Business
Forensic audit indicts NNPC, NPDC for non-remittance of $1.48bn
The Nigerian National Petroleum Corporation, NNPC, and the Nigerian Petroleum Development Company, NPDC, have been indicted by the PriceWaterHouse Coopers’ (PWC) forensic audit report for failing to remit a minimum of $1.48 billion, about N251.6 billion into the Federation Account between January 2012 and July 2013.
Highlights of the investigative forensic audit report, looking into the allegations of unremitted funds into the Federation Accounts by the NNPC for the period January 2012 and July 2013, presented to the media by the Auditor-General of the Federation, Mr. Samuel Ukura, however, failed to state the maximum amount to be remitted by both the NNPC and the NPDC.
According to the report, total gross revenues generated from Federal Government of Nigeria crude oil liftings was $69.34 billion and not $67 billion as earlier stated by the Senate Reconciliation Committee for the review period, while total cash remitted into the Federation Accounts in relation to crude oil liftings was $50.81 billion and not $47 billion as earlier stated by the Senate Committee.
PWC, however, recommended that the NNPC and the NPDC be made to refund a minimum of $1.48 billion to the Federation Account.
The PWC report also indicted the NNPC for its unsustainable operating model which it said has made it difficult for it to meet its monthly remittances to the Federation Account.
The report maintained that, “The Corporation operates an unsustainable model. Forty-six per cent of proceeds of domestic crude oil revenues for the review period was spent on operations and subsidies. The Corporation is unable to sustain monthly remittances to the Federation Account Allocation Committee (FAAC), and also meet its operational costs entirely from the proceeds of domestic crude oil revenues, and have had to incur third party liabilities to bridge the funding gap.
‘The NNPC provided transaction documents representing additional costs of $2.81 billion related to the review period, citing the NNPC Act LFN No 33 of 1977 that allows for such deductions. Clarity is required on whether such deductions should be made by NNPC as a first line charge, before remitting the net proceeds of domestic crude to the Federation Accounts.”
The report further recommended that an urgent review and restructuring of the NNPC model of operation be undertaken, stating that the current model which has been in operation since the creation of the Corporation cannot be sustained.
The report also queried the transactions surrounding the transfer of NNPC’s assets in eight oil wells divested by Shell, while it indicted the NPDC of failing to remit dividends to the NNPC and ultimately to the federation account and also for failing to pay $2.22 billion, about N377.4 billion, being the amount for Signature Bonus, Petroleum Profit Tax (PPT) and Royalty.
The report said, “According to NPDC former Managing Director’s (Mr Victor Briggs) submission to the Senate Committee hearing on the subject matter, for the period covered by their mandate, NPDC generated $5.11 billion (net of royalties and petroleum profit tax paid).
“PWC relied on the legal opinion provided to the Senate Committee by the Attorney General (AG) on the subject of the transfers of NNPC’s (55 per cent) portion of Oil Mining Leases (OMLs) involved in the Shell Petroleum Development Company (SPDC) divestments which impacted crude oil revenues in the period. The AG’s opinion indicated that these transfers were within the authority of the Minister of Petroleum Resources to make.
“NNPC’s (55 per cent) portions of oil leases (OMLs) involved in the Shell divestments related to the eight OMLs were transferred to NPDC for an aggregate amount of US$1.85 billion. So far, only the amount of $100 million had been remitted. PwC had expected a transfer basis higher than the US$1.85 billion aforementioned.
“NPDC had done a self assessment of PPT and Royalty and had unpaid self-assessed PPT and Royalty to the tune of $0.47 billion related to the review period.
“PWC did not obtain any information that suggested that NPDC has been assessed for PPT and Royalty for the review period.”
The report, therefore, insisted that the NPDC should remit dividend to NNPC and ultimately to the Federation accounts, based on NPDC’s dividend policy and declaration of dividend for the review period.
The report further queried the rationale behind the NNPC’s payment of $3.38 billion (N574.6 billion) for subsidy on kerosene, especially in light of the fact that letters obtained from certain officials of the Presidency and the Petroleum Products Pricing Regulatory Agency, PPPRA shows that subsidy on kerosene has been discontinued since 2009.
The report said, “PwC determined from information obtained from PPPRA that $3.38 billion relating to Dual Purpose Kerosene (DPK) subsidy cost was incurred by the NNPC for the review period.
“PWC also obtained a letter, dated 19th October 2009, written by the Principal Secretary to the President, to the National Security Adviser, confirming a Presidential directive of 15 June 2009, instructing that subsidy on DPK be stopped.
“PwC also obtained a letter dated 16 December 2010 from the Executive Secretary, PPPRA, to the Central Bank of Nigeria, CBN, Governor clarifying that PPPRA had ceased granting subsidy on kerosene since the Presidential directive of 15 June 2009.
“Furthermore, Kerosene subsidy was not appropriated for in the 2012 and 2013 FGN budget. However, the Presidential directive was not gazetted and there has been no other legal instrument cancelling the subsidy on DPK.
“PwC therefore recommended that an official directive be written to support the legality of the kerosene subsidy costs. This should also be followed by adequate budgeting and appropriation for the cost.”
The audit was commissioned by the Federal Government, when former CBN Governor, Sanusi Lamido, now Emir of Kano, had about a year ago, told a Senate Committee of Finance that the NNPC had failed to remit $20 billion to the Federation Account out of the $67bn it realised from crude oil sale on behalf of the Federal Government.
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