21 December 2013

Nigeria: NNPC's Supposed Missing Billions

One minute, the story from the Central Bank Governor Sanusi Lamido Sanusi was that the Nigerian National Petroleum Corporation has failed to remit $49.8bn (about N8trn) to the federation account. The next minute, the story along with the figures changed to $12bn (about N2trn) DAVID ADUGE-ANI looks at the facts on how the CBN governor got it wrong.

t over a week ago, a news outlet quoted CBN Governor Sanusi Lamido Sanusi as complaining to President Goodluck Jonathan via a letter about the continuing refusal of the NNPC to honour its legal obligations, including failure to remit the said amount, which it said represented 76 per cent of the value of crude oil lifting during the period.

The complaints are contained in the letter to the President dated September 25, 2013.

Sanusi reportedly wrote, "Our analysis of the value of crude oil export proceeds based on the documentation received from pre-shipment inspectors shows that between January 2012 and July 2013, NNPC lifted 594,024,107 barrels of crude valued at $65,332,350,514.57.

"Out of this amount, NNPC repatriated only $15,528,410,098.77, representing 24 per cent of the value. This means the NNPC is yet to account for, and repatriate to the Federation Account, an amount in excess of $49.804bn of the value of oil lifted in the same period."

Barely 24 hours after the letter was made public, NNPC responded, saying the CBN is playing politics with the issue.

The Group Managing Director of NNPC, Andrew Yakubu, at a press briefing in Abuja stated that he was forced to believe that the CBN may have decided to add to Nigeria's already heated political atmosphere with the letter.

Said Yakubu: "I want to say that the allegation is unfounded, baseless and has become a political instrument in the current politically- charged environment."

Yakubu said the NNPC was taking aback by the CBN letter because the issue came up about four months ago.

"The statement credited to the CBN governor that NNPC has failed to remit the sum of $49.8bn representing 76% of total national oil receipts is borne out of lack of understanding of how revenues from crude oil sales are remitted into the Federation Account."

He said NNPC crude oil liftings are made up of Equity Crude, Royalty Oil, Tax Oil, Volume for Third Party Financing and NPDC equity volume.

Yakubu explained that CBN's decision to come up with the issue, four months after it was allegedly discovered was suspicious, adding that it would be appropriate for the Nigerian media to thoroughly investigate the underlying intentions of the CBN with regards to the issue.

He said: "We are taken aback because in my presentation, you saw clearly that there was hardly any operation that the NNPC does alone.

"It is a multi-agency transaction and right from our production containment and entitlements meetings, all the various agencies that are involved in crude oil production are involved in the meetings and reconciliation is done with lifting numbers agreed and signed off before the lifting of our crude oil.

On the audit exercise being undertaken by PricewatershouseCoopers (PwC) on the operations of NNPC, Yakubu said: "It was ordered by the minister of petroleum resources some months ago and they are about rounding off the audit exercise; it is normal. Last year, we had a similar one and we are supposed to go through an audit on regular basis, that is ongoing and will soon be concluded and handed over to the honourable minister.

The CBN letter claims that for the period 1st Jan 2012 to 31st July 2013, total National crude oil liftings was 1.287 billion barrels. Our records show that the total national crude lifting for the same period was actually higher at 1.330 billion barrels. Furthermore, total NNPC liftings during the same period was again higher at 618.552 million barrels as against the 594.024 million barrels stated by CBN.

We further wish to state that the proceeds from the total NNPC liftings comprising Federation Equity, Royalty Oil , Tax Oil, Volume for Third Party Finance, NPDC equity and volume for Trial Marketing Period amount to US$67.12bn as against the $65.33bn that the CBN stated. At this point, we wish to categorically state that all the proceeds amounting to $67.12bn have been remitted as statutorily required.

The GMD said NNPC remitted its portion which is $18.48bn into the Federation Account being the total proceeds from Equity Crude and gas sales. This represents 27.5% of total proceeds of $67.12bn as against the 24% declared by CBN. Throwing light on the issue of US$49.8 billion or 76% of total national liftings and the alleged unremitted funds, he clarified that this represents the proceeds from Royalty and Petroleum Profit Tax liftings, noting that they are remitted to the Department of Petroleum Resources (DPR) and the Federal Inland Revenue Service (FIRS) which are statutorily empowered to collect and remit same into the Federation Account.

For the benefits of those who may not be aware of the workings of the industry, it is imperative to state that the CBN, NNPC, FIRS and DPR meet regularly to reconcile liftings, sales and remittance of proceeds. Therefore, the data presented are jointly reconciled by CBN, NNPC, FIRS, and DPR.

"It is NNPC's position always that in carrying out our statutory duties we 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" he added.

President Goodluck Jonathan last Wednesday waded into the bickering between the Nigerian National Petroleum Corporation (NNPC) and the Central Bank of Nigeria over the missing $49.8 billion oil revenue.

Also elaborating, General Manager, Media Relations Department of the NNPC, Dr. Omar Farouk Ibrahim who refuted the claims however maintained that the figure given by the CBN governor "does not represent the correct picture of crude oil lifting for the period."

Ibrahim said the corporation found it necessary to clarified based on the CBN's misunderstanding of the workings of the oil and gas industry and the modality for remitting crude oil sales revenue into the Federation Account.

"For the avoidance of doubt, it needs to be stated that the figure of 594.024 million barrels of crude oil given by the CBN as the total crude oil lifting for the period of January 2012 to July 2013 does not represent the correct picture of crude oil lifting for the period.

"From our records, the correct figure is 618.55m barrels. This shows that the CBN understated the actual crude lifting by 4.13 per cent," Dr. Ibrahim stated.

He explained that revenues from crude oil lifting are in various categories, namely: Equity Crude; Petroleum Profit Tax, Royalty, Third Party Financing and the Nigerian Petroleum Development Company, NPDC. Revenues from each of these categories are statutorily collected by different agencies of the government.

The NNPC collects only one of the aforementioned categories, namely Equity Crude. Petroleum Profit Tax is collected by the Federal Inland Revenue Service, FIRS, Royalty goes to the Department of Petroleum Resources, DPR, Third Party financing goes for Research, Development, Program and Satellite fields Development, while NPDC goes to NPDC for upstream development.

While the NNPC pays proceeds from Equity crude directly to the Federation Account with the CBN, the FIRS and DPR pay PPT and Royalty respectively into the Federation Account with the CBN.

The sum total of these proceeds make up the alleged unremitted revenues, Dr. Ibrahim stated.

He expressed NNPC's availability at all times to meet with all relevant stakeholders to clarify issues.

Sanusi's letter however says the missing $49.8 billion is from the value of oil NNPC sold, and makes a distinction with taxes. It says under law, the NNPC must submit all oil export proceeds.

"As an indicator of how bad this situation has become, please note that in 2012 alone, the Federation Account received $28.51 billion in Petroleum Profits and related taxes but only $10.31 billion from crude oil proceeds," the letter said.

NNPC sold 46 percent of Nigeria's oil between January 2012 and July 2013, but its remittance amounted to only one-third of the taxes paid by oil companies that exported the other 54 percent, the letter claimed.

NNPC exports Nigeria's share of around two, to 2.5 million barrels per day of oil the country produces, mostly in joint ventures with oil majors like Royal Dutch Shell, Exxon Mobil, Italy's Eni and Chevron.

Crude exports and taxes earned from these oil majors account for around 80 percent of government revenues in Africa's second largest economy and top oil producer. When questioned by the Senate last week, Sanusi revised his figures saying only $12bn was missing while the finance minister Ngazi Okonjo-Iweala said the actual figure was $10.8bn.


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