Nigeria oil company, NNPC, operating at a loss- GMD

The NNPC blames its problems on the difficult operational environment in the industry.

The management of the Nigerian National Petroleum Corporation, NNPC, on Tuesday, blamed huge operational losses in its business for its inability to pay about N142.7 billion, money that the House of Representatives Committee on Finance claimed the corporation and its subsidiaries owe the Federal Government.

Though the corporation refused to provide details on the quantum of the losses, it described the claim by the lawmakers as embarrassing and regrettable as the committee had not completed its assignment on the review and reconciliation of its account books before going public with its claim.

Chairman of the House of Representatives Committee on Finance, Abdulmumin Jibrin, had said on Monday that the Corporation’s conduct violated the provisions of the Fiscal Responsibility Act, FRA, 2007.

Consequently, the Committee asked the Inspector General of Police, IGP, to arrest the Corporation’s Group Managing Director, Andrew Yakubu; the Executive secretary, Petroleum Products Pricing Regulatory Agency, PPPRA, Reginald Stanley; and director, Department of Petroleum Resources, DPR and bring them before the House on Tuesday.

The three men were accused of refusing to honour repeated invitations to explain why the NNPC failed to remit the said amount from the N6trillion Internally Generated Revenue, IGR, realised between 2009 and July last year to the Consolidated Revenue Fund, CRF, as demanded by law.

Also summoned were the chief executives officers of all the 16 subsidiaries of the oil corporation, including the Nigerian Liquefied Natural Gas Company, NLNG and the refineries.

According to Committee Chairman, in 2009, the Corporation generated N2.048 trillion and realised N2.155 trillion in 2010 while N1.9trillion was realised in 2011 and N259billion in 2012 as its IGR.

He said however that between 2009 and 2012, the NNPC failed to remit anything from the N6 trillion it generated to the CRF as demanded by law.

Consequently, a technical committee was constituted to examine the books of the corporation and its 16 subsidiaries to ascertain what was due to the Federal Government.

According to the lawmakers, findings at the Office of the Accountant-General of the Federation, revealed that N549.9 billion was deducted from the proceeds of crude oil sales for the 2007 Joint Venture Cash Calls (JVC); N1.168 trillion for Excess Crude, and N236.6 billion for Petroleum Product Subsidy, while N25.951 billion and N62.542 billion were excess proceeds deducted in respect of Petroleum Profit Tax (PPT) and Royalties respectively.

The committee noted that those deductions were made prior to the net revenues paid to the Federation Account contrary to the provisions of Section 162(1) of the 1999 Constitution of the Federal Republic of Nigeria which requires all such revenues to be paid directly into the Federation Account.

The lawmakers also noted that from the audit examination of the mandate letters from NNPC to the Central Bank of Nigeria in the months of January and February, 2007, the benchmark amount of the domestic crude oil sales proceeds were not fully paid by N38.816 billion to the Federation Account. They pointed out that total withdrawals from the Excess Crude Oil Account in the year 2007 was about $1.604 billion that could not be traced in the records of FAAC for the year.

Similarly, it said payments of about $1.569 billion made from Excess Crude Oil/PPT/Royalty Revenues as per FAAC records were not reflected in the CBN Statement of Account for the year 2007.

But, the NNPC denied all the allegations, saying it cannot be expected to sweep funds into the CRF when there is no surplus to pay as the corporation has been operating at a huge loss law and the law specifically requires “surplus” to be so paid.

According to the General Manager, Media Relations, Farouk Ibrahim, who spoke to reporters on behalf of the GMD, the role of “product supplier of last resort”, has taken a huge toll on the finances of the corporation.

He blamed the causes of the corporation’s operational losses on a number of reasons, including its requirement to buy crude oil at international rate while selling refined petroleum products at regulated prices.

He also blamed the problem on the menace of products pipeline vandalism and crude oil theft which has worsened the difficult operational environment in the industry, pointing out the NNPC deserved some recognition for its ability to survive in such difficult terrain and still provide about N400 billion monthly to the Federation Account from its upstream operations.

On the allegation by the lawmakers that the NNPC has always ignored its invitation, Mr. Ibrahim said the corporation has always responded promptly to all invitations by the lawmakers, as it has nothing to hide about its operations.

He blamed the lawmakers for the misunderstanding, saying the committee members failed to attend meetings scheduled to review the issues for reasons he could not explain.

“It was agreed that the Committee would get the Office of the Accountant General along with some members of the Committee to raise a team within seven days to look at the Corporation’s books and we promised to cooperate. It should be noted that one week after that meeting, no one visited us at the NNPC,” Mr. Ibrahim said.

He said efforts were still made to reconvene the meeting but on the day the lawmakers were scheduled to visit NNPC, two members and the clerk of the Committee who showed up left in anger when their drivers were asked to park their vehicles at the visitors’ car park after dropping them off.

At the end of the meeting which held without the lawmakers, Mr. Ibrahim said all the Account books presented by NNPC and the draft observations based on its financial statements and those of its 16 subsidiaries were reviewed and all issues were duly clarified, with another meeting scheduled to resolve all outstanding issues.

Though he said the Committee did not complete its assignment, Mr. Ibrahim wondered why the lawmakers decided to make the allegation that it had uncovered a debt of N142.7billion by the NNPC, describing the claim as “calculated to put the Corporation in bad light.”


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