The audit was conducted by PricewaterhouseCoopers (PwC) following allegations that the NNPC did not remit $20 billion into the federation account in a letter written to President Goodluck Jonathan in September 2013 by the former governor of central bank, Sanusi Lamido Sanusi, who is now the emir of Kano.
Sanusi initially put the figure at $49.8 billion, but after a reconciliation committee was set up following a media leak of his letter, he revised the figure to $20 billion.
He was subsequently asked to resign by Jonathan and suspended when he refused to do so, but presidency said his suspension was based on a report by the Financial Reporting Council of Nigeria (FRC) on his misdemeanors at the central bank.
The PwC report, which was ordered released to the public by Jonathan on Monday, did not corroborate Sanusi's figure but the findings were no less damning.
PwC stated in the report that in the payment of subsidies for petrol (PMS) and kerosene (DPK) between January 2012 and July 2013, that there were gaps between what was paid and what was supposed to be paid.
It put the difference at $980 million (about N195 billion) and alleged "duplicated discharges" in subsidy computation.
"Our review of the subsidy documentation revealed that the subsidy due to NNPC between January 2012 and July 2013 on PMS and DPK import was $8.99billion compared to the $9.97 billion stated by the Reconciliation Committee.
"The difference was due to the following: Exclusion of October 2011-December 2011 subsidy claims of $1.2billion. This does not relate to the review period of January 2012 to July 2013; $0.13billion increase in PMS subsidy claimed for the 19 months period, $0.09billion increase in DPK subsidy claimed for the 19 months period; duplicated discharges noted in subsidy computations
"Our examination of the PMS and DPK import verified by PPPRA revealed that some discharges were apparently verified and subsidy advised to NNPC more than once," the report said.
PwC alleged "repeated subsidy" for PMS amounting to N3,709,879,190 ($23,954,796) and another "repeated subsidy" for DPK amounting to N6,169,502,266 ($39,836,652).
It said the there was another $36.05 million "over-statement" in PPPRA’s PMS subsidy payment advice to NNPC.
The accounting firm said its review of the payment advice sent by PPPRA to NNPC for discharges between January 2012 and July 2013 revealed that PPPRA applied the pre-2012 Ex-Depot Price (N49.51) on some discharges in 2012 instead of the approved Ex-Depot Price of N81.51.
A total of 174,449,778 litres of PMS were affected in these PPPRA computations, it said, concluding that the "error" resulted in an over-statement of PMS subsidy by N5.6 billion ($36.05 million).
$205m DPK subsidy over-charge
A review of a sample of the copies of the pro forma invoices (PFIs) issued to the other marketers of DPK across different geopolitical zones of Nigeria, PwC said, revealed that the other marketers bought DPK from NNPC/PPMC prior to arrival at NNPC depot in Nigeria at N40.90.
It noted that the marketers were required to incur the Lightering expenses, NPA charges, Jetty Throughput Charge and Storage Charges before bringing the product into Nigeria. Subsidy is then calculated as Landing Cost minus Ex-Depot Price.
"NNPC claimed that this cost is incurred by both NNPC and the marketers. For the purpose of this report, we have considered this cost as a cost incurred by the marketers. Over-charge of subsidy above depends on PPPRA’s decision to either consider this cost in favour of NNPC or in favour of marketers of kerosene," it reported.
"Per PPPRA’s template, Landing Cost also includes the extra expenses incurred by the other marketers.
"By selling DPK to marketers at N40.90 and claiming subsidy at an Ex-depot price of N34.51 without adjusting the Landing Costs for the extra costs borne by the marketers, NNPC had over deducted subsidies to an estimated amount of N31,522,234,881.06 ($204 million)."
Under-recognition of NPDC lifting
PwC said liftings by the Nigerian Petroleum Development Company (NPDC) were "under-recognised" to the tune of $0.82billion by the reconciliation committee.
