The Nigerian government has ordered a number of non-Nigerian oil and gas companies to pay nearly $20 billion in taxes.
Reuters news agency reported Thursday that the move could deter investment in Africa’s largest economy.
Quoting industry and government sources, the news medium said the taxes are allegedly owed to local states.
Details of the demand are contained in a letter sent to the companies earlier this year via a debt-collection arm of the government, wherein the Nigerian National Petroleum Corp (NNPC) cited what it called outstanding royalties and taxes for oil and gas production.
The affected oil companies include Royal Dutch Shell, Chevron, Exxon Mobil, Eni, Total and Equinor. The firms were each asked to pay the Nigerian government between $2.5 billion and $5 billion, sources who saw or were briefed on the letters told Reuters.
But Reuters reports that the request were however confirmed by Norway’s Equinor, which produced around 45,000 barrels per day (bpd) of oil in Nigeria in 2017.
“Several operators have received similar claims in a case between the authorities in Nigeria and local authorities in parts of the country,” an Equinor spokesman said.
On its part, Exxon said it “is currently reviewing the matter”, according to a spokeswoman of the U.S. company.
The affected companies were expected to dispute their respective payment claims. Already, Equinor has said that it sees no merit to the case.
Nigeria, Africa’s biggest oil and gas producer, has in place several oil exploration mechanisms, including joint venture and production-sharing agreement with which oil companies develop and operate giant offshore fields.
The companies pay the government in the form of royalties and tax.
The Nigerian government has however had challenges with its own provision of cash calls in some of the agreements signed with the oil firms.
The new tax demand is expected to generate ripples in the industry, amidst numerous other operational challenges faced by local and foreign investors.
Already, the industry is plagued by massive oil theft, oil spills and corruption, among other factors that prevent the nation from realising its full potential despite its oil resource.
In 2018, Nigeria produced about 2.1 million bpd of oil, up from 1.8 million bpd it produced in 2017.
In 2016, the nation slipped into recession amidst dwindling oil revenue. It exited recession in the second quarter of 2017 after production and prices improved amidst relative stability in its oil-rich Niger Delta region.
The revelation comes as Nigeria prepares to go to the poll in an election described as crucial and keenly contested by analysts.