Monumental Oil Subsidy Fraud And Corruption At The NNPC-The Damning KPMG Report :Premium Times

Petroleum resources minister, Diezani Allison-Madueke-Reuters photo
By Musikilu Mojeed

On Thursday December 1, the Minister of Finance, Ngozi Okonjo-Iweala, cringed when the senate joint committee investigating the management of funds set aside for petroleum subsidy handed her a seven-day ultimatum to produce a secret forensic report on the Nigerian National Petroleum Corporation in her custody.

The audit, done for her ministry by renowned audit and advisory consultancy, KPMG, which exposed the massive financial malfeasance and monumental corruption in the NNPC, is one document the federal government, the petroleum ministry and the NNPC have worked hard to conceal for a little over a year now.

The report, which could trigger a fierce face-off between the federal and state governments, is one of the most closely guarded secrets in Nigeria today.  It contains shocking details of how the NNPC, and by implication, the federal government has been swindling the states.

So when the committee requested Mrs. Okonjo-Iweala to produce it, she became a bit uneasy, knowing that doing so might embarrass the administration and sparked some troubles for the NNPC, a source close to her told the Times. Initially the minister didn’t make any commitment, but when pressed by committee members, she reluctantly acceded to the request.

It is not known at press time whether she has sent the document to the committee. Contacted yesterday, her spokesperson, Paul Nwabuikwu, said he had no information on the matter.  Calls to the chairman of the senate joint committee, Magnus Abe (PDP, Rivers), were unanswered. But as at noon today, long after the ultimatum given to Mrs. Okonjo-iweala expired, a source close to the committee said the minister was yet to make the report available. He said there was high-powered lobby by the NNPC not to make the document public.

The damning report
But the Times has scooped the report for you in case the minister fails to
produce it or does so to the committee in camera. As far as the 41-page report is concerned, the NNPC is a cesspool of monumental corruption and fraud. The report detailed the corporation’s sharp business practices, violation of laid down rules and regulations, illegal deductions of funds belonging to the state, and failure to account for several billions of naira that should go to the federation account.

The agency, the report says, has also severely defrauded our country in subsidy claims. Auditors found that between 2007 and 2009 alone, the NNPC over-deducted funds in subsidy claims to the tune of N28.5 billion. It has not been able to account for the sum ever since.

The over-deduction from its remittance to the federation account for 2010 and 2011, believed to be in several billions of naira, is not captured in the report.

The Federal Government, through the Federal Ministry of Finance, hired KPMG and another Nigerian auditing firm, S.S. Afemikhe & Co., in July 2010, to look into the books of the corporation following allegations of “wrongful deductions at source by the NNPC to fund its operations” by the 36 state governors.

There were also concerns at the time that “the procedures for managing and
reporting the country’s crude oil and gas revenues are opaque and characterized by gaps, overlaps and inconsistencies in the role of key parties responsible for the assessment, collection and reporting on these revenue streams.”

Officials of the petroleum ministry and the NNPC, a source at the finance ministry disclosed, developed cold feet after the auditors were sent in, and indeed tried hard to frustrate the representatives of the two audit firms by failing to supply evaluation criteria for commercial bids submitted in respect of petroleum products importation.

Believing that would turn the auditors away, our source further explained, the corporation also failed to provide them with other relevant documents such as the criteria for allocation of products and product volumes to importers/suppliers and periodic pre-qualification list of approved products importers/suppliers.

But in spite of the difficulty they faced, the auditors were able to determine that the NNPC had been anything but transparent in the management of our country’s oil resources.

The report that emerged from the audit was just too damning that the leadership of the petroleum ministry, the NNPC and some few other elements in the Federal Government have worked hard to keep it away from the 36 state governors and federal lawmakers in particular and Nigerians in general.

Stealing the states blind
In what is likely to anger state governors, the audit established that the
corporation was in the habit of arbitrarily estimating subsidy claims and then over-deducting funds from proceeds of domestic crude sales.

“For example,” the report said, N25bn was deducted as subsidy estimate for
September 2009 from domestic crude sales proceeds while PPPRA approved a subsidy
of N23.8bn. N35bn was also deducted as subsidy estimate fro November 2009 but
PPPRA approved of N21.3bn.”

The auditors’ analysis indicates “over-deduction for these two months amounted to N14.9 billion. However, only N4.2.bn was swept into the Federation Account by the NNPC as adjustment for subsidy claimable in the two months.” That is beside the N11.8 billion subsidy claim the NNPC claimed it paid for imported products that didn’t reach consumers.

State governors have always complained that the NNPC was shortchanging them
through illegal deductions from revenues payable to the federation account.

Fraudulent underhand tactics
Over-deduction is however not the only way the corporation is defrauding the federal and state governments. According to laid down regulations, the NNPC is invoiced in dollars for domestic crude allocations but is expected to remit the equivalent naira value to the Federation Account. But auditors found to their chagrin that in doing that, the corporation used exchange rates far lower than those published by the Central Bank of Nigeria.