It reported: "The Reconciliation Committee put the value of liftings in favour of NPDC at $6billion. We did not receive any supporting documentation from NPDC to validate this figure other than the submission to the Senate by the former MD of NPDC, Mr Victor Briggs, who disclosed the total value of NPDC liftings from all its assets as $6.82billion.
"While we were unable to verify the $6.82 billion directly at NPDC, we performed a recomputation of the values of liftings using information provided by COMD (NNPC's Crude Oil Marketing Department) and arrived at a value of $5.65 billion. Discussions with COMD revealed that lifting data captured by COMD for NPDC might not be complete as COMD does not capture liftings done directly by NPDC’s Strategic Alliance Partners. Volumes recorded by DPR for NPDC did not contain the necessary pricing information for valuation."
PwC said cash payments of $863 million by NPDC to FIRS were not captured by reconciliation committee.
Computation of Crude Oil loss
PwC also raised observations on the computation method adopted by the NNPC to arrive at crude oil loss - a major source of revenue leak in the upstream sector.
"NNPC used a conversion rate of $100/barrel to value differences between the quantity of crude oil pumped at the terminals and quantity received at the refineries. We adopted the monthly average Platts price to value the losses, considering that the revenue generated from Crude oil lifted during the review period had been accounted for using such Platts information instead of a fixed rate. Applying the monthly average Platts price to value the crude oil losses amounted to $73,851,144.93," PwC said.
25 September 2013
Sanusi Lamido Sanusi, former CBN Governor, writes a letter to the President stating that from January 2012-July 2013, NNPC had lifted $65bn worth of crude on behalf of the FGN but remitted only $15.2bn, thus $49.8bn was outstanding.
13 December 2013
The former GMD NNPC (Andrew Yakubu) responds that no money is missing. A revenue reconciliation meeting was set up by the FGN to look into the allegations.
18 December 2013
After the reconciliation meeting, a joint press statement was issued by all the parties. Actual value of crude lifted over the period was $67bn which was accounted for as follows: Revenues which directly accrued to NNPC (for the Federation Account) of $14bn. Additional revenues lifted by NNPC on behalf of other parties as follows: FIRS ($15bn), DPR ($2bn), NPDC ($6bn), Other third party financing ($2bn), domestic crude lifted by the NNPC ($28bn).
The Ministry of Finance acknowledged that all crude lifted was remitted apart from domestic crude remittances with a shortfall of $10.8bn, made up of: Unpaid subsidy claims – USD 8.77billion, Holding costs of strategic reserves – $0.46billion, crude oil and product losses – $0.76bn, Pipeline and management costs – $0.91billion. CBN governor stated that the shortfall is $12bn because, of the $28bn due from the domestic crude, NNPC had only remitted $16bn. NNPC insisted that the shortfall is $10.8bn and the difference was due to $1.2bn subsidy payments it claimed to have made between Jan-Mar 2012 (relating to October – December 2011 discharges), and which had been certified by the PPPRA. CBN did not recognize it as no documents were provided by NNPC to support the explanation.
4 February 2014
The CBN Governor appearing before the Senate Committee on Finance stated that NNPC needs to account for $20bn discounting some of the initial explanations provided by NNPC (the lifting in favour of NPDC, other third party financing and certified subsidy claims). The Governor stated that out of the $67billion worth of crude oil lifted by the NNPC, only $47billion had been appropriately accounted for as follows:
· NNPC payment for FGN crude - $14bn FIRS crude - $15bn
· Domestic crude - $16bn
· IOC payment (Royalty) - $2bn
· Total - $47bn
13 February 2014
The NNPC accounted for the $20bn shortfall as follows: NPDC $6bn, Other third party financing $2bn, Jan – Mar 12 certified subsidy $1.2bn, DPK subsidy $3.5bn, PMS subsidy $5.25bn, Crude oil product losses $0.76bn, Maintaining the strategic reserves $0.46bn, Pipeline maintenance and management costs $0.91bn, Total $20.08bn.
The Minister of Finance and Coordinating Minister of the Economy, recommended that there should be an independent forensic audit of the amounts constituting the $10.8bn as stated on 18 December 2013.