Poor audit report implementation greatest challenge to prudent management of extractive sector revenue, says NEITI

Ongoing audit is critical to reforms in industry

The Nigeria Extractive Industries Transparency Initiative, NEITI on Tuesday said poor implementation of its independent audit reports in the oil and gas sector was posing the greatest challenge to prudent management of extractive sector revenues.

The Chairman of NEITI National Stakeholders Working Group, NSWG, Ledum Mitee, said in Lagos at the opening of a workshop marking the commencement of NEITI comprehensive audit of the oil and gas sector for the year 2012.

Mr. Mitee said if NEITI Reports where given the attention they deserved, such issues as confirmation of remittances of funds to the Federation Account would not be a subject of controversy.

Though the NEITI audit processes were historical in nature, Mr. Mitee said with adequate funding and support, the agency could automate its data collection processes to enable the country get real time data that could be resorted to in the event of controversy like the current allegations by the Central Bank of Nigeria, CBN against the Nigerian National Petroleum Corporation, NNPC.

“I shudder to hope that one useful outcome of the current controversy over alleged unremitted funds would be the realisation of the need by all relevant agencies and institutions to give NEITI and its audit recommendations the deserved seriousness and support,” he said.

He said a properly resourced NEITI whose audit recommendations were promptly addressed remained vital not only to the economic well being of the country, but also citizens derived needed benefits from the extractive resources.

The NEITI Chairman gave the assurance that the ongoing audit was critical to the provision of reliable information and data required for the proposed massive reforms of the industry.


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The Chairman said the commencement of the current audit circle was coming at a time in the country’s nation’s political development when issues of transparency and accountability were attracting increased attention.

The issue was also important in two other important respects, namely the audit that could be conducted under the new set of EITI requirements and standards approved by the global body in May, 2013. He pointed out that the current audit would contain information of beneficial ownership, amongst other issues.

Secondly, it is coming at a time in the national history that the nation is embroiled in a very unfortunate allegation of non-remittance of oil revenues to the federation account.

“NEITI finds the controversy unfortunate for there are issues that ordinarily fall under the NEITI statutory mandate that would have been needless and unnecessary had relevant agencies, officials and institutions taken the NEITI Audit recommendations more seriously,” he said.

The Executive Secretary of NEITI explained that the workshop was to expose all the 88 Oil and Gas Companies and over 24 Federal Government Ministries, Departments and Agencies, MDAs covered by the Audit to the type of information and data which NEITI requires for the Audit.

“Specifically, this audit exercise will establish the quantities of hydrocarbons produced, exported or imported and how the licensing process and agreements were reached and implemented between governments through its agencies and the companies,” Mr. Mitee said.

He said the exercise would also examine and validate accuracy of royalties and petroleum profit tax payments, petroleum product importation, fuel subsidy management regime, measurement processes and pricing of federation equity crude. “It will also check remittances of funds due to government to the Federation account among others.”

The NEITI Executive Secretary also explained that the exercise would cover other key areas, such as mapping of hydrocarbon flows, volumetric analysis and technical assessment of hydrocarbons streams and examination of procedural systems.

The audit would involve data reconciliation, aggregate reporting of hydrocarbons produced and computation of financial implications as well as value analysis during the period under review (2012).

Representatives of 88 companies in the oil and gas companies such as Shell, Chevron, Mobil, Agip and Addax Petroleum Development Company are attending the Workshop. Government agencies include the NNPC and its subsidiaries, the CBN, Federal Inland Revenue Service, FIRS, Department of Petroleum Resources, DPR, Office of the Accountant General of the Federation, AGF; Office of the Auditor General of the Federation, OAGF, are among the over 24 government agencies participating in the workshop.

The NEITI Industry Audits is designed to establish how much companies paid to government by way of taxes, royalties, signature bonuses, levies and how much of this funds where actually received into the federation account during the period of the audit.

NEITI is required by law to reconcile these information and data to enable the Nigerian citizens and the civil societies use the information and data to ask informed questions to hold government and companies to account.


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