Nigeria: Auditors Cast Doubts Over NNPC's Ability to Continue As Going Concern

NNPC Towers (file photo).
21 October 2020

Auditors to the Nigerian National Petroleum Corporation (NNPC) have expressed doubt over the national oil company's ability to continue as a going concern, following the figures released by the corporation in its latest Audited Financial Statement (AFS).

Making their independent remarks on the published 2019 AFS, which was made public by the corporation last week, the auditors of NNPC, comprising Pricewaterhouse Coopers, SIAO Partners, and Muhtari Dangana & Co said their position was based on the string of losses by the company and the fact that its liabilities exceeded its assets.

"In our opinion, the consolidated and separate financial statements give a true and fair view of the NNPC and its subsidiaries as at 31 December 2019," it started.

However, under "material uncertainty relating to going concern" they posited: "We draw attention to note 42 of the consolidated and separate financial statements which indicate that the group recorded a net loss of N1.8 billion (corporation net loss of N107.8 billion during the year ended 31, December 2019) and as that date, the group's current liabilities exceeded its current assets by N4.4 trillion.

"As stated in note 42, these events or conditions along with other matters, as set forth in note 42, indicate that a material uncertainty exists that may cast significant doubt on the group and corporation's ability to continue as a going concern. Our opinion is not modified in respect of this matter."

The AFS showed that the NNPC had an accumulated loss of N1.9 trillion and N474 billion respectively, thereby raising serious doubts and exposing a negative capital base.

In the joint and unmodified report to stakeholders, the auditors stated that the NNPC Group and Corporation recorded net losses of N1.8 billion and N107.8 billion respectively in 2019, compared to N803.1 billion and N254 billion in 2018 respectively.

The joint report added that the NNPC's current liabilities exceed its current assets by N4.4 trillion and N1.1 trillion for the Group and Corporation respectively, compared to N3.3 trillion and N968.7 billion in 2018 respectively.

According to the financial statements released by the corporation, NNPC current assets stood at N5.3 trillion and N4.5 trillion in 2019, while total current liabilities stood at N9.7 trillion and N5.6 trillion respectively.

On the other hand, in 2018, NNPC Group and Corporation's total current assets stood at N5.4 trillion and N4.8 trillion respectively, while total current liabilities stood at N8.7 trillion and N5.7 trillion respectively.

The accumulated losses according to the financial statement are approximately N1.5 trillion and N474 billion, compared to N1.6 trillion and N490.7 billion for the Group and Corporation in 2018 respectively. But the corporation said it is taking steps to ameliorate the situation.

However, the report by the directors signed by the Secretary and Legal Adviser to the NNPC, Mrs. Hadiza Comassie, appeared to have contrasted with that of the independent opinion of the auditors.

The directors noted that they had no reason to believe that there was a threat to the corporation's ability to continue as a going concern in the nearest future.

"The directors assess the group's future performance and financial position on an ongoing basis and have no reason to believe that the group will not be a going concern in the year ahead.

"For this reason, these audited annual financial statements are prepared on a going concern basis," the directors' report stated.

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