Nigeria: Three Refineries Gulped N1.6trillion in Cumulative Losses in 5 Years, Says NNPC Audit Report

Oil refinery (file photo).

Three of Nigeria's four refineries gulped N1.64 trillion in cumulative losses recorded in their operations since 2014, details from the first-ever audited accounts and financial statements of the companies published by the Nigerian National Petroleum Corporation (NNPC) on Friday has shown.

Two of these refineries are the 210,000 barrels per day capacity Port Harcourt Refining and Petrochemical Company Limited and 110,000 barrels per day Kaduna Refining and Petrochemical Company Limited.

The audit reports showed that combined losses from the two refineries were N208.6 billion in 2014; N252.8 billion in 2015; N290.6 billion in 2016; N412 billion in 2017, and N475 billion in 2018.

The five-year audited account details for 125,000 barrels per day Warri Refining and Petrochemical Company Limited were, however, removed from the published details by the NNPC.

However, PREMIUM TIMES' review of the published details showed cumulative losses from the operations of the four refineries in 2017 and 2018 stood at about N412.8 billion.

Critics say the humongous losses, which epitomises the level of rot and decay in the four refineries, counters the logic in the federal government's avowed commitment to sink more public funds in their rehabilitation before selling them to private investors.

Both the Minister of State for Petroleum Resources, Timipreye Sylva, and the Group Managing Director of the NNPC, Mele Kyari, have spoken variously about the government's plan to rehabilitate the four refineries before considering privatisation.

A review showed the bulk of the losses were from the operating costs and administrative expenses accumulated by the companies despite that some have since been shut down or operating at grossly below installed capacities.

Findings showed all the refineries spent huge earnings on administrative expenses, which included head office overhead funding, Public Relations and publicity, staff training expenses, local/international travels and hotels, employee benefits, director's remuneration, and consultancy fees.

Kaduna Refinery

The worst details are in the financial statement by Haruna Yahaya & Co. and Oye Abioye Quaye & Co., the chartered accountants that conducted the audit on the Kaduna Refining and Petrochemical Company Limited.

The report showed that the refinery did not realise any revenue in 2018 through processing fee due to the shutdown of the plants and ongoing turnaround maintenance.

But, the total comprehensive loss for 2018 was about N64.3 billion, as against N111.9 billion in the previous year, total equity loss put at about N423.4 billion, up from N359.2 billion in 2017.

The expenses that contributed to the losses included auditor's remuneration N50 million in 2018 and N30 million in 2017; employee benefits N13.9 billion, down from N27.3 billion in 2017; refinery assets N11.4 billion and N73.4 billion in 2017; staff bus N90.7 million and N85.1 million in 2017.

Similarly, operating losses for 2018 dropped by 42% from N112 billion in 2017 to N64.6 billion in 2018, while administrative expenses grew from N21.7 billion in 2017 to N39.995 billion in 2018.

Details of the administrative expenses include NNPC head office overhead (N14.1 billion) in 2018, and N1.3 billion in 2017; Public Relations and publicity N45.1 million in 2018 and N58.5 million in 2017; maintenance N102. 8 million and N567.7 million in 2017.

The expenses also include staff training expenses N447.8 million and N340.2 million in 2017; local and international travels N662.2 million and N783.3 million in 2017, and employee benefits N13.9 billion, down from N13.5 billion in 2017; depreciation of property plant and equipment N106.3million in 2018 and N128.9 million in 2017, and allowance for obsolete equipment N183.8 million down from N4.4 billion in 2017.

Also, the audit report showed that details of the N23.3 billion spent on employee benefits in 2018 and N27.3 billion in 2017, including salaries and wages; staff death benefits and other benefits.

The report said the company realized about N134.4 million in 2018 and N98.7 million in 2017 as other income, consisting sale of electricity, penalties for the loss of ID cards; Insurance claim and miscellaneous income.

Finance income, which rose to N208.9 million in 2018 from N114.4 million in 2017, included interest on employee loans.

The components of the direct cost, which stood at about N24.7 billion in 2018 as against N92.6 billion in 2017, including employee benefits; administrative expenses; asset under construction written off and consultancy fees.

On Director's remuneration, the report showed that the four directors earned between N10 million and N20 million in 2018 and 2017, with the highest paid director earning N33million in 2018 and N27million in 2017.

The four directors of the company contained in the report include the Managing Director, Ladenegan Adewale Solomon; Executive Director (Operations), Tsavnande Thaddeus Atghir; Executive Director, Finance & Accounts), Chinwe Osolu Eunice, and Executive Director (Services), Abdullahi Idris.

Besides, a total of 312 higher-paid employees of the company other than the directors in 2018 and 1022 in 2017 were paid various amounts ranging from N100,000 to over N15 million.

Although the payments excluded pension contributions and other benefits, the directors also received other emoluments totalling about N109.8 million in 2018 and N242.9 million in 2017.

Since 2014, the refinery has been operating at a loss with net liabilities totalling N181.4 billion in 2014; N217 billion in 2015; N247.2 billion in 2016; N359.1 billion in 2017, and N429.4 billion in 2018.

