On Wednesday 17th October 2018, a seven-man panel of the Supreme Court led by the Chief Justice of Nigeria, Justice Walter Onnoghen ordered the Federal Government of Nigeria (“FGN”) to revisit the fiscal terms of existing Production Sharing Contracts (PSCs) and embark on an upward adjustment of the share of revenues accruing to the FGN whenever the price of Crude Oil exceeds $20 per barrel. The order emanates from suit no. SC964/2016 instituted by Rivers State, Bayelsa State and Akwa-Ibom State (in the names of their respective Attorneys General) who had approached the Supreme Court for the interpretation of Section 16(1) of the Deep Offshore and Inland Basin (Production Sharing Contracts) Act (the “PSC Act”).
Section 16(1) of the PSC Act provides that:
“The provisions of this Act shall be subject to review to ensure that if the price of crude oil at any time exceeds $20 per barrel, real terms, the share of the government of the Federation in the additional revenue shall be adjusted under the production sharing contracts to such extent that the production sharing contracts shall be economically beneficial to the government of the Federation.”(Emphasis ours)
The judgment in Suit No. SC964/2016 compels the FGN to exercise the statutory right outlined in Section 16(1) above - a right which the FGN has not exercised at any time since the enactment of the PSC Act - and specifically to “immediately set up a body and the necessary mechanism for recovery” of the lost revenue.
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