The Federal Government ordered forensic audit on the operations of the Nigerian National Petroleum Corporation, NNPC, has indicted the national oil company for various questionable transactions.
Highlights of the recommendations by the audit firm of PriceWaterhouseCoopers, PwC Nigeria, which conducted the audit, asked the Nigerian Petroleum Development Company, NPDC, the upstream subsidiary of the NNPC, to refund a total of $1.48billion (about N248.6billion) to the Federation Account for various unreconciled transactions.
The Auditor General of the Federation, AuGF, Samuel Ukura, who said he was presenting the highlights of the report at the request of President Goodluck Jonathan, pointed out that it was not his responsibility to present such audit reports to arms of government other than the National Assembly in line with the Constitution.
According to Mr. Ukura, contrary to the allegation by the former Central Bank of Nigeria, CBN, Lamido Sanusi, that only $67billion was the total unremitted revenue from crude oil lifting by the NNPC between January 2012 and July 2013, findings by PwC Nigeria showed that the total amount involved was $69.34 billion.
He said the amount included about $28.22billion, being the value of the domestic crude oil allocated to the NNPC for local refining during the period, while total cost directly attributable to domestic crude oil was $1.46billion.
In addition, he said total amount spent on subsidy for premium motor spirit, PMS, or petrol, was about $5.32billion, while a similar expenditure for dual purpose kerosene, DPK, or diesel stood at about $3.38billion.
Other third party financing arrangements, including equity crude oil processing costs, the report said, was $1.19billion, while other costs incurred by NNPC that were not directly attributable to domestic crude oil was $2.81billion.
According to the report, total revenue submitted by the NPDC, after petroleum profit tax, PPT, and Royalty were deducted amounted to $5.11billion, pointing out that the amount needs to be included in the financial statements of the company from where dividend should be declared to the Federation Account.
It noted that signature bonus PPT and royalty yet to be paid by NPDC to the government stood at about $2.22billion.
“Total cash remitted to the Federation Accounts in relation to crude oil liftings for the period from January 2012 and July 2013 was $50.81billion and not $47billion,” the report said. “Based on the information available to PwC and from the analysis above, the firm submitted that NNPC and NPDC should refund to the Federation Accounts a minimum of $1.48billion.”
Further analysis, the AuGF said, centred on NNPC costs, ownership of NPDC revenues and DPK subsidy, pointing out that the corporation was operating an “unsustainable model”.
While 46 per cent of the revenues realized from domestic crude oil for the period was spent on its operations and payment and subsidies, the NNPC was unable to either sustain its monthly obligation to remit to the Federation Account Allocation Committee, FAAC, or meet its operational costs from such revenues.
To bridge the funding gap between available revenue and third party liabilities, the report said transaction documents valued at about $2.81 billion, representing additional costs for such funding arrangements based on the NNPC Act No. 33 of 1977 required further clarification to justify such deductions by NNPC as a first line charge.
Echoing the need to revisit the issue of the Petroleum Industry Bill, PIB, currently pending before the National Assembly, the report called for an urgent review and restructuring of the NNPC operational model to bring it up to the global standard.
On ownership of NPDC revenues, the report noted that out of about $1.85billion realized from NNPC’s 55 percent stake in the oil mining leases, OMLs, involved in the Shell Petroleum Development Company, SPDC divestment of from eight OMLs, only $100 million has so far been remitted to government coffers.
Noting that the NPDC had conducted a self-assessment of PPT and Royalty it collected, about $470 million was yet to be remitted, while there were no records to suggest that the company had done the assessment for the period under review.
“NPDC should remit dividend to NNPC and ultimately to the Federation Accounts based on NPDC’s dividend policy and declaration of dividend for the period,” the report said.
On kerosene subsidy, the report said information obtained from the Petroleum Products Pricing Regulatory Agency, PPPRA, revealed that NNPC incurred about $3.38billion cost relating to subsidy for diesel for the period.
Despite a correspondence by the Presidency confirming a 2009 presidential directive stopping payment of subsidy on diesel, and another from the PPPRA to the CBN governor clarifying that the agency had ceased to grant subsidy, kerosene subsidy was not appropriated for in the 2012 and 2013 federal budget.
The report recommended that an official directive be written to legalise the presidential directive on cancellation of subsidy payment on diesel, while also issuing same to support the directive on kerosene subsidy, both of which were not gazette.
“There should be followed by adequate budgeting and appropriation for the costs,” the report.
The audit became necessary after the former CBN governor had alleged that as much as $49 billion was diverted by the NNPC. Though the figure was reconciled between the CBN, Finance Ministry and NNPC, Mr. Sanusi said about $12 billion was involved, while Minister of Finance, Ngozi Okonjo-Iweala said the amount left was $10.8bilion.
Mr. Sanusi later reviewed the amount to $20 billion, and called for investigations, A Senate probe failed to get to the roots of allegation.
In April, Mrs. Okonjo-Iweala, had announced the appointment of PwC Nigeria, to conduct a detailed investigation into the accounts and activities of NNPC.
Though the auditors were given 16 weeks till September 2014 to complete its assignment, the report was coming several months after the deadline, triggering huge concerns from Nigerians, who demanded the release of the audit findings.
Apart from the Presidential candidate of the All Progressives Congress, APC, Muhammadu Buhari, who made the call on government to publish the report, the former Vice President of the World Bank, Oby Ezekwesili also joined to demand for the report.
The former CBN governor, Chukwuma Soludo, also touched on the issue in his recent article accusing the managers of the Nigerian economy of not accounting for several billions of oil money.