Nigeria’s Exit from Cash Call, a Commendable Move

The Nigerian government has terminated her cash call payments policy adopted on the country’s Joint Venture Agreements (JVAs) with major international oil companies for crude oil exploration and production in Nigeria. The country said it exited because the policy has contributed in making her lose a huge amount of monies.

The exit from the cash call policy frees the country from the financial obligation to jointly fund oil production activities. From 2009 and 2013, Nigeria spent N2.3 trillion funding joint venture cash call, while $16.2 billion was also spent on the same purpose respectively. This was one of the avenues of corruption in the sector.

Nigeria’s exit is a relief from debt burden which JV policy has imposed on her for over 40 years. However, in the last 10 years, NEITI audit reports in the oil and gas industry had drawn government attention that Nigeria is losing a huge amount of resources in the management of JV cash call regime, and had recommended Nigeria exits from it. This is certainly one of the remediation issues that Nigeria has developed adequate political will to handle.

For instance, NEITI reports show that from 2009 to 2013, NNPC made payments of N2.4 trillion and another $16.2 billion respectively as cash calls obligations for Joint Venture operations in the oil and gas industry. In 2009, Nigeria paid N460.24 billion for cash call, while in 2010 she paid N441.44 billion. In 2011, the sum of N416.58 billion was paid, and in 2012, the amount rose to N612.93 billion while in 2013 the sum of N492.81billion was paid as cash call to JV operations.

Apparently, the decision of the Nigerian Government to terminate cash call policy is commendable. The direct benefit of this action is that it will liberate Nigeria from the difficult financial yoke and give room for the state resources to be channeled to other national developments. This is also one of the notable reforms in the oil and gas sector that ought to be applauded.