Using this “fraudulent underhand tactics”, the NNPC succeeded in cheating
the three levels of government of a whooping N85.2bn in three years – N25.7 bn in 2007, N33.8 billion in 2008 and N26.7 billion in 2009.

When the auditors requested explanations for these exchange rate disparities, the NNPC claimed it obtained the exchange rates it used from the CBN via telephone.

The report also severely indicted the NNPC over the shoddy and non-transparent manner it renews crude sale contracts every year. The auditors noted that “evaluation criteria for renewal of contracts are not clearly stated in the contract document”, and that the selection exercises were based on individual discretion and wrong assumptions and criteria.”

The NNPC claims that renewal of contract was based on performance of off-takers (buyers). But the auditors observed that the basis and process for determining performance were not clearly defined.

The auditors wondered why in 2007 and 2008, some companies not on the approved list of buyers for that year were allocated crude, a practice the examiners believe had led to crude being sold to non-credible buyers, even with relevant guarantees and safeguards not implemented.

Specifically the auditors queried the allocation of crude to Ovlas Trading (2,852,316 barrels in 2007 and 906, 269 barrels in 2008) Petrojam (2,818,914 in 2007), Oil Fields (950,166 barrels in 2007) and Zenon (906,000 barrels in 2008) even when they were not on the list of authorized buyers for that year.

Contracts for the importation of products, the auditors wrote, were also
routinely awarded without regard for approved guidelines and procedures. “We observed that contracts for the importation of petroleum products were awarded to companies and suppliers not listed in the approved pre-qualification list used for the fourth quarter 2008 importation,” the report noted.

The auditors specifically queried the award of contracts in that manner to
Astana Oil Corporation Limited, Natural Energy and Oando, when they were not prequalified for patronage that year.

Among other forms of misdemeanour, ranging from poor accounting and shoddy
record keeping, the auditors also indicted the corporation for leaving its own storage facilities, unused, and then proceeding to incur additional cost from leasing of third party storage facilities.

The auditors reported that DPK tanks (with storage capacity of 18,000 cubic
metres) at the PPMC depots within the Mosimi Area had not been used for three years even though there were in good condition. Yet the corporation, the examiners added, had been leasing storage facilities from third parties.

The spokesperson of the NNPC, Levi Ajuonuma, declined to comment on the report, saying he had nothing to say until the government releases it officially.

See Raw KPMG Report below:

Comments
108 comment(s)
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Subsidy

VERY SAD, INDEED

Good work

The minister of finance have tried by bringing in auditing firms and their claims are clear that some people from NNPC are frauding nigeria of several billion of naira. Let the FGN try them for fraudulence and 150 million Nigerian can be saved from further fraud

Well done

The minister of finance 'Okonjo-iweala' have tried by bringing in auditing firms and their claims are these clear that some people from NNPC are frauding nigeria of severa billion of naira. Let the federal govt try them for fraudulence and 150 million Nigerian can be saved from forther fraud

Nigerian Judiciary should see

Nigerian Judiciary should see to their scandalous BANK ACCOUNT first.
With such outrageous BANK ACCOUNT the judiciary lacks the moral ground
to look into this scam. Nigeria is a haven of corruption. Only Revolution
can change Nigeria.

Just 2 gud

Just 2 gud

oil subsidy removal

why are we paying for organisation failure? Are we deregularising or removing subsidy? if deregularising, why increase in pump price? please all those involved in this scam MUST be brought to book. If we can pass the law to jail same-sex marriage for life. Then, those that have brougt us to this should go for life-imprisonment. Nigerian Judiciary should see to this.

fact

Not surprised at all!

the truth

i want all the government to come out and say to all Nigeria what they have and to declare their asset maybe we can know the truth from the lies, Jonathan and Etal are all fooling us in this nation and we are not going to agree with them.

this scares the livin day light out of me

this is scary

TOO BAD TO BE TRUE

TOO BAD TO BE TRUE

let jonathan speak.

I think it is unruly of you to defend the govt
on the sahara report claims about the KPMG
audit report.You know next to nothing about it
and probably as a pro-jonathan fan you would
stand in the way of critics urging people to
take a closer look @ his anti-people govt
policy.If there's any clarification to be made
let jonathan speak.

One more chance

We still a chance to correct the wrongs of our past leaders. We need unity than ego 'display' if we must conquer this menace. Long Live The Federal Republic Of Nigeria!

NNPC at it again

This is exacly what the government of GEJ should be out to contend with instead of broadcasing wrong figures of subsidy annually. i a country where the criminals are not punished only encourages future criminals. we are here talking about subsidy and some others are there enjoying themselves from the countries fund. sell NNPC please.

