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 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:

108 comment(s)
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Islam is

Se I No Tell Una?

I told all of you that subsidy removal is another scheme to rob Nigeria! E be like say some people are already planning for breaking of the country by hoarding money anyhow they can. Welcome to Fresh Air! Goodluck to you!


As long as the "National cake syndrome" holds sway in Nigeria,ie a system where 90% of the nations earnings are centrally controlled,corruption will not end and the mad scramble for the centrally controlled national cake will keep claiming the usual casualty,the suffering masses who dont even know the way to Abuja.
For sanity to prevail power and control of resources must be the prerogative of the regions,The federal system,in its present configuration can never work in favour of the commoner.The corrupt few at the top will always hijack our resources and live the crumbs for the poor majority.In the meantime,we continue the slf deciet till we reach breaking point.

@ Truthism

That was a human being lynched and then set on fire with "people" standing about?! Tell me this is not true! What might he have stolen that he deserved to be treated that way? And those same idiots are not ready or willing to do the same to the Polilooters who are actaully respondsible for their miseries. Again that's what lack of education and culture can do to you. I'm really very sorry for the poor guy!

Is that Chris Aires blood

Is that Chris Aires blood diamonds on her neck ....Dieziani doesn't play.



No to subsidy removal. NNPC

No to subsidy removal. NNPC is Thieving corporation. Disband it now.

The fuel subsidy cartel

I dey laugh- this audit report should at least list d country of origin for various products imported and let us know d role of vitol hyson in this whole stuff

vitol hyson provides d primary resourses for d cirruption in NNPC FOR BOTH CRUDE AND REFINED PRODUCTS SCAN

Fresh Air indeed!

Another greek gift from fresh air.WE ALL NEED FRESH AIR AND WE ARE INDEED GETTING IT.
Even during emperor OBJ he has Minister of state petroleum resources.But what about fresh? Only Diezaniiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii.

Where's The Beef?

This piece does "monumental" injustice to the caption. That the NNPC and the Petro Ministry are corrupt like sin is open secret, wasting money to look into their books (and then hiding the findings) was a waste of time. This account of what the report might contain is nothing but cold gossip without the full report. SR, you guys are slacking, sloppy!

It is not rocket science to know that with Aunt Diezie at the helm, the NNPC funded Dumbo onto The Rock. That is the leash Tante Diezie has around Dumbo's neck and the reason he cannot dare declare his assets, because she knows he's very corrupt and part of the problem! She will remain Minister of Oyl as long as Dumbo remains on the Rock!

As per subsidy, we're only weeks away. Let them remove it lets see the outcome.

na beans?!

N28.5bn,N25bn,N23.8bn,N35bn,N11.8bn,N4.2bn,N21.3bn,N14bn!!! Lord of mercy! These numbers don't represent beans in some warehouse, imagine how many kids could be educated, how many roads, infrastructure, hospitals, universities, refineries, Argra communities could have been built or constructed with these huge amount of money? IMAGINE! Most senior civil servants, Most politicians and some in the business community have demons and only demons roaming in their heads. When will this hellhole finally explode?! Don't nigerians realise it's honourable to  fight for a better future and in the process probably die (die you will anyway, as a result of hunger) if not for you but at least for your children and children's children's?!

Corruption in Nigeria

Are we surprised at what goes on in NNPC? A den of thieves, just like our politicians. Today the Lagos State Speaker Ikuforiji had a bench warrant put ou by a Federal court for his arrest in relation to the misappropriation of state funds. He stands accused of embezzling a portion of a 7 billion naira fund he coolected on a first line basis. The EFCC has now taken his case to court, and it shows that not only PDP has thieves in their midst. So are we surprised at corruption in nigeria? Not really, people who perfected 419 and internet crimes can do anything.

Oh Spare Me....

Blah...Blah...Blah..(yawn)until the next big corruption headline.

When you ready to stop telling us and take action, call me, until then, let me go back to eating my ewa agoyin with Agege bread.



Let the much needed CHANGE begin with you!

Nigeria is the HOME of Corruption! From top to bottom. From the PARENT who aids and abate examination malpractice of their children to the gateman or policeman nearby who demands N20 bribe,to local govt chairmen,commissioners,ministers,legislators,etc The level of corruption depends on ones level of access to funds. Those at the top do theirs in billions of naira while the bottom cadre in notes of N20. If a horse-whip is to go round the country to FLOG all those who are corrupt,very very few persons will be spared and the horse-whip will be BUSY till eternity. Fortunately we all agree that corruption is killing the country and has to be reduced to the bearest minimum. The much needed CHANGE must begin with you and I! This is a time for sober reflection and PERSONAL REVOLUTION and not finger pointing

And this is a surprise? Even

And this is a surprise? Even Ms. Ngozi's beautiful Cartier lasses you must understand does not come cheap.....Please I beg this is nothing new in Nigeria.

This is what Nigeria has become

Corruption has created hell in Nigeria. Watch this and weep.

What a country we live in. Im

What a country we live in. Im just speechless. Dumbo take a bold decision now and salvage your name and image from eternal damnation.

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