Missing oil funds Read highlights of NNPC audit

The audit was conducted by PriceWaterHouse Cooper
and was ordered by the Minister of Finance, Ngozi
Okonjo-Iweala after the former Central Bank Governor,
Sanusi Lamido raised an alarm about oil funds going
missing from the Federation account.

The Federal Government has shared the highlights of a
forensic audit carried out on the finances of the
Nigerian National Petroleum Corporation (NNPC).
The audit was conducted by PriceWaterHouse Cooper
and was ordered by the Minister of Finance, Ngozi
Okonjo-Iweala after the former Central Bank Governor,
Sanusi Lamido Sanusi raised an alarm about oil funds
going missing from the Federation account.
Read the highlights of the report, as published by the
Auditor General for the Federation, Ukura T. Samuel ,
below:
Highlights of Investigative Forensic Audit done by
PriceWaterHouse Cooper into the allegations of
unremitted Funds into the Federation Accounts by the
NNPC for the period January 2012 to July 2013.
Highlights of PwC Findings. Based on the work
conducted by PwC, their conclusions are as follows;
Total gross revenues generated from FGN crude oil
liftings was $69.34 billion and NOT $67 billion as
earlier stated by the Senate Reconciliation Committee
for the period from January 2012 to July 2013.
Within the $69.34 billion, $28.22 billion was the value
of domestic crude oil allocated to NNPC. Total amount
spent as subsidy for PMS amounted to $5.32 billion
Total amount spent as subsidy for DPK (Not
appropriated) amounted to $3.38 billion
Total other third party financing arrangement, and
equity crude oil processing costs amounted to $1.19
billion
Total cost directly attributable to domestic crude oil
amounted to $1.46 billion
Other costs incurred by the Corporation not directly
attributable to domestic crude oil is $2.81 billion
Revenue attributable to NPDC as submitted by the
former NPDC Managing Director to the Senate hearing
(less PPT and Royalty paid) is $5.11 billion. PwC stated
that this amount needs to be incorporated into the
financial statements of NPDC from where dividend
should be declared to the Federation accounts.
Signature bonus, PPT and Royalty yet to be paid by
NPDC is $2.22 billion
Total cash remitted into the Federation accounts in
relation to crude oil liftings was $50.81 billion and NOT
$47 billion as earlier stated by the Senate
Reconciliation Committee for the period from January
2012 to July 2013
Based on the information available to PwC, and from
the analysis above, the firm submitted that NNPC and
NPDC should refund to the Federation Accounts a
minimum of $1.48billion.
PwC recommendations:
The PwC report centered on the following three (3) key
areas;
NNPC Costs
Ownership of NPDC revenues
DPK subsidy
Below are the highlights as extracted from the report.
NNPC Costs
“The Corporation operates an unsustainable model.
Forty six percent (46%) of proceeds of domestic crude
oil revenues for the review period was spent on
operations and subsidies. The Corporation is unable to
sustain monthly remittances to the Federation Account
Allocation Committee (FAAC), and also meet its
operational costs entirely from the proceeds of
domestic crude oil revenues, and have had to incur
third party liabilities to bridge the funding gap”.
NNPC provided transaction documents representing
additional costs of $2.81 billion related to the review
period, citing the NNPC Act LFN No 33 of 1977 that
allows for such deductions. Clarity is required on
whether such deductions should be made by NNPC as
a first line charge, before remitting the net proceeds of
domestic crude to the federation accounts.
PwC therefore recommended that the NNPC model of
operation must be urgently reviewed and restructured,
as the current model which has been in operation since
the creation of the Corporation cannot be sustained.
Ownership of NPDC revenues
PwC stated that:
– According to NPDC former Managing Director’s (Mr
Victor Briggs) submission to the Senate Committee
hearing on the subject matter, for the period covered by
their mandate, NPDC generated $5.11billion (net of
royalties and petroleum profits tax paid).
– They relied on the legal opinion provided to the Senate
Committee by the Attorney General (AG) on the subject
of the transfers of NNPC’s (55%) portion of Oil leases
(OMLs) involved in the Shell (SPDC) Divestments which
impacted crude oil revenues in the period. The AG’s
opinion indicated that these transfers were within the
authority of the Minister of Petroleum Resources to
make.
– NNPC’s (55%) portion of Oil leases (OMLs) involved in
the Shell Divestments related to the eight (8) OML’s
were transferred to NPDC for an aggregate amount of
US$1.85billion. So far, only the amount of US$100m
had been remitted. PwC also added that they had
expected a transfer basis higher than the US
$1.85billion aforementioned
– NPDC had done a self-assessment of PPT and Royalty
and had unpaid self-assessed PPT and Royalty to the
tune of $0.47 billion related to the review period. PwC
added that they did not obtain any information that
suggested that NPDC has been assessed for PPT and
Royalty for the review period.
– PwC also stated that NPDC should remit dividend to
NNPC and ultimately to the Federation accounts, based
on NPDC’s dividend policy and declaration of dividend
for the review period.
Kerosene Subsidy
PwC determined from information obtained from PPPRA
that $3.38 billion relating to DPK subsidy cost was
incurred by the NNPC for the review period. They
obtained a letter, dated 19 October 2009 written by the
Principal Secretary to the President, to the National
Security Adviser, confirming a Presidential directive of
15 June 2009 instructing that subsidy on DPK be
stopped.
PwC also obtained a letter dated 16 December 2010
from the Executive Secretary PPPRA to the CBN
Governor clarifying that PPPRA had ceased granting
subsidy on Kerosine since the Presidential directive of
15 June 2009. Furthermore, Kerosine subsidy was not
appropriated for in the 2012 and 2013 FGN budget.
However, the Presidential Directive was not gazetted
and there has been no other legal instrument cancelling
the subsidy on DPK.
PwC therefore recommended that an official directive
be written to support the legality of the kerosene
subsidy costs. This should also be followed by
adequate budgeting and appropriation for the costs.

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