Forensic Audit Report concludes that NNPC, NPDC should refund $1.48bn

Proshare


Thursday, February 05, 2015 3.02 PM / News
 

The Auditor General for the Federation, Mr. Samuel Ukura, in Abuja today released highlights of the forensic report into the allegations of unremitted funds to the Federation Accounts submitted to him by PriceWaterHouse Coopers (PWC).
 

In his highlight of the PwC report which centred on three key areas – NNPC costs, ownership of NPDC revenues and kerosene subsidy, he affirmed that the Nigerian National Petroleum Corporation (NNPC) and the Nigerian Petroleum Development Company (NPDC) were indicted and asked to refund to the federation account “a minimum of $1.48bn.”

 

The Revenue and Payment Due
PwC stated that while the total gross revenue generated from crude oil lifting was $69.34bn between January 2012 and July 2013 and not $67bn as earlier stated by the Senate Reconciliation Committee, what was remitted to the Federation Account was $50.81bn and not $47bn.
 

Of the $69.34bn, the audit report stated that $28.22bn was the value of domestic crude oil allocated to the NNPC, adding that the total amount spent on subsidy for Premium Motor Spirit amounted to $5.32bn.
 

The report also concluded that an unappropriated amount of $3.38bn was spent as subsidy on kerosene in the period.
 

The report stated in part, “Total other third party financing arrangement and equity crude oil processing costs amounted to $1.19bn. Total costs directly attributable to domestic crude oil amounted to $1.46bn. Other costs incurred by the corporation not directly attributable to domestic crude is $2.81bn. Revenue attributable to the NPDC as submitted by the former managing director to the Senate hearing was $5.11bn.
 

“PwC states that this amount needs to be incorporated into the financial statements of the NPDC from where dividend should be declared to the Federation Account. Signature bonus, Petroleum Profit Tax and royalty yet to be paid by the NPDC is $2.22bn. Total cash remitted into the Federation Account in relation to crude oil lifting was $50.81bn and not $47bn as earlier stated by the Senate Reconciliation Committee for the period January 2012 to July 2013.
 

“Based on the information available to PwC, and from the above analysis, the firm submitted that the NNPC and NPDC should refund to the Federation Account a minimum of $1.48bn.”

 

Business Model and Costs
On NNPC costs, the report stated, “The corporation operates an unsustainable model. Forty-six per cent of proceeds of domestic oil revenues for the review period was spent on operations and subsidies.
 

“The corporation is unable to sustain monthly remittances to the Federation Account Allocation Committee 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.”
 

The report stated that while the NNPC provided transaction document, representing additional cost of $2.81bn related to the review period, there was a need to clarify whether such deduction should be made by the corporation as a first line charge before remitting the net proceeds of domestic crude to the Federation Account.
 

As a result of this, PwC recommends, “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.”

 

Ownership of Revenues and Dividends
On the ownership of NPDC revenues, the PwC report stated that the organisation should remit dividends to the NNPC and ultimately to the Federation Account based on its dividend policy and declaration of dividend for the review period.

 

Unapproved Subsidy Payments
The NNPC incurred a total of $3.38bn as subsidy cost for kerosene within the review period.
 

On kerosene subsidy, the report stated that while the Petroleum Products Pricing Regulatory Agency and the NNPC relied on a presidential directive of June 15, 2009 to stop subsidy on kerosene, the directive was not gazetted, and as such, there was no legal instrument cancelling subsidy on the product.
 

The report, therefore, recommended that an official directive be written to support the legality of the kerosene subsidy cost, followed through adequate budgeting and appropriation. 

 

The Directive
Hours after the presentation, the Federal Government directed the NNPC to pay to the Federation Account $1.48bn being outstanding signature bonus, taxes and royalties of the NPDC.



 

 

READ MORE:
Related News
SCROLL TO TOP