Details contained in the five years audited report and financial statements published by the Nigerian National Petroleum Corporation (NNPC) on Friday showed in 2014 the refinery recorded a total comprehensive loss for the year of N34.1 billion; N35 6 billion in 2015; N30.2 billion in 2016; N111.9 billion in 2017 and N64.3 billion in 2018.

Although revenues dwindled from N20.7 billion in 2014 to N418.8 million in 2015, it improved marginally to N1.5 billion in 2016 and to N2.2 billion in 2017, before fizzling out completely in 2018 with not one Naira earned from the company's operations.

Port Harcourt Refinery

In Port Harcourt Refinery, total comprehensive loss recorded in 2014 stood at N27.2 billion; N35.8 billion in 2015; N43.4 billion in 2016; N53.8 billion in 2017 (N55.8 billion in the published 2018 report) and N45.6 billion in 2018.

Non-current liabilities included Corporate Headquarters funding of N372.5 billion in 2018 and N330.3 billion in 2017; retirement benefits N10.3 billion for defined contribution plans and N12.4 billion for defined benefit plans for 2018 and 2017 respectively.

In 2018, operating loss stood at about N46.6 billion as against N57.8 billion in 2017, with about N1.5 billion realized as revenue in 2018 and N4.8 billion in 2017 and processing expenses in 2018 put at N24 billion and N23.8 billion in 2017, and administrative expenses at N24 billion in 2018 and N38.8 billion.

Administrative expenses include N9.2 billion and N10.9 billion as salaries, allowances and bonuses for 742 and 815 staff in 2018 and 2017 respectively.

Other expenses included staff welfare N1.3 billion in 2018 and N1.4 billion in 2017; staff terminal benefit N121.5 million in 2018 and N99.7 million in 2017; retirement benefits (defined plan) N1.6 billion in 2018 and N2.2 billion in 2017, and defined benefits N12.4 billion in 2017.

On turnover, N2.5 billion was realized in 2014; N683.5 million in 2015; N3.4 billion in 2016; N4.8 billion in 2017 and N1.5 billion in 2018.

However, processing expenses gulped about N20.6 billion in 2014; N25.7 billion in 2015; N24.4 billion in 2016; N23.8 billion in 2017, and N24 billion in 2018.

Details of the processing expenses included direct materials cost, direct labour, direct expenses and processing overheads.

On Directors' emoluments, the report showed that about N58.8 million each for 20188 and 2017 the Chairman of the Board and other directors, while the other directors received a minimum of N12 million and above every year.

The directors include the former NNPC GMD, Maikanti Baru as Chairman; Managing Director, Abbar Bukar; Executive Director (Finance & Accounts) Aramide Ekundayo; Executive Director (Services), Ngini Amaka Nwakaife, and Executive Director (Operations), Ganiyu Abiodun Owolabi.

Warri Refinery

In Warri Refinery, total comprehensive loss in 2018 stood at N52.2 billion and N84.6 billion in 2017.

Although the statement showed the company had as revenue N1.99 billion in 2018 and N1.3 billion in 2017, the cost of sales gulped about N12.7 billion in 2018 and N14.5 billion in 2017, with total operating loss at N45.4 billion in 2018 and N85.1 billion in 2017.

Further details on the cost of sales showed that N7.2 billion and N6.1 billion was spent on salaries, wages and allowances; natural gas/industrial electricity N2.9 billion and N4.4 billion; direct maintenance cost of N1.7 billion and NN3.4 billion; chemicals consumed N43.1 million and N104.8 million in 2018 and 2017 respectively.

The audited account by Oguobi & Co and Ijebor+Ijebor, Chartered Accountants, showed operating loss covered operating expenses of N34.6 billion in 2018 and N71.9 billion in 2017.

Details of the operating losses revealed the bulk of the expenses were on the welfare of the staff and remuneration of the directors.

While about N270.1 million and N353 million were spent on the directors' remunerations in 201 and 2017 respectively, salaries, wages and allowances of the workers took N13.8 billion in 2018 and N12.9 billion in 2017.

The directors include Managing Director, M. Abali; Executive Director (Finance) A.E Bisong; Executive Director (Services), F.I.Ololo, and Executive Director (Operations), A. Ariaga.

Other expenses included staff pension N876.1 million in 2018 and N917.2 million in 2017; staff welfare N275.1 million in 2018 and N73.2 million in 2017; staff training N275.98 million in 2018 and N60.5 million in 2017; periodic benefit expenses N2.7 billion in 2018 and N10.5 billion in 2017 as well as travel and hotels N758.9 million in 2018 and N471.8 billion in 2017.

In addition, plant lease charge was N10 billion in 2018 and N44.9 billion in 2017; auditors' fees N50 million in 2018 and N30 million in 2017, and other expenses N673.8 million in 2018 and N429.4 million in 2017; depreciation N296.1 million in 2018 and N259.8 million in 2017.

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