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The Missing Oil Trillions Yet to Be Found – Reports



The latest audit report of Nigeria’s oil and gas industry undertaken by the Nigeria Extractive Industries Transparency Initiative, (NEITI), which was published recently, made striking revelations on the extent of revenues withheld by the Nigerian National Petroleum Corporation, (NNPC).

The audit further swelled the list of scathing reports that have exposed the Corporation’s devastating consumption of public revenues and performance failures prior to the present administration.

The NEITI audit which was presented in Abuja by the Minister of Solid Minerals Development and Chairman of the NEITI board, Dr. Kayode Fayemi, revealed that the country earned $58.07bn (about N11.4tr) as revenue from crude oil sales, taxes, royalties and other incomes in 2013.

However, part of the amount that should have gone to the Nigerian treasury was either diverted or got lost due to many reasons.

A breakdown of the amount that failed to get into government coffers showed that N1.1 trillion comprising $3.8bn being oil export sales plus other dollar-based payments and outstanding refunds in addition to N358.3 billion in naira-denominated revenues, were not remitted by the NNPC. $5.966 billion and N20.4 billion were lost due to opaque crude swap agreements and oil theft.$599.8 million was lost as a result of under-payments of petroleum profit taxes and royalties by oil and gas companies.

The audit also revealed that the Nigeria Liquefied Natural Gas Limited, (NLNG), paid $1.289 billion as dividends, interests and loan repayments in 2013. While the NNPC acknowledged receipt of this amount, it did not forward it to the federal government.

The $1.289 billion, according to the audit, brings to a total of $12.9 billion payments to the NNPC by NLNG between 2005 and 2013 that were not forwarded by NNPC to the federal government.

Worried by the enormity of the loss of revenue revealed in the report, the Senate has recently summoned the NEITI boss to formally present the report at plenary and explain the alleged missing trillions.

Where did the trillions go?

The NEITI audit report tried to unravel where the billions of payments and NNPC oil sales that didn’t get to the federation treasury went to.

One of the major sources of with holdings as captured even in other previous audits stem from the $1.7 billion balance for the sale of NNPC’s interest in eight Oil Mining Leases, (OMLs), whose whereabouts is unknown. It will be recalled that between 2010 and 201,1 NNPC divested 55 percent federation equity in the eight OMLs from the Shell JV to its subsidiary, Nigerian Petroleum Development Company, (NPDC). The eight OMLs were valued at $1.8billion out which only $100 million was paid in April 2014, leaving the $1.7 billion balance which has not been paid by NNPC to the federation account.

The huge revenue losses came at a time average prices for the country’s light sweet crude topped $110 per barrel during the boom of 2011 to 2014. Yet during that same period, treasury receipts from oil sales fell significantly.

The $58.07 billion total revenue flows to the federation from all sources in 2013 represented a decline of 8 percent when compared with the $62.9 billion realized in 2012.

Analysts are of the opinion that while volumes lost to oil theft explains some of the decline, NNPC’s massive revenue with holdings and suboptimal sales arrangements were also to blame.

From the figures presented in the audit vis-à-vis other audit reports, analysis showed that management of NNPC’s oil sales and remittances worsen particularly between 2010 and 2014. It was in early 2014 that a former Governor of Central Bank of Nigeria, (CBN), Lamido Sanusi raised the alarm that $20 billion in NNPC oil sale revenues had gone missing.

The alarm prompted the set-up of a Senate Committee to investigate the alleged unremitted crude oil revenue to the federation.

In addition, the Ministry of Finance set up a Reconciliation Committee consisting of the CBN, NNPC, DPR, FIRS, OAGF, the Budget Office, Federal Ministries of Finance and Petroleum Resources to align the differing figures.

PricewaterhouseCoopers, (PwC), also performed an investigative forensic audit into the alleged unremitted funds into the Federation Accounts by NNPC within that same period.

NNPC is yet to publicly counter the claims in NEITI’s latest audit. However, it has lately replied similar issues raised by other government queries questioning its processes.

The Auditor-General of Federation recently reported that the Corporation withheld N3.2 trillion ($16 billion) in oil revenues in 2014. The Revenue Mobilization Allocation and Fiscal Commission, (RMAFC), immediately raised the number to N4.9 trillion ($25 billion) in revenues between 2011 and 2015.

NNPC disputed the auditor-general’s claims by putting out a third set of figures, saying what it owed the Federation Account was N326 billion which was still being reconciled and not N3.23 trillion as alleged by the auditor.

What has changed?

“Clearly, a few things have or could have changed since 2013 that the reports covered,” this was the verdict of Chairman of the NEITI board, Kayode Fayemi.

Kudos to President Muhammadu Buhari’s determination to tackle graft and coupled with global low oil prices, the government has made positive changes in how NNPC manages the nation’s oil wealth. It is clear that there is an ongoing reform in NNPC and the oil sector in general.

The coming of Ibe Kachikwu as NNPC head has witnessed drastic cut in the number of passive, well-connected middlemen that pocket money from oil sales. NNPC has canceled costly, unbalanced swap contracts and sought more efficient replacements.

The Corporation now publishes a monthly financial data and its leadership says it is seeking solution for some of its costliest problems, not the least the moribund refineries and the payment of debts to its upstream Joint Venture, (JV) partners.

These moves, according to industry watchers, suggest a real determination by the minister and government to take on some of NNPC’s problems.

However, it is clear that despite the gap of three years, most of the issues raised in the NEITI report are still relevant today.

PricewaterhouseCoopers, (PwC), auditors in 2015 reviewed NNPC’s oil sales system, and wrote: “NNPC has a ‘blank’ cheque to spend money without limit or control. This is untenable and unsustainable and must be addressed immediately.”

A recent report by the Natural Resource Governance Institute, (NRGI), claimed that NNPC under President Buhari’s administration still withholds a major share of oil sale earnings and spends them at will.

Experts say these statements remain true today as there are still no agreed rules that govern how much money the NNPC can keep, and how it can spend those funds.

Until the government states clear rules for NNPC financing, both the controversies and the underlying revenue leakages will persist.

The latest drafts of the Petroleum Industry Bill, (PIB), which do not adequately address how NNPC and the federation will share revenues in future is still a source of concern.

To this end, government should move to recover these funds especially now that its revenues are low and is looking for more avenues to fund the budget.

It is now up to the legislature to take keen interest in the audit findings to design legislations for the extractive sector and carry out their oversight functions.

Credit: Daily Trust

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