The Nigerian Midstream and Downstream Petroleum Regulatory Authority’s authority to levy and collect taxes on petroleum products supplied in Nigeria has been upheld by the Federal High Court in the first significant court ruling concerning the Petroleum Industry Act 2021.
The PUNCH reported that NMDPRA said in a statement released in Abuja on Sunday that IHS Nigeria Limited and INT Towers Limited filed an action against the organisation, claiming that the plaintiffs were exempt from paying the mandatory 0.5 percent levies for the “Authority Fund” and the “Midstream and Downstream Gas Infrastructure Fund” on petroleum products they import.
The plaintiffs contended that their goods did not fall within the category of petroleum products that are subject to the levies since they were not sold in Nigeria but were instead used for their individual business operations.
According to the regulator, they also asked the court to deem two important rules that were necessary for the PIA’s implementation to be invalid and unlawful.
According to the regulator, they also asked the court to deem two important rules that were necessary for the PIA’s implementation to be invalid and unlawful.
Among the regulations are the Petroleum (Transportation and Shipment) Regulations 2023, which outlines the information that the NMDPRA may require from a permit holder, and the Midstream and Downstream Petroleum Operations Regulations 2023, which define the term “sold in Nigeria.”
According to the statement, the plaintiffs stated that the regulations should be deemed unlawful and void since they violated the constitutional rights to personal property and overreached sections 47(2) and 57(7) of the PIA, respectively.
In rendering a decision in the case on Monday, February 5, 2024, Federal High Court Abuja Division Judge, Inyang Ekwo, accepted the arguments put forth by The counsel for the NMDPRA, Dr. Emeka Akabogu, and upheld the legality of the Petroleum (Transportation and Shipment) Regulations 2023 and the Midstream and Downstream Operations Regulations 2023.
The court determined that the restrictions do not violate or overshoot sections 47(2)(c) and 57(7)(a) of the Petroleum Industry Act, which mandate the payment of a one percent charge on natural gas and petroleum products traded in Nigeria.
“The NMDPRA said that the court determined that the term, ‘sold in Nigeria’ encompasses three discrete scenarios: where the goods are sold “fob” in Nigeria or its territorial waters, where they are loaded or offloaded for sale within a Nigerian wholesale point, or where the transaction starts, happens, or is completed in Nigeria.”
The regulator commented that the ruling validated the broad authority given to the NMDPRA by section 33 of the PIA to regulate the industry through subsidiary laws.
It also has a significant effect on petroleum products and natural gas intended for export, which are automatically governed by and subject to the MDPO laws.
It said, “Therefore, in order for legitimate export operations to occur, petroleum producers who sell and export such products are liable to payment of the levies.”
Providing a more effective and efficient regulatory framework for the Nigerian petroleum industry is the mandate of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, which was founded in September 2021.
Its duties include creating and enforcing laws and rules for the petroleum industry’s midstream and downstream segments, which include marketing, storing, refining, and transportation.
In order to maintain environmental sustainability, efficiency, and safety in the sector, the agency creates technical and commercial regulations.
Regarding oversight and regulation, the organization grants licenses and permits for both midstream and downstream petroleum operations, keeps an eye on and enforces adherence to rules and guidelines, and looks into and resolves stakeholder concerns and grievances.
