NNPC forensic audit : Only $1.48b remains unremitted to federation account , says PwC

FAR from the $48.9 billion or the latter figure of $10.8 billion alleged un-remitted crude oil sales proceeds to the Nigerian Federation Account made  by immediate past Central Bank of Nigeria (CBN) Governor, and now Emir of Kano, Mallam Sanusi Lamido Sanusi for the period  between January 2012 and July 2013, a forensic audit conducted by PwC firm has found out that only $1.48 billion is yet to be fully accounted for or remitted into the account by the Nigerian National Petroleum Corporation ( NNPC)

 The findings will no doubt put to rest the dust raised by the allegation and counter allegation of  ‘missing’ funds  by both the Federating States, the National Assembly  and  members of the opposition political community in Nigeria.

 On their part, the states, represented by the Finance Commissioners’ Forum at the Federation Accounts Allocation Committee ( FAAC) have continued to insist that the NNPC was still withholding part of the Federation Account revenue, while the NNPC, on its part, has continued to explain  that it was no longer indebted to the Federation Account, as much of the revenue claimed by the states has been used by it for either subsidy settlement or other costs and that what was remaining was just reconciliation of the figures.

 However, PwC, the international auditing firm has accordingly recommended for the immediate remittal of the said amount into the Federation Account and has equally recommended for the review of the NNPC’ s operating model to bring it at par  with modern operating and  reporting  standard as the operating model has remained unchanged since the establishment of the NNPC over 50 years ago.

 These were part of the major highlights released yesterday at a press conference by the Auditor General of the Federation ( AuGF) , Mr. Samuel Ukura . 

  He said the PwC’s audit centred on three key areas of  NNPC cost; ownership of NNPC revenues; and DPK subsidy.

  Ukura said: “ Based on the work conducted by PwC , their conclusions are as follows:

 *Total gross revenue generated from FGN crude oil liftings was $69.34 billion and not $67 billion as earlier stated by the Senate Reconciliation Committee for the period from January 2012 to July 2013 . Within the N69.34 billion, $28.22 billion was the value of domestic crude oil allocated to NNPC;

*total amount spent on subsidy for PMS amounted to $5.32 billion;

*total amount spent on subsidy DPK ( not appropriated ) amounted to $3.38 billion;

*total other third party financing arrangement and equity crude oil processing cost amounted to $1.19 billion;

*total cost directly attributable to domestic crude oil amounted to $1.46 billion;

*other costs incurred by the Corporation not directly attributable to domestic crude oil is $2.81billion;

*revenue attributable to NPDC as submitted by the former NPDC Managing Director to the Senate hearing ( less PPT and Royalty paid ) is $5.11 billion. PwC stated that this amount needs to be incorporated into the financial statement of NPDC from where dividends should be declared to the Federation Account;

*signature bonus , PPT Royalty yet to be paid by NPDC is $2.22 billion

Total cash remitted into the Federation Account in relation to crude oil liftings was $50.81 billion not $47 billion as earlier stated by the Senate Reconciliation Committee for the period from January 2012 to July 2013;

*based on the information available to PwC and from the analysis above, the firm submitted that NNPC and NPDC  should refund to the Federation Account a minimum of $1.4 billion.

  On the  NNPC cost imperative , the Auditor General said  PwC  observed that the Nigerian National Oil Company operates an unsustainable model.

   According to the report : “ Forty- six ( 46 ) per cent proceeds of domestic crude oil revenues for the review was spent on operations and  subsidies. 

 “The corporation is unable to sustain monthly remittances to the Federation Account Allocation Committee  ( FAAC) and also meet its operational costs entirely from the proceeds of domestic crude oil revenues, and has had to incur third party liabilities to bridge the funding gap.

“ NNPC provided transaction documents representing additional costs of $2.81 billion related to the review period citing the NNPC Act LFN No.33 of 1977 that allows for such deductions.

  “Clarity is required on whether such deductions should be made by NNPC as a first line charge before remitting the net of domestic crude to the Federation Account.

 “PwC therefore recommended that the NNPC model of operation must be urgently reviewed and restructured as the current model which has been in operation since the creation of the Corporation cannot be sustained,” the report further unfolded.

 On the ownership of NPDC revenues, PwC observed that “according to NPDC former Managing Director, Mr. Victor Briggs’ submission to the Senate Committee , hearing on the subject matter, for the period covered by their mandates. NPDC generated $5.11 billion ( net of royalties and petroleum profit tax paid.

  “ They relied on the legal opinion provided to the Senate Committee by the Attorney General (AG) on the subject of the transfers of NNPC’s 55 per cent portion of oil leases ( OMLs) involved in the Shell ( SPDC ) divestments which impacted crude oil revenues in the period. The AG’s opinion indicated that these transfers were within the authority of the Minister of Petroleum Resources to make

  “NPDC’s 55 per cent portion of OMLs involved in the Shell divestments related to the eight OMLs were transferred to NODC for an aggregate amount of US$1.85 billion. So far only the amount of US $100 million has been remitted. PwC also added that they had expected a transfer basis higher than the US$1.85 billion aforementioned .

  “NPDC had done a self-assessment of PPT and Royalty and had unpaid self assessment PPT and royalty to the tune of of $0.47 billion related to the review period . PwC added that they did not obtain any information that suggested that NPDC has been assessed for POT and Royalty for the review period. PwC also stated that NPDC should remit dividend to NNPC and ultimately to the Federation Account based on NPDC’s dividend and declaration policy for the review period. “ 

  Finally, on the kerosene subsidy, the report said PwC based on the information obtained from the PPRA learnt that $3.38 billion  unappropriated relating to kerosene subsidy cost was incurred by the NNPC for the review period  though there was a letter dated 19 October 2009 written by the Principal Secretary to the President to the National Security Adviser confirming the Presidential directive to stop subsidy on the product.

  It however regretted that the Presidential directive to date,  is yet to be gazetted, neither is there any legal instrument canceling the subsidy on kerosene.

  It therefore recommended  that “an official directive be written to support the legality of the kerosene subsidy costs. This should also be followed by adequate budgeting and appropriation for the cost.”