Federal investigators, prompted by President Goodluck Jonathan’s vow to combat petroleum sector fraud, launched a dramatic raid on the Petroleum Product and Pricing Regulatory Agency office, removing a trove of documents connected to the operation of the fuel subsidy.
A major directive of the president’s position is a review and implementation of the KPMG report which indicted the Nigerian National Petroleum Corporation, and his approval – through the petroleum minister, Diezani Alison-Madueke – for full investigations of agencies involved, and the punishment of culpable officials.
The move has put in the spotlight the shocking revelations of the forensic report – which the administration initially tried to overlook- and analysts expect them to be the yardstick of the probe, and the measures to block widespread corruption in the sector.
From unauthorized surpassing of OPEC oil production quota for Nigeria, to falsification of exchange rates with which payments into federation accounts were made, to illegal award or termination of oil lifting contracts, the reports carefully presents a terms of reference for the planned probe.
Each of the illegalities, as stated by KPMG, comes with their implications for the economy and highlight a complex web of collaboration between the NNPC, PPPRA and other agencies in the sector.
But none is as contentious and sensitive to the current national mood as the blatant fraud alleged under the management of the oil subsidy, a veritable starting point for the review of NNPC activities.
Key to that will be establishing how the NNPC over deducted N2bn for 2007, N10.3 billion for 2008 and N16.2 billion for 2009.
Arbitrary deductions of subsidy claims at source, before crude earnings are paid into the federation accounts, remains a serious accusations against the corporation, and according to several government officials, that has fuelled abuse, as with the overpayments.
At the ongoing House of Representatives hearing on the subsidy on Tuesday, Finance minister, Ngozi Okonjo-Iweala said it was left for only the NNPC to explain where it derives the power for the deductions.
Last Wednesday, at the same hearing, the NNPC Group Managing Director, Austin Oniwon, said the PPPRA establishing laws grants the NNPC such powers.
According to the KPMG report, such subsidy payments or deductions by the NNPC, need the clearance of the PPPRA. But whenever the PPPRA delays itts approval, the NNPC implemented its own payments between 2007 and 2009, over-deducted without refunding the full excess.
The corporation will also have to explain a revelation in the reports that it sidelined the Central Bank published dollar benchmark for years, and paid oil receipts at a devalued rate into the federation account, causing losses as follows N25.7bn for 2007, N33.8bn for 2008 and N26.7 for 2009.
According to the KPMG report, officials of the NNPC claimed the rates were obtained from the CBN via phone, without any documentation to back that up. The review ordered by the president will ascertain how legitimate that is.
Another key area will be revelations in the report that crude sales to the NNPC were at lower prices(lower than the official selling price)still, without documentation, leading to significant revenue loss to the nation.
Added to the list, the corporation was widely accused of illegal practice of renewing crude sales contracts not in line with best practices, and without needed documentation.
Where there are documentation, they were hardly adhered to, the report adds. That gave room to discretionary awards, cronyism, abuse of process and corruption. The criminal investigations are expected to press at establishing how that was sustained, and the officials involved.
The government-run corporation will also be expected to be probed on accusation by the KPMG that is deliberately starved the few functional refineries of cash in order to make them beholden to it and the company’s decision to illegally exceed OPEC quota for Nigeria with the attendant risk of exerting a “downward pull on crude prices, causing loss of revenues to the government.”
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