span a period of three years.  Mozambique is the first on the list of beneficiaries of these investments.

NAS’ activities in Mozambique will include import and export cargo handling. Furthermore, the company will offer storage for shipments passenger and engineering services. Additional services include aircraft maintenance and ramp handling. These services are not restricted to Mozambique’s capital at Maputo Mavalane International. The services will be provided at all airports in Mozambique.

Employment

The new investment will also incorporate investments in human capital. With the increasing demand for air transport in the region, there is a need to recruit more local employees in the sector. NAS has stated that it will recruit and train local employees to ensure secure and quality services. The company estimates that it will hire 1,000 Mozambicans to join their global operations.

Cargo Terminal in Monrovia

Meanwhile, NAS has already broke ground to build a cargo terminal in Liberia. The company has partnered with Global Logistics Services Inc. to build the cargo terminal at Roberts International Airport. The two companies will build a 2,700 square meter cargo terminal. The name of the project is Roberts Air Cargo Center–RACC.

The center will support export supply in Liberia, as well as improve cargo operations to meet international standards. Previous forecasts had indicated that there is a demand for around 3,500 square meters in air freight. Construction of the cargo terminal is set to be completed by April 2020.

According to Peter Malcom King, chairman of GLS-NAS, RACC will be the first of its kind in Liberia. The center will provide the much-needed infrastructure to improve trade barriers, boost Liberia’s position as the hub in the region, and enhance air cargo supply. The freight terminal will feature temperature controlled storage, dangerous goods storage, racking for storage, five loading docks, mail area, and a vault. The Liberia Airport Authority will also develop a separate freighter stand.

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