The Nigerian Extractive Industries Transparency Initiative, NEITI, has urged the Nigerian government to recover over $21.8 billion (about N7.2 trillion) unremitted oil revenue from the Nigerian National Petroleum Corporation, NNPC.
It said the recovery of the revenue would make it unnecessary for Nigeria to seek loans and other international funding assistance to jump-start its economic recovery.
In the latest edition of the NEITI Policy Brief unveiled in Abuja on Tuesday, Executive Secretary of the transparency agency, Waziri Adio, said findings from a series of its oil and gas sector audits revealed that the NNPC and its upstream subsidiary, the Nigerian Petroleum Development Company, NPDC, failed to remit over $21.78 billion and N316.1 billion to the Federation Account.
Mr. Adio said details of these unremitted funds, which NNPC has never disputed, were from federation asset divested to NPDC and its legacy liabilities; payments for domestic crude oil allocation to the NNPC, and dividends paid from investment in the Nigerian Liquefied Natural Gas, NLNG, but withheld by the NNPC.
He said details of these unremitted funds were part of the briefing he gave in a presentation on Monday to the National Economic Management team presided over by Vice President Yemi Osinbajo.
“Considering the difficulties the government has been facing securing as little as $1billion foreign loan, recovering these funds will significantly enhance government’s fiscal position in the short term,” Mr. Adio said.
Details of the unremitted funds, NEITI Brief showed, included outstanding $1.7 billion from a total of $1.8 billion as a result of the transfer of eight oil mining leases, OMLs from Shell Petroleum Development Corporation, SPDC, and $2.2 million from four other OMLs from the Nigerian Agip Oil Company, NAOC, to the NPDC respectively.
Besides, NEITI said about $148.3 million paid as cash calls on the transferred OMLs, in addition to about $1.5 billion legacy liabilities as well as about $15.8 billion that accrued as NLNG dividends between 2000 and 2014 were yet to be remitted to the Federation Account.
Criticizing the decision to transfer the country’s oil asset to NPDC as not founded on sound economic judgment, NEITI noted that although the company was established to foster indigenous participation in the upstream sector of the industry, it has so far not been able to produce substantial levels on its own.
A review of the company’s operations, NEITI said, showed that in mid-2006, total output from its wholly owned production stood at just 10,000 barrels per day, while production from its service contract agreement with NAOC fetched a paltry 65,000 bpd.
Reasons NPDC gave for the poor performance, NEITI said, included undue interference by NNPC, inadequate financial structure and inability to source project financing.
This development, the agency said, led the company into partnerships with international and indigenous oil firms engaged in the actual exploration and production of NPDC asset.
On the NLNG dividends, the NEITI expressed concern that despite evidence of payment from the NLNG to NNPC, there was no corresponding evidence of NNPC remittance to the Federation Account in accordance with the provisions of Sections 80(1) and 162(1) of the Nigerian constitution.
Despite owning majority shares in the NLNG operated as a private company run by its private partners, NEITI lamented the non-involvement of the Nigerian government in the management of the company.
Rather, it said the government earned revenues from its investment in the enterprise in form of dividends, interests and loan repayments.
“Since the Federation’s shareholding in NLNG is held through NNPC, dividends are paid to NNPC, which should remit same to the Federation. However, NEITI audits have revealed that until 2015, NNPC has failed to remit the interests and dividends from NLNG to the Federation Account totaling $15.8 billion between 2000 and 2014,” NEITI said.
Consequently, NEITI recommended urgent measures by government to recover the funds to support its on-going economic recovery plans.
‘‘At current exchange rate, unremitted revenues to government’s treasury comes to about N7.2 trillion. Achieving a recovery rate of just 20 per cent would significantly offset the projected deficit for the 2017 budget, while a third of the computed unremitted revenues would completely eliminate the need to borrow to finance the budget, with short and long-term positive implications for the economy,’’ it said.
Other recommendations included re-evaluation of the asset divested to NPDC to determine the actual market prices, with a view to recovering the full value of these asset; a review of the relationship between NPDC, NNPC and the Federation, to determine and establish effective lines of accountability of NNPC subsidiaries in line with global best practices.
NEITI also asked government to review the process of acquiring OMLs b NNPC and NPDC, to ensure the long-term net positive value was realized; investigate the status and use of the NLNG dividends from 2000 to 2014 and undertake criminal proceedings against anyone found culpable of any fraud as well as fast- track a comprehensive reforms of the petroleum sector.
When contacted, NNPC’s spokesperson, Ndu Ughamadu, said a committee constituted by the corporation’s management was studying NEITI audit report and recommendations and at the appropriate time would come up with a response.