A federal high court has affirmed the power of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to impose and collect levies on petroleum products sold in Nigeria.
According to a recent statement by the NMDPRA, the court ruling is the ‘first’ major judicial decision on the Petroleum Industry Act (PIA) of 2021.
In an action filed by IHS Nigeria Limited and INT Towers Limited against the NMDPRA, the plaintiffs prayed that they were not liable to pay statutory 0.5 percent levies for the ‘Authority Fund’ and the ‘Midstream and Downstream Gas Infrastructure Fund’ on petroleum products they import.
The authority said the complainant argued that their products were not sold in Nigeria, but rather used for their respective business operations, and therefore, they do not fall under the category of petroleum products that are subject to the levy.
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The regulator said they also prayed the court to declare two key regulations for the implementation of the PIA void and illegal.
The regulations include the midstream and downstream petroleum operations regulations 2023, which defines the concept of ‘sold in Nigeria’, and the petroleum (transportation and shipment) regulations 2023, which sets out the information the NMDPRA may demand from a permit holder.
According to the NMDPRA, the plaintiffs said the regulations should be deemed void and unconstitutional since they violate the constitutional rights to personal property and overreached provisions 47(2) and 57(7) of the PIA.
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“Delivering judgment in the suit on Monday, February 5, 2024, Justice Inyang Ekwo of the Federal High Court Abuja Division, agreed with the arguments of the NMDPRA counsel Dr Emeka Akabogu and affirmed the validity of the Midstream and Downstream Operations Regulations 2023, as well as the Petroleum (Transportation and Shipment) Regulations 2023,” the statement reads.
“The court held that the regulations neither overreach nor conflict with sections 47(2)(c) and 57(7)(a) of the PIA which provide for payment of a one percent levy on petroleum products and natural gas sold in Nigeria.
“The court found that the definition of ‘sold in Nigeria’ covers three distinct situations – where the goods are sold ‘fob’ in Nigeria or its territorial waters, where they are loaded or offloaded for sale within a wholesale point in Nigeria, or where the transaction originates, occurs or is concluded in Nigeria.”
The statement said the ruling validates the wide discretion given to the NMDPRA under section 33 of the PIA to regulate the industry through ancillary laws.
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“It also has a far-reaching impact on natural gas and petroleum products meant for export, which are automatically covered by and subject to the provisions of the MDPO regulations,” NMDPRA said.
As a result, the NMDPRA said in order for valid export activities to take place, petroleum producers who sell and export such products must pay the levies.
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