Amid its controversial financial dealings that have negatively impacted the nation’s financial standing, the Nigerian National Petroleum Company Limited has been accused by the Auditor-General of the Federation of diverting a total sum of N2.68tn and $9.77m in the last four years.
Findings by Sunday TheNigerian using the Auditor-General’s annual reports published between 2017 and 2021 showed that N1.33tn was diverted in 2017, N681.02bn in 2019, N151.12bn, ($19.77m) in 2020 and N514bn in 2021 amounting to N2.68tn and $19.77m over four years.
The reports, which were submitted to the National Assembly, indicated that there were violations of the Constitution of the Federal Republic of Nigeria and the 2009 Act of Financial Regulations.
Checks by our correspondent also revealed that the national oil firm, while disregarding good corporate governance practices, did not provide any response or justification for the infractions raised by the auditor general within the review period.
14 financial infractions
The NNPCL has been regarded by the World Bank and other international organisations as an opaque company due to the limited transparency in its financial dealings.
The bank, in its Nigeria Development Update, December 2023 edition, said its opaqueness extends to subsidy arrears that are still being deducted and the impact of subsidy removal on federation revenues.
The former governor of the Central Bank of Nigeria, Sanusi Lamido, from June 2009 to February 2014, first adjudged the NNPC as the “most opaque oil company in the world.”
The vocal economist slammed the NNPCL for allegedly failing to remit enough forex into government coffers.
He also knocked the national oil company for keeping its many joint ventures, oil-backed loans and other shared production arrangements away from Nigerians.
A breakdown showed that the oil firm was accused of 14 financial infractions ranging from unauthorised deductions worth N1.33tn from the federation account, discrepancies of N663bn transferred to the federation account, non-production of complete information on allocation of crude oil to refineries, non-adherence to payment of all revenue to the federation account, incomplete report of losses of crude oil amongst others.
Analysing the issues year by year, the auditor-general revealed that the NNPCL didn’t make a full payment of N2.41tn revenue payable to the government, deducting N1.33tn without authorisation in 2017.
It said the audit issues violated the provisions of Section 162 (1) of the 1999 Constitution which stipulates that, “The Federation shall maintain a special account to be called ‘the Federation Account’ into which shall be paid all revenues collected by the Government of the Federation.”
The report read, “From the total revenue of N2.41tn payable to the Federation Account by the NNPC, the corporation deducted the sum of N1.33tn for Joint Venture Cash Call before paying the resulting net figure of N1.07tn into the Federation Account, causing a reduction in funds available for allocation to the three tiers of the federation.”
“The Accountant-General is required to ensure that all deductions made at source contrary to Section 162 of the Constitution of the Federal Republic of Nigeria 1999 (as amended) are stopped. Any payment to be made from Federation Account Revenues should be made by the Federation Account Allocation Committee and not by any collecting Agency. Defaulting Agencies should be appropriately sanctioned.”
However, the auditor general didn’t report any financial infractions by the company in 2018.
In 2019, the audit report uncovered seven major financial infractions amounting to N681.02bn in the operations of the NNPCL.
It explained that the oil firm remitted only N519.92bn out of the N1.27tn revenue accrued through the National Petroleum Investment Management Services.
It said the company transferred the sum of N1.27tn to the federation account as reported both in the statement of cash flows and of the Annual Reports and Financial Statements of NNPC-NAPIMS for the year ended 31st December 2019.
“The Accountant-General of the Federation recorded the sum of N608.71bn as a remittance by NNPC into the Federation Account for 2019. The sum of N519.92bn was transferred to the Federation Account by the NNPC based on transfer mandates.
“A discrepancy of N663.89bn existed between the NNPC-NAPIMS audited account and the amount recorded by the AGF as remittance for 2019, and the schedule of transfers to the Federation Account by NNPC-NAPIMS was not provided for scrutiny. The above anomalies could be attributed to weaknesses in the internal control system at the NNPC-NAPIMS.”
The audit further observed that 107,239,436.00 barrels of crude oil were lifted as domestic crude without providing the necessary documents.
“Allocation of crude oil to refineries for a billing date of 9th January to 29th May 2019 was 2,764,267 bbls valued at N55,891,009,960.63. Information on the sale of unutilised crude oil by refineries for 2019 was not provided, and information on crude oil allocations from 30th May to 31st December 2019 was not provided for scrutiny.”
Other issues raised for the year were the incomplete report of losses of crude oil valued at N5.498bn and unjustified deductions of $1.278bn from joint venture royalty by NNPC before remitting into the federation account
In 2020, the oAuGF requested the intervention of the National Assembly for the recovery of N151.122bn in revenue unjustifiably deducted by NNPCL from the source before remittance to the Department of Petroleum Resources during the 2020 financial year.
The audit observed from the review of NNPC Joint Venture schedules and other documents that: i. The sum of N151,121,999,966.34 was deducted by the NNPC from the Oil Royalty assessed by the Department of Petroleum Resources now Nigerian Upstream Petroleum Regulatory Commission for 2020.
The oAuGF disclosed that the deductions by the NNPCL were purportedly for handling government priority projects, strategic holding costs, crude oil and product losses among others.
It, however, observed that “no evidence was produced to show details of the priority projects and approval by Federation Account Allocation Committee.
“The deductions by the NNPC were made before remittance to DPR (now NUPRC), and no justifiable reasons were provided for the deductions of the royalties by the NNPC before remittance.
“The above anomalies could be attributed to weaknesses in the internal control system at the DPR (now NUPRC).”
Meanwhile, for the year 2021, the auditor-general stated that a review of NNPC SAP payment records from March to May 2021 showed that N484.73bn was generated from the sales of 18,966,095 barrels of crude oil but N343.64bn was deducted as operational costs. It said the company didn’t provide a breakdown of the costs.
The report read, “The sum of N343.64bn from the gross amount was unilaterally deducted from the gross domestic crude sales as NNPC Value shortfall, Strategic Stock Holding Cost, Crude Oil and Products Pipeline Losses, as well as the pipelines maintenance and management costs.
“The details of each of the cost components deducted were not provided for audit review. Hence, reasons for the deductions could not be justified by the Management.
“In the month of May, the net payable which could have been remitted ought to have been N127.075bn but only the sum of N77.075bn was remitted, leaving an unremitted balance of N50bn to the Federation Account which has remained unaccounted for.
“The above anomalies could be attributed to weaknesses in the internal control system at NNPC, now NNPC Ltd. This is a potential loss of Federation Revenue, diversion of public funds, or misapplication or misappropriation of funds.”
Another issue raised was the deduction of N82.95bn from the sale of Crude Oil and Gas (Federation Revenue) from the 2020 and 2021 records and for purported Refineries Rehabilitation without evidence of authorisation and approvals before the deductions were made.
“Audit observed from the review of NNPC Payment records for the period 2020 and 2021 that the sum of N82.95bn was deducted from the sale of Crude Oil and Gas (Federation Revenue) from the 2020 and 2021 records.
“This amount deducted at source for purported Refineries Rehabilitation was not supported with evidence of authorization and approvals before the deductions were made.
“The above anomalies could be attributed to weaknesses in the internal control system at NNPC, now NNPC Ltd,” it noted.
Similarly, the auditor-general reported that the national oil firm didn’t report N3.75bn as a shortfall from the sales of petrol sales.
“Audit observed that the sum of N3.75bn was paid to a Company as a shortfall on sales of MT cargo of PMS
Also, the audit observed that the sum of N83.66bn, being miscellaneous income from the NNPC joint venture operations from the year 2016 to 2020, was sunk into the CBN/NNPC sinking fund account instead of the Federation Account.
“Warehousing of the miscellaneous income of 2016 to 2020 meant for the Federation Account into the CBN/NNPC Sinking Fund Account led the Federation to resort to borrowings,” the report noted.
CALCOL, CISLAC demand sanctions
Commenting on the infractions, the Centre for Anti-Corruption and Open Leadership described the NNPCL as a hub of institutional corruption, alleging that powerful interests within and outside the government had shielded the organisation from accountability.
CACOL’s Executive Director, Debo Adeniran, lamented that despite the enactment of the Petroleum Industry Act aimed at decentralising and unbundling the NNPCL, the company’s operations remained opaque and rife with allegations of corruption.
According to Adeniran, the NNPCL has always been a source of liquid enrichment for government officials, even before it was converted into a limited liability company.
“The operations of the NNPCL have always been shrouded in secrecy. Even the Petroleum Industry Act has not helped. Despite all the noise about decentralisation and unbundling of the NNPCL, nothing has materialised.
“It is the strongest cabal in Nigeria. All the powerful elements in government and MDAs work in concert with those managing the NNPCL’s accounts, perhaps due to gratification.
“Even the anti-corruption agencies find it difficult to probe the NNPCL. A couple of attempts were made by the ICPC and EFCC in the past, but they have not been able to uncover anything. There must be something shielding the NNPCL from exposure for its corruption crimes,” Adeniran said.
He alleged that the cooperation operated as Nigeria’s most powerful cabal, with influential elements in government and various ministries, departments, and agencies allegedly collaborating with those managing the company’s accounts.
Similarly, the Executive Director of the Civil Society Legislative Advocacy Centre, Musa Rafsanjani, criticised the NNPCL for its lack of accountability, attributing the failure to not only the corporation but also to President Bola Tinubu, the National Assembly, and security agencies.
Rafsanjani asserted that the president, as the leader of the nation, bore the primary responsibility for ensuring that the NNPCL operated transparently and remained accountable to Nigerians.
“It is within the call of the president, who is supposed to ensure that the NNPCL is accountable to the nation. So, I blame the president for any shortcomings of the NNPCL,” Rafsanjani stated in an interview with Sunday TheNigerian.
The civil society leader also expressed dissatisfaction with the National Assembly, particularly the committees overseeing the oil sector, arguing that the lawmakers had a statutory duty to ensure the proper functioning of the NNPCL and criticised them for their perceived inaction in holding the corporation accountable.
Rafsanjani further highlighted the role of security agencies in addressing issues such as crude oil diversion, suggesting they must also share responsibility for the ongoing crisis.
He called on the government and other stakeholders to adopt a firmer stance against the alleged cartel operating within the NNPCL, emphasising the need for a stronger commitment to addressing corruption in the oil sector.
Additional report by: Ismaeel Uthman, Olufemi Adediran and Daniel Ayantoye
