NEITI accuses NNPC of failing to remit another N3.65 trillion oil revenue

A KPMG report describes the NNPC as a cesspool of monumental corruption

Almost every agency of the Nigerian government seems to agree that NNPC is a cesspool of corruption but the state oil company says there’s an orchestrated campaign of calumny to discredit it. 

The Nigeria Extractive Industries Transparency Initiative, NEITI on Wednesday said the Nigerian National Petroleum Corporation, NNPC, may again be hiding significant liabilities on oil revenues to the Federation than it has so far disclosed.

The allegation came weeks after Central Bank Governor, Sanusi Lamido, blew a whistle on the state oil company, accusing it of diverting not less than $20billion of oil revenue.

In the fresh allegation, the Executive Secretary of NEITI, Zainab Ahmed, told the joint committees on Petroleum Resources Upstream, Downstream and Justice that the NNPC failed to account for another $22.8 billion (about N3.65 trillion) during the 2009-2011 audit exercise.

Mrs. Ahmed, who was addressing the committee probing allegations of massive corruption involving the NNPC and two Swiss oil companies, Vitol and Trafigura, urged the lawmakers to compel the corporation to disclose in its audited reports all alternative funding arrangements it entered into.

NEITI said the unremmited funds represented NNPC’s portion of a third party financing scheme from external financial markets and loans from its multinational Joint Venture operating partners, as part of alternative funding arrangements for its activities.

Nigeria reportedly lost about $6.8 billion in 2013 to fraudulent deals, which the ‘Bernes Declaration’ said involved the sale of Nigeria’s crude oil below international prices.

“The implication is that there may be significant liabilities to the Federation Account that is not being disclosed by the NNPC.” Mrs. Ahmed said. “There is therefore the need to compel the NNPC to transparently disclosure all alternative funding arrangements in its audited financial statements.”

NEITI accused the NNPC of diverting $1.73 billion meant for funding JV cash calls to non-cash call items, namely security payments, $600 million; National Petroleum Investment Management Services, NAPIMS fees, $486.6 million and expansion of Escravos-Lagos Pipeline Project, ELPP, $646.9 million.

The agency also listed non-cash call items totaling $1.73 billion purportedly financed from the Central Bank of Nigeria, CBN/NNPC JP Morgan Chase Cash Call Dollar Account.

The transparency agency said these revenues reduced the amount available for funding JV Operations, with the attendant implications to NNPC seeking alternative funding arrangements to fund cash call shortfalls.

Urging NNPC to desist from the practice, NEITI said the corporation should apply funds meant for JV cash calls strictly for that purpose.

But the Group Managing Director of the NNPC, Andrew Yakubu, on Tuesday told the federal lawmakers that allegations by the Bernes Declaration NGO were “baseless and without material substance,” and therefore must be “set aside in its entirety.”

Moreover, Mrs. Ahmed said there was no cost efficiency in NNPC’s crude-oil-for-refined-products swap arrangement with offshore processing organisations, which she said involved  about $866,10 million in under-deliveries.“

She described as  “not economically beneficial” the total cost of offshore processing consisting of cost of crude, processing fees, freight and demurrage, when compared with the reported price of premium motor spirit, PMS, dual purpose kerosene, DPK, automotive gas oil, AGO and the retained products’ proceeds paid to NNPC.

However, NEITI faulted NNPC’s denial, citing the example of NNPC’s use of exchange rate different from that provided by the CBN in its transactions, which resulted in the loss of about N98.3billion to the Federation between 2009 and 2011.

NEITI noted the similarity in its audit report and the Bernes Declaration report, pointing out that the Bernes Declaration report has a lot of substance that the committee would need for its assignment.

NEITI also told the committee that it was strongly opposed to the continued allocation of 445,000 barrels of crude daily to the NNPC for domestic fuel as the corporation did not have the capacity to  utlilise it.

The NEITI Executive Secretary said “the 445,000 barrels per day allocation should be reviewed to the actual refining capacity of the refineries” as they lacked the capacity to refine the crude,

On the alternative, Mrs. Ahmed called on government to urgently privatise the country’s refineries.

The Managing Director of the Pipelines and Product Marketing Company, PPMC, Haruna Momoh, however defended the swap arrangement of crude for refined products between the NNPC and its foreign trading partners.

Mr. Momoh denied that the country lost over $8billion annually to the arrangement, pointing out that the arrangement was the reason the country no longer experienced acute scarcity of petroleum products.

In a related development, the House Committee on Finance also accused the NNPC of withholding about N105billion of independent revenue from the Consolidated Revenue Fund of the Federation.

In a separate meeting, the Chairman of the committee, Jubrin Abdulmumin, said records from the Budget Office of the Federation revealed that the money had not been remitted to the Federation Account.

But the NNPC’s Chief Strategist, Tim Okon, who led a team of the corporation’s officials to the meeting, expressed surprise at the allegation, saying the corporation was not aware of it.

In a statement, the acting Group General Manager, Group Public Affairs Division, NNPC, Omar Farouk, later raised the alarm over what it called “an orchestrated campaign of calumny designed to tarnish the reputation of the Corporation by some unscrupulous elements.”

Mr. Omar pointed  at what he referred to as “deliberate misrepresentation of NEITI’s presentation”, describing it as an example of the well-choreographed negative campaign against the Corporation.


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