The Nigeria Extractive Industries Transparency Initiative (NEITI) has uncovered a fresh $22.8 billion "off balance sheet items" hidden from the financial records of the Nigerian National Petroleum Corporation (NNPC).
The sum represents NNPC's alternative funding/financing arrangements with its Joint Venture partners in form of third party financing from external financial markets and Modified Carry Arrangement (MCA) which are loans from existing JV partners (international oil companies).
NEITI's executive secretary Hajiya Zainab Shamsuna Ahmed made the disclosure yesterday during the second day of the ongoing joint House of Representatives investigative public hearing into alleged shady transactions between the NNPC and two top oil companies in Switzerland, Vitol and Trafigura.
NEITI's executive secretary, in a memorandum to the joint House committees on Petroleum Resources Uptream, Downstream and Justice conducting the probe, also called for transparency in NNPC's alternative funding transactions.
The presentation is based on NEITI's 2009-2011 audit report of the oil and gas revenue to the country.
"... these transactions (alternative funding) which sum up to $22.8 billion are off balance sheet items (not disclosed in NNPC's audited financial statements). The implication is that there may be significant continent liabilities to the federation that is not being disclosed... there is therefore the need for transparent disclosure of all alternative funding arrangements in the audited financial statements (AFS) of NNPC," she told the joint House panel.
NEITI accused the NNPC of diverting $1.73 billion meant for funding JV cash calls/operations to non-cash call items, namely: security payments ($600,000,000), National Petroleum Investment Management Services (NAPIMS) management fees ($486,604,000) and expansion of ESCRAVOS Lagos Pipeline Project ($646,950,000).
"Non-cash call items totalling $1.73 billion were financed from the CBN/NNPC JP Morgan Chase Cash Call Dollar Account. This reduced the amount available for funding JV Operations with the attendant implications of NNPC seeking alternative funding arrangements to fund cash call shortfalls... The practice should be discouraged. NNPC should apply funds meant for JV cash calls strictly for that purpose."
NEITI's executive secretary said Nigeria's four refineries were operating "far below their nameplate capacities". The operational and overhead costs are the same irrespective of the volume of production, she said.
"The 445,000 barrels per day allocation should be reviewed to the actual refining capacity of the refineries. The federal government should consider privatisation of the refineries."
Again, NEITI's executive secretary said there is no cost efficiency in the NNPC's Crude Oil-Product Exchange, otherwise known as crude oil swap arrangement with the offshore processing organisations. She reported $866,189,632.47 in under-deliveries.
"The total cost of of offshore processing consisting of cost of crude, processing fees, freight and demurrage (if applicable) when compared with the reported price of PMS, DPK, AGO, and the retained products proceeds paid to NNPC is not economically beneficial."
Meanwhile, the extractive transparency organisation has indicted the NNPC over the 2013 Berne Declaration report alleging a $6.8 billion crude oil swap fraud NNPC perpetrated in connivance with some Swiss oil trading companies.
According to NEITI, the allegation by the Swiss-based organization "has substance".
The position of the NEITI is a sharp contrast to that of the group managing director of the NNPC, Andrew Yakubu, who said on Tuesday that the claims of the Bernes Declaration "are baseless and without material substance" and requested that the committee members " set it aside in its entirety".
The Central Bank of Nigeria (CBN) deputy governor, financial system stability, Dr Kingsley Moghalu, at the House investigative hearing said the CBN was not involved in the oil deals between the NNPC and the Swiss oil trading companies.
"The CBN was not involved in any of the oil deals and does not have an information on the subject matter at hand, " Moghalu said.