The Nigerian National Petroleum Corporation (NNPC) has refuted the claim of the Auditor-General of the Federation that it failed to remit the sum of N3.235Trillion to the Federation Account for the period which ended on 31 December 2014.  NNPC

Submitting his 2014 report to the Clerk of the National Assembly two days ago, Auditor-General Samuel Ukura drew attention to “monumental corruption” in some federal establishments, and cited as one of the key findings in the report the refusal of the NNPC to remit a whopping N3.235tr from its revenue for the sale of domestic crude oil into the federation account.

In a press statement released today, however, Isiaka Abdulrazaq, the Group Executive Director/Chief Financial Officer (Finance & Accounts) of the NNPC, said the Auditor-General’s declaration was wrong, and may have been “borne out of misunderstanding of how revenues from crude oil and gas sales are remitted into the Federation Account.”

He explained that NNPC is allocated 445,000 barrels per day for processing into petroleum products for distribution in the nation, and that any unprocessed crude is sold and the proceeds used to pay for the importation of petroleum products.  According to him, the proceeds from the sale of those products are remitted to the federation account after deducting the cost associated with the supply and distribution.  

He said those costs included:

Subsidy on Petroleum Products;
Crude Oil & Petroleum Product Losses; and
Petroleum Product Strategic Holding Cost and Pipeline Repairs and Maintenance Cost

As a result of this, Mr. Abdulrazaq said the figure owed to the Federation Account as at January 2015 Federation Account Allocation Committee (FAAC) meeting report was onlyN326 billion, a figure which he said is “being reconciled,” and not the N3.23Trillion declared by the Auditor-General.

According to him, “Since the new management was appointed it has placed great emphasis on transparency, accountability and integrity and has sought to refocus and reposition the Corporation as demonstrated by the 20 fixes initiatives some of which include the following:

The publication of NNPC monthly Financial and Operations Reports in all major newspapers as well as on its website.
 

Focus on cost reduction across the board; this effort has yielded a drop in monthly operational losses from N30Billion in August 2015 to N3Billion in January 2016.  
 

Restructuring of NNPC, which is focused on improving the performance and profitability of all NNPC operations.
 

The improvement in revenue remittances to the Federation Account.”

Turning to the subject of the $235Million proceeds from the sale of Natural Gas allegedly transferred to some secret escrow account, Mr. Abdulrazaq denied that NNPC has any hidden Escrow Accounts. 

“The fact is that the alleged $235Million represent proceeds from the sale of gas feedstock to Nigerian Liquefied Natural Gas Limited (NLNG) that was used to repay part of the Modified Carry Agreement (MCA) loans, applicable royalty to DPR and tax to FIRS,” he said.  “The MCA loan was contracted specifically to fund the development of upstream oil and gas projects whose transactions are regularly reported to FAAC as part of the reconciliation of the revenues to NNPC, FIRS and DPR.  The MCA and all other alternative funding arrangements are annually appropriated by the National Assembly and are therefore fully disclosed to FAAC on a monthly basis.”

Full text of the statement:

PRESS RELEASE BY NNPC

RE:  NNPC FAILED TO REMIT N3.235 TRILLION IN 2014 – BY AUDITOR GENERAL OF THE FEDERATION

Ladies and Gentlemen of the press, the Auditor-General of the Federation (AuGF) declared to the National Assembly on the 14th of March 2016 that NNPC has failed to remit the sum of N3.235Trillion to the Federation Account for the period ended 31st December 2014.  NNPC wishes to state in strong terms that the AuGF’s declaration is erroneous.  It should also be noted that although this period is before the New NNPC Management was appointed in August 2015, the management still deem it fit and important to correct any misinformation about the activities of the Corporation as this will adversely affect its current and future financial and operational plans if not corrected.  Hence the need for this press release.

Since the new management was appointed it has placed great emphasis on transparency, accountability and integrity and has sought to refocus and reposition the Corporation as demonstrated by the 20 fixes initiatives some of which include the following:

The publication of NNPC monthly Financial and Operations Reports in all major newspapers as well as on its website.

Focus on cost reduction across board; this effort has yielded a drop in monthly operational losses from N30Billion in August 2015 to N3Billion in January 2016.  

Restructuring of NNPC which is focused on improving the performance and profitability of all NNPC operations.

The improvement in revenue remittances to the Federation Account.

Upon the appointment of the new NNPC management, it identified all legacy claims issues between NNPC and the Federation and engaged with the Federal Ministry of Finance (FMF) to resolve the issues by inviting the appointed forensic auditors to conclude the previous forensic audits on these claims and the final report on this is expected soon. 

Ladies and Gentlemen of the press as you are well aware, it is not in NNPC’s character to join issues or trade blames with other agencies of government but, considering the high level publicity generated by the purported declaration by the AuGF to the National Assembly that NNPC has failed to remit the sum of N3.235Trillion and the erroneous impression it has created among Nigerians and international financial community, it has become imperative to set the records straight. 

The declaration by the AuGF may have been borne out of misunderstanding of how revenues from crude oil and gas sales are remitted into the Federation Account. The following explanation clarifies the process and lays out the facts behind the figures to correct any ambiguities associated with this issue.

As part of its responsibilities, NNPC is allocated 445,000 barrels per day for processing into petroleum products for distribution to the nation.  Any unprocessed crude is sold and the proceeds used to pay for importation of petroleum products.  The proceeds from the sale of these products are remitted to the federation account after deducting the cost associated with the supply and distribution.  

These costs include:  

Subsidy on Petroleum Products

As a major supplier of petroleum products to the nation, NNPC is entitled to claims on subsidy from Petroleum Products sold at government regulated price (whether imported or locally refined).  The process and determination of appropriate subsidy claim is managed by PPPRA who ultimately issues certificates, which is netted out of domestic crude cost.  The total amount of subsidy that have been approved and certified by PPPRA for the period of January 2012 to December 2014 was N2.34trillion.  An additional N7.96Billion subsidy claim is still under reconciliation. 

Crude Oil & Petroleum Product Losses

Losses from crude oil and petroleum products as a result of vandalism on its network of pipelines for the period of January 2012 to December 2014 were N202.68Billion.

Petroleum Product Strategic Holding Cost and Pipeline Repairs and Maintenance Cost for the period of January 2012 to December 2014 amounted to N358.88Billion. 

Consequently, the figure owed to the Federation Account as at January 2015 Federation Account Allocation Committee (FAAC) meeting report was N326,142,137,205.79 (which is still being reconciled) as shown on the table below and not the N3.23Trillion alleged by the AuGF.

Note:  This report does not include NNPC’s claim, as at 2009, of N1,374,856,321,401.00 against the Federation. 

All the stakeholders in FAAC meeting are familiar with the N326.14Billion and it is already in public domain since then to date. As regard to the N1.374Trillion claims against the Federation, this is currently being re-viewed by FMF appointed Forensic Auditors at the instance of the Honourable Minister of Finance.

It is clear that the AuGF failed to reflect all the figures as they should be, not minding the fact that there is a clear process in conducting FAAC meetings where all Federation revenues are presented, discussed and approved. There are series of meetings before and after FAAC meetings to reconcile and resolve any issue as the need may arise.

The $235Million Allegedly Transferred To Undisclosed Escrow Account.

With respect to the $235Million proceeds from sale of Natural Gas allegedly transferred to some undisclosed escrow account, it should be noted that NNPC does not have any secret Escrow Accounts. 

The fact is that the alleged $235Million represent proceeds from the sale of gas feedstock to Nigerian Liquefied Natural Gas Limited (NLNG) that was used to repay part of the Modified Carry Agreement (MCA) loans, applicable royalty to DPR and tax to FIRS.  The MCA loan was contracted specifically to fund the development of upstream oil and gas projects whose transactions are regularly reported to FAAC as part of the reconciliation of the revenues to NNPC, FIRS and DPR.  The MCA and all other alternative funding arrangements are annually appropriated by the National Assembly and are therefore fully disclosed to FAAC on monthly basis. 

The best practice and established due process is that after any audit there should be an exit meeting between the auditor and the auditee where any outstanding issues are finally discussed and explained before the issuance of the audit report. There was no such meeting and NNPC did not receive any draft report from the AuGF’s office for comments.

Ladies and Gentlemen of the Press, NNPC wishes to state that in carrying out its statutory duties it will continue to maintain the highest level of transparency and accountability. Please be assured that NNPC remains available at all times to provide clarifications on these issues or any other matter relating to our responsibility to the Federation and the Nigerian people.  

Signed,

ISIAKA ABDULRAZAQ

Group Executive Director/Chief Financial Officer (Finance & Accounts)

Nigerian National Petroleum Corporation

NNPC Towers, Abuja.

 

16th March, 2016

 

 

 

You may also like

Read Next