Monday, May 23, 2016 3:22PM/ NEITI
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This report summarises information about the reconciliation of fiscal and non-fiscal revenues from the extractive solid minerals sector in Nigeria as part of the implementation of the Extractive Industries Transparency Initiative (EITI). In this context, extractive companies and Government Entities report payments and collections respectively from the extractive industry for royalties, profit taxes, dividends, and other material industry related payments.
Limitation to the reconciliation work
The work undertaken is set out in the Terms of Reference (ToR) for the engagement. It includes obtaining reports from Government Entities. We did not receive complete declarations covering all the extractive companies selected in the scope from FIRS. Nigeria Customs Service (NCS) did not submit any information about revenues collected from extractive companies; they only submitted information on minerals exports.
According to Nigerian Minerals and Mining Act, all operators in the mining industry shall be granted an exemption from payment of customs and import duties in respect of plant,machinery,equipment and accessories specifically and exclusively imported for mining operations. As a result, the impact after adjustment of company reporting templates was “Nil”.
Revenue generated from the solid minerals sector
The receipts reported by the government in 2013, after reconciliation, may be depicted as follows:
Structure of direct revenues of the solid minerals sector
Total revenue from the solid minerals sector amounted to NGN 33.905 billion in 2013. The revenue stream from the Solid Minerals Sector is composed of 85.50% of taxes received by FIRS, mining taxes received by MID and MCO represent 3.97% and 2.08% respectively and other taxes paid to other Government Agencies not selected in the scope 8.45%. The detail of these revenues is set out in the table below:
Total contribution of solid minerals sector
According to the data collected from extractive companies and Government Entities, after reconciliation work, revenues generated from the Solid Minerals Sector amounted to NGN 33.862 billion. These revenues include, in addition to the reconciled revenue amounting to NGN 30.253 billion and representing 91% of the total revenues, unilateral disclosures of companies amounting to NGN 2.861 billion and unilateral disclosures of Government Entities amounting to NGN 748 million, both representing 9% of the Solid Minerals revenues. The detail of the revenues by Government Agency and by Sector is set out in the table below:
Government Revenues from the Solid Minerals Sector increased from NGN 31.449 billion in 2012 to NGN 33.862 billion in 2013. This increase of NGN 2.413 billion is explained mainly by the growth of the amount of taxes paid to FIRS. The detail of revenues by Government Agencies is presented in the table below:
Based on the data gathered and set out in Section 3.1.4 of this report, the solid minerals sector is still a minor productive industry with low contributions in the main macro areas
Production and exports
According to the statistical data provided by the Mines Inspectorate Department (MID)1 total production across the whole solid minerals sector is as follows:
There was an increase in the mining activity in 2013, due to the rise in limestone production from 18 million tons in 2012 to 24 million tons. This was a result of the increase of the production of cement in Nigeria during 2013. The production detail of 2012 and 2013 by minerals and by State is set out in Annex 8 of this report.
The solid minerals sector accounted for an average of 0.09% of total export earnings for the year 2013 (0.02% for 2012). Lead ores accounted for over 50% of the solid minerals sector exports as shown in the table below:
The exports data for the other commodities extracted is set out in Section 3.1.4 of this report.
EITI scope of the solid minerals sector
Payment flows and data reported
The report covers payments made by extractive companies operating in the solid minerals sector and revenues received by Government Entities and other material payments and benefits to Government Entities as detailed in Section 4.3.1. The report also covers mining production, export sales and social contribution.
In accordance with reporting instructions approved by NSWG, all companies operating under a mining or quarrying license which made payments to MID in excess of NGN 2 million (approx. USD 12,8871 ) were required to report their payments. As a result, cash flows reconciled for solid minerals sector came from 65 extractive companies, representing 90.49% of royalties received by MID.
These companies are listed in Section 4.3.2 of this report. For extractive companies operating in the solid minerals sector and which have made royalty payments below the NGN 2 million threshold, cash flows are included in this report through unilateral disclosure by Government Entities.
The revenues collected from these companies which were submitted by MID and MCO during the preliminary analysis phase are detailed in Section 6.2 of this report. Based on the list of mining companies and payment streams included in the scope, all Government Entities involved in revenue collection were required to report under the EITI Standard. These entities are listed in Section 4.3.3 of this report.
Completeness and Accuracy of Data
Solid Minerals companies: all companies included in the reconciliation scope attended the reconciliation meetings, except the companies listed in the table below. These companies did not submit a reporting template either.
The receipts reported by Government Entities in respect of companies mentioned above amounting to NGN 86 million accounts for only 0.28% of the total revenue declared by the Government Entities.
Government Entities: Government Entities included in the reconciliation scope and which returned their reporting templates for companies are listed below:
Nigeria Customs Service (NCS) did not declare payments received from companies selected in the solid minerals sector. However, this Government agency has reported information on minerals exports (see Annex 11). FIRS confirmed part of the flows on an accruals basis and also confirmed “Nil” flows for some companies despite the existence of payments as detailed in Section 5 of this report.
According to NSWG instructions reporting templates should be approved by an authorised company official. However, NSWG did not request that the templates should be certified by a Registered Auditor. According to the information collected during the reconciliation work:
· only 34 companies out of 65 have submitted reporting templates signed by an authorised officer; and
· the data submitted by the Government agencies were subject to the audit conducted by the Office of the Auditor General for the Federation. An official letter has been produced by the OAGF to certify the completeness and accuracy of the extraction of payments data submitted to us during the EITI reporting process. The letter mentioned that the audit procedures used were in line with international standards. A copy of the letter is set out in Annex 13 of this report.
Reconciliation of cash flows
Moore Stephens has been contracted to reconcile the taxes reported by extractive companies and Government Entities in order to identify and clarify any potential discrepancies in the declarations reported. Section 5 of this report presents the reconciliation results at disaggregated level.
Cash flow reconciliation
At the beginning of the reconciliation, the total amount reported by Nigerian Government Entities amounted to NGN 55,880,632,497. We note, however, that the total net difference between the amounts declared by reporting companies and those of the Government Entities amounted to NGN 22,889,538,207 (41%), as summarised in the table below:
At the end of the reconciliation, a total amount of NGN 30,252,584,194 was reported to have been received by the Government of Nigeria between 1 January and 31 December 2013. A net difference of NGN (301,774,143), (1%) remained unreconciled, as summarised in the table below:
The final unreconciled difference of NGN (301,774,143) relating to the 2013 reconciliation exercise is summarised in the table below:
Individual tax templates by company showing the reconciliation are presented in Annex 10 of this report.
Verification of Royalties paid
According to the data collected from the Solid Minerals Companies, we have calculated the royalties that should be paid to MID based on the quantum reported during the reconciliation exercise and applying the royalty rates in force during 2013 (see Annex 7). The difference between the amounts actually paid and those calculated is NGN 170,693,002 and represents 15.2% of the total royalties declared by MID. Details of the reconciliation are summarised in the table below:
The detail of these figures by type of minerals and by company is set out in Section 5.5 of this report.
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