THE Nigerian National Petroleum Corporation (NNPC) is once again under intense searchlight. A recent audit of its financial operations by the Nigeria Extractive Industries Transparency Initiative (NEITI) revealed that the agency and some of its subsidiaries either lost or declined to remit a total of N2.23 trillion to the Federation Account in 2013. This consists of $9.75 billion and N378.67bn earned from various aspects of its operations in that year. Section 162(1) of the 1999 constitution (as amended) mandates all revenues from government agencies to be paid into the Federation Account. This presupposes that failure to remit such revenues amounts to fraud or misappropriation.
These disclosures were made by the chairman of NEITI and Minister of Solid Minerals, Dr. Kayode Fayemi, at the presentation of the audit report in Abuja. He said some revenues that should have gone to the Federation Account in 2013 did not make it there. According to Fayemi, these outstanding payments were due from unpaid consideration from the divested OMLS, cash call refunds from its sub-units and the Nigerian Petroleum Development Company (NPDC) lifting from NAOC (AGIP) Joint Venture, among other subsidiaries.
As a result of this, Dr. Fayemi noted that the country lost a hefty $5.966bn and N20.4bn in revenue. He added that the losses were due to Offshore Processing Agreement, crude swap, crude theft and others, in which a total of $599.98 million was lost as a result of under-assessment/underpayment of petroleum profit taxes and royalties by oil and gas companies. The losses also allegedly stemmed from the use of different pricing methodology by government and the companies because of the “absence of a new fiscal regime.”
Also disturbing is the aspect of the audit report which stated that the Nigeria Liquified Natural Gas (NLNG) paid a hefty $1.289bn as dividends, interest and loan repayment for 2013. But the NNPC management, while acknowledging receipt of the amount, reportedly failed to remit same to the Federation Account.
Altogether, the report said that the 2013 figure covered by the audit brought to $12.9bn the total NLNG payments received by NNPC between 2005 and 2013 but not remitted by NNPC to the Federation Account. According to NEITI, the total revenue flows to the Federation Account from all sources in 2013 amounted to $58.07bn. This included revenues from crude oil sales, taxes, royalties and other incomes.
It is disheartening that over the years, NNPC has been associated with different forms of corrupt practices. Many different audit reports in the past indicted the corporation for shortchanging the government by either remitting much less, or refusing to remit revenues to the Federation Account as required by the Constitution. This is an abuse of laid down rules and regulations. In 2014, for example, a forensic audit into the corporation by Pricewaterhouse Coopers (PWC) described the operations of the organisation “as opaque”, a situation it said has made accountability and transparency difficult to achieve. It recommended a strategic restructuring of the operations of the organisation and its sub-units. It is doubtful that this has been done.
The latest NEITI report validates previous audit reports into the operations of NNPC, to the effect that financial indiscipline and lack of prudent management of revenue have become commonplace in the corporation which receives all oil revenues accruing to the Federal Government. However, the management of NNPC has repeatedly denied any financial impropriety.
We urge the Federal Government to institute a thorough investigation of the claims in the NEITI report. Anyone found to have underpaid the Federation Account in any way should be made to refund such earnings. This has become even more necessary in view of heavy shortfalls in government earnings from crude oil sales, due to the fall in crude oil price in the international market.
This is the time to clean up the Augean stable of the NNPC. As a result of the frequent allegations of corruption in the organisation, some multinational oil companies operating in the country may have taken advantage of the situation to fleece the country of huge revenues either through non-payment or underpayment of taxes, royalties and other statutory dues. Sanitising NNPC is the right step forward towards the reform of the oil sector. To do that, government should carefully study the NEITI report, authenticate its claims and implement its recommendations.
Before now, government has not been taking NEITI’s audit reports on NNPC seriously. We recall that in 2014, a NEITI audit report revealed that between 1999 and 2008, oil majors in Nigeria underpaid government by a total sum of N38trn. Actions such as this deprived government of revenue for development purposes. It also gives Nigeria a bad image and is a disincentive to foreign investments.
Over all, we commend NEITI for its diligence in discharging its statutory responsibility, particularly in checking corrupt practices in the oil sector. With the submission of the NEITI report, government should study it diligently and do the right thing. The allegation against NNPC is a serious one that should not be swept under the carpet. We must stop all fraudulent practices in the oil sector to free funds for badly needed infrastructural projects. A judicious handling of this audit report will go a long way in deterring future mishandling of revenue from the oil sector.