Jimitota Onuyume
6 July 2009
interview
Comrade Higgins Chika Onuegbu, an Economist, a member of the International Industrial Relations Association (IIRA), an Associate of the Chartered Institute of Taxation of Nigeria (CITN) and a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN) is the Zonal Industrial Relations Officer of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Port Harcourt Zone. The zone is the hub of oil and gas activities in Nigeria and covers 10 states including Abia, Akwa-Ibom, Anambra, Bayelsa, Benue, Cross River, Ebonyi, Enugu, Imo and Rivers States .
In this interview with Jimitota Onuyume of Sweet crude, Chika as he is often called by close associates and friends focuses on the operations at the Onne oil and gas free zone, Rivers state. For him, the place is a rip off on the economy of the nation because its operations negate the essence for which it was established. He urges the federal government to take drastic steps aimed at correcting what he termed the ills in the zone.
He also speaks on conflicts in the Niger Delta while calling on all parties to give peace a chance he passionately enjoined insurgents and militants in the region to spare oil workers in the region of any attack as they do not in any way contribute to the challenges of underdevelopment in the region.
Excerpt:
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 unionised. 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-unionised 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 unionised, 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 honour 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.
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