NNPC at it again

This is exacly what the government of GEJ should be out to contend with instead of broadcasing wrong figures of subsidy annually. i a country where the criminals are not punished only encourages future criminals. we are here talking about subsidy and some others are there enjoying themselves from the countries fund. sell NNPC please.

Oil Subsidy Fraud

This is treasonable felony and should be treated as such.

RE: Audit Report of NNPC

If the above report is true, then it's really unfortunate that a few people are holding the entire nation to ransome. Government should study this report closely and bring perpetrators of this kind of heinous crime to book, followed by a complete overhaul of the Agency instead of orchestrating subsidy removal and further unlease more suffering on the masses.
Hail you for following the report closely and for your courage to publish it here, which other media organizations could not do.
Long live Sahara Reporters,Long live Nigeria!

the authority concerned

the authority concerned should do the work accordingly and any found wanty should be dealt with accordingly. sooner god will see us through from these corrupt people.

@noble

Me thinks u are d real mugu.....cos common sense (which might not be common afterall).....that ur GEJ being at d helm of affairs would do d right thing by following up properly....we damn well know what Buhari would have done........

@Gabika

Bros why do u fool urself......GEJ, OBj and co..... Nigerians will come to course them sooner than later........

MOTIVE

The world is getting to be more of a village in case you have not yet discovered. This kind of reports get to be exposed sooner or later. It is no more business as usual. Remember, wikileaks...

it is criminal

why audit the account only for 2007 to 2009, what is wrong with the details of the account in 2010 and 2011? what are they still hiding? I say GEJ is no good. Thanks to my honorable Gov. who brought this issue at first.

laffs

i still dey laugh oo.capital punishment for stealing of public funds.Nigerians are cowards.lol

Some years back at the

Some years back at the beginning of his tenure Late Yar Adua Governemnt promised to unbundle the NNPC. Then nothing followed. I think This Government can try and do something from these findings. Thanks

Motive

SR is at it again. As a financial analyst, I'd be surprised that KPMG would allow a sensitive report of that nature to leak to the media. Is the document SR relying on true? Has the FG made any comment on that report?

My fear is that such stories send negative signals about Nigeria and its quest for foreign direct investments. If government wanted to hide any fraud,it wouldn't have hired KPMG to do this job.

There are questions to ask about the motive of this story, coming just weeks away to the withdrawal of fuel subsdies, which we know SR has been vocal in criticizing.

I suggest that the FG should comment on this tater, while fiery online comments should be restrained.

At leat the FG should be commended for allowing and encouraging debates about the subsidy withdrawal by all key segments of the society. Now more people are emoting aware that subsidy on consumption is negative to any economy, rather ubsidy should be encouraged in production, like agriculture.

This is Nigeria - Law of the Jungle

The extra-judiciary killing of Chief Ogbe Onokpite. We all know Nigeria politics is a do or die affair, but does that mean that the state can openly use the security forces to kill people in broad daylight, in public and mercilessly without fear or accountabilty. Nigeria is at the precipice of Rwanda / Congo. Please watch and internationalize if you want to save this nation from itself.
http://www.youtube.com/watch?v=uFVjAoz_BQc

Mr/Dr? Birobalologunodun, It

Mr/Dr? Birobalologunodun,
It saddens me too when I read comments on this forum and realise a lot is coming from idiots who pretend to be doctors but cannot put two sentences together or make sense yet they label people as idiots.

By the way, what are you trying to say? So far you have said nothing. Get together with some literate person who can help you put your ideas into English then I can answer your question. E gbo mi nko?

Long live the Republic of Biafra. Death to Islamic terrorists and their collaborators.

NNPC corruption

To me, it's not a news that there is a massive corruption in NNPC what is a news is that somebody that will be bold enough to open the cans of worms on how the corporation has been miking the entire nation. Unfortunately we have a leadership problem at the moment who can't handle basic problem of social needs talk less of fighting a major challenge called corruption.Nigerians must rise up to take their destiny in their own hand or else the problems will continue such as joblessness, poverty, high level illiteracy etc. No nation progresses when the people expect miracle to happen without making the required efforts.This nation is too blessed to remain poor like this. GOD Bless Nigeria

Real Mugu

@Mugu,your comment sounds exactly like your name. Where has Jonathan erred on this matter?

Just to educate you:

1 The audited account period spanned from 2007 to 2009.

2 Jonathan was sworn in as President in May 2010 to complete Late Yaradua's term while he was sworn in on his own victory on 29th May 2011.

3 Jonathan directed that the account be audited.

So how did he cause you to suffer? Your Muguness has beclouded you.

Nigeria and corruption

Each time I read these reports I just get tired.The level of corruption for which the Shagari>s government was overthrown is a child play to what we have today.

Let the National Assembly act now.

National Assembly should recommend a total overhaul of NNPC and all it's subsidiaries, the fraud was much haba. The mases are surfering and some people are milking NIGERIANS why?

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