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Tag: NNPC

  • We’ll ensure kerosene subsidy is accounted for, says Peterside

    We’ll ensure kerosene subsidy is accounted for, says Peterside

    The Chairman, House of Representatives Committee on Petroleum (Downstream), Dakuku Peterside, has said the committee will make sure that kerosene subsidy payments are accounted for.

    He spoke yesterday while announcing the postponement of the committee’s proposed investigation into the kerosene subsidy.

    Peterside said the postponement was due to the absence of the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Andrew Yakubu and the Pipeline and Products Marketing Company (PPMC).

    The hearing will now hold on February 18.

    This is the second time the investigation has been pushed forward.

    The Committee had in its letters to the three principal actors in the sector requested for the provision of “all relevant detailed information as it relates to approvals on kerosene subsidy, source of money for payment of the subsidy, budgetary approvals, kerosene import details, PFI allocation and product distribution chart, PPPRA authorisation and validations, auditors approval and reports, relevant shipping documents and all other documents that will assist the committee in discharging its responsibility.”

    A letter from the Office of the Permanent Secretary, Ministry of Petroleum Resources, dated February 7 but received in Peterside’s office a few minutes before the commencement of the probe yesterday gave excuses for the absence of the Minister and requested for a rescheduling of the hearing.

    It reads: “I wish to inform you that the Honourable Minister together with the top management if the Ministry and its agencies will be participating in the International Summit on Power Financing starting today, 10th February, 2014.

    “As a result we regret to inform you of our inability to honour your invitation. We are also currently engaged with the Senate Committee on Finance and it is not clear when their hearing will end. “

    NNPC, in a letter by its General Manager, National Assembly Liaison, Mr. M.B Bamanga and dated February 7, gave the same excuse as the ministry. “I am further directed to appeal to the Chairman to allow NNPC and its subsidiary sufficient time to collate the required documents and reschedule an alternate date for the appearance of our organization at the hearing, please,” the NNPC said.

    The PPMC’s letter, also dated February 7, also followed the same format with the same excuse and request for additional time to collate documents.

    Peterside said: “It is not in the character of the seventh National Assembly to waste people’s time. On behalf of the committee, I want to apologise to you; we are going to be compelled by circumstances to put off this hearing to the February 18.

    “We owe you a duty to carry out the investigation, we will not let you down, we want to apologise once more, we will move on with the hearing February 18th.”

     

  • Sanusi’s alarm

    Sanusi’s alarm

    •Where is our $20 billion dollars?

    As if living to its billing as a nation where scandals are never in short supply, the Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi, again on February 4, stirred the hornet’s nest when he drew the attention of members of the Senate Committee on Finance to an alleged discrepancy of $20 billion in crude oil receipts.

    This time, he was point-blank when he told the members: of the $67 billion crude confirmed to have been shipped by the Nigerian National Petroleum Corporation (NNPC) between January 2012 and July 2013, only $47 billion was remitted to the federation account. Taking his chance to present what appears to be, by far, the most robust rebuttal to the disclaimer put out by the NNPC that any oil money was missing, he also revealed other details bordering on legal and constitutional violations by the corporation – all of which speak to how gangrenous the sore of impunity has become.

    Among the highlights is the so-called kerosene subsidy which, although had been eliminated by a 2009 presidential directive, still nonetheless bled the nation by $100 million monthly within the period; the petrol subsidy albatross which the NNPC claims as justification for withholding  $8.49 billion of monies due to the federation account –  whose rationalisation came only after the discrepancy was highlighted; the contentious $6 billion worth of crude oil said to have been shipped by the NNPC on behalf of its prospecting arm – the Nigerian Petroleum Development Company (NPDC); the “Strategic Alliance Agreement” under which public revenue is transferred into private hands; and of course the practice of crude swap that has remained opaque.

    We note the attempt by the Group Managing Director, NNPC, Andrew Yakubu, to latch on to the now worn defence of  so-called ignorance by Sanusi, of oil sector accounting, after the so-called overstatement of the amount due to the federation account last month. That is deplorable. We cannot accept that as a defence to the weighty issues raised any more than his strange position that the CBN’s role – as banker to the Federal Government – stops at collecting the receivables on behalf of the government.

    For sure, the contention that the CBN governor cannot raise queries on the activities of the corporation, or sound alarm when entities like NNPC perpetrate brazen outlawry on the treasury is absurd. We certainly expect more than the hollow, opportunistic and dangerously self-serving defence being put out by the NNPC on the issue.

    The truth of course is that the CBN, as banker to the Federal Government, has a primary responsibility to track the nation’s revenue. What role does the CBN governor’s membership of the Economic Management Team confer if not to enable him draw attention to such open and direct threats to the economy?

    So, who is the author of mischief – the individual calling for scrutiny of the finances or the corporation’s top guns and their principals that would rather go on doing as they please with our common wealth?

    Now, very much unlike the previous outing, Sanusi did not pretend, nor did he claim, to have the final word on the matter. That, he has made clear, is for the authorities – the National Assembly – to determine. On this, we find common agreement. If, as he claims that the value of crude export for the period between January 2012 and July 2013 is $67 billion, let the corporation present its books to prove that it has nothing to hide. The same goes for the so-called “Strategic Alliance Agreement”; the burden is on the NNPC to explain how the strange partnership with a firm with unknown pedigree can be said to have added value to the nation. And, as for the racket called subsidy, now perhaps is the time for forensic auditors to be called in to finally lay all matters to rest.

  • NPDC votes $3.6b for capital expenditure

    NPDC votes $3.6b for capital expenditure

    The Nigerian Petroleum Development Company (NPDC), the upstream subsidiary of the Nigerian National Petroleum Corporation (NNPC), has set aside $3.6billion for its capital expenditure for the year and 2015.

    The firm set 300,000 barrels per day (bpd) and 900million standard cubic feet of gas per day (mscf/d) as its oil and gas production targets over the next four years.

    Its Managing Director, Victor Briggs, who unveiled the company’s programmes as well as the state of the divested assets from Shell at the weekend, said, the firm produces 140 barrels per day (bpd) and expects to increase it to 160,000bpd by end of this year while it delivers 410 mmscf/d and plans to raise it to 600mmscf/d by end of the year.

    He said from the operational projections, the expenditure from 2016 would decrease by 50 per cent from the budget of $1.8 billion for the year and 2015 to between $700 million and $800 million despite projected increases in oil and gas outputs.

    According to him, many investments are going into the newly acquired assets from Shell to optimise production and connect the well to where crude can be piped to the export terminals through the flow lines, flow stations and trunk lines.

    He explained the extent of works done on oil mining licences (OMLs) 26 4340 42 34, current levels of production, plans and timelines to increase their output.

    He said: “The company started in 1988 with few assets. At that time the company was producing less than 1000bpd. NPDC then was very active in exploration and production. Most of the fields that are keeping Total were discovered by NPDC as well as some of those of Conoil but because the NPDC didn’t have the funds to continue with the development phase of these assets where the bulk of the money was needed, they were taken away and given to other companies to develop.

    “We started with OMLs 65 and III but today NPDC is involved in several OMLs, about 28, with some in deep offshore where we are not operators but equity partners. One is shallow offshore (OML119), which we are operating, some in swamp where we have OMLs 40 and 42, which we also operate. The remaining OMLs are on land. Currently, we are concentrating on swamp, land and offshore, which we have been doing over a long period.

    “Today, NPDC has the capacity to produce about 140,000bpd. Production varies each day depending on absence of any issue. If there is any breach on our pipeline or flow line, the safe thing to do is to shut down. The main impact on our production is really when there is a breach on a trunk line, which is a big pipe which carries production from different companies’ pipe to the terminal. The essence of the trunk line is that it is cost-effective for the oil companies. Therefore, if there is a breach on such line, all the companies using it will be forced to shut down.”

  • CBN is raising false alarm, says NNPC

    CBN is raising false alarm, says NNPC

    Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi appeared on Tuesday at the Senate’s Investigative Public Hearing on Unremitted Oil Revenue. The Nigerian National Petroleum Corporation (NNPC), in a statement yesterday, said Sanusi is just raising false alarm. 

    At the public hearing of the Senate Committee on Finance on Tuesday on the unreconciled $10.8 billion, CBN’s position suddenly changed. At a new conference held by the Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, the Governor of Central Bank, Mallam Sanusi Lamido Sanusi and heads of Department of Petroleum Resourses (DPR) and Federal Inland Revenue Service (FIRS), the initial figure of $49.8 billion was reconciled to $10.8 billion. On the same day, at the Senate hearing, the CBN gave a figure of $12 billion which was corrected by the Coordinating Minister of the Economy to $10.8 billion. Yet in today’s presentation the CBN’s figure changed again. This time CBN alleges it is now $20b. This is a clear indication of CBN’s inconsistency, thereby presenting conflicting figures to the generality of Nigerians. We are concerned by the dynamics of the moving numbers as the Central Bank’s figures keep changing. This is a worrying trend coming from an Agency of Government charged with managing the financial affairs of Nigeria.

    While NNPC and other relevant Government Agencies are in the process of reconciling the $10.8 billion as accepted by all parties, we are surprised by the new $20 billion figure introduced by the CBN. According to CBN, the $20 billion is made up of $12b subsidy claim, $6 billion NPDC gross revenue and $2 billion third party revenue. It is worthy to note that the CBN accepted NNPC submission with respect to $16 billion royalty and PPT payments into the federation Account through the FIRS. This indicates that the CBN cherry picks the figures.

    For example in taking the entire $6b gross revenue accruable to NPDC and allocating same to the Federation Account, CBN simply multiplied the gross production by the crude oil price; thereby failing to account for the operating costs (opex) and amortised capital expenditure that underpin the production. In other words, the CBN failed to take into account the cost of production.

    We reiterate that NPDC has been remitting the royalty and petroleum Profit Tax, PPT to the Federation Account. NPDC as a subsidiary of NNPC operates a business model similar to other international companies in Nigeria and abroad and will continue to be governed by these global best practices in the execution of these assets.

    Regarding the subsidy claim on kerosene, it is important to note that NNPC as the supplier of last resort is the only company supplying this product in Nigeria for the benefit of the citizenry. If kerosene has been deregulated, why are the independent marketers not supplying this product in line with what is applicable to diesel (AGO). NNPC owes a duty to Nigerians to ensure that there are adequate products in the country. This mandate has without question been accomplished in the past four years. NNPC deserves to be commended rather than battered, for ensuring adequate supply of kerosene at regulated price of N50.00k.NNPC cannot be held responsible for any differential pricing from non NNPC retailers. This is the basis for NNPC’s claim on kerosene subsidy.

  • $20b oil money missing, Sanusi alleges

    $20b oil money missing, Sanusi alleges

    •NNPC: It’s not true

    Another major row over Nigeria’s cash crisis broke out yesterday.

    Missing from the Federation Account is N20 billion – up from N10.8 billion – Central Bank of Nigerian (CBN) Governor Sanusi Lamido Sanusi claimed.

    Sanusi told members of the Senate Committee on Finance at the National Assembly in Abuja that “it is established that of the $67 billion crude shipped by the Nigeria National Petroleum Corporation (NNPC) between January 2012 and July 2013, $47 billion was remitted to the Federation Account.”

    “It is now up to NNPC, given all the issues raised, to produce the proof that the $20billion unremitted either did not belong to the Federation or was legally and constitutionally spent,” the CBN boss said.

    Sanusi insisted that “there is no dispute that $20 billion out of $67 billion has not been paid into any account with the CBN.”

    Speaking on the supposed inter-agency reconciliation between the ministries of Finance and Petroleum Resources, NNPC, CBN, FIRS, Office of the Accountant General of the Federation and others, Sansui said the NNPC admitted that it lifted $67 billion worth of crude between January 2012 and July 2013. Of this amount, all agreed that the following amounts had been remitted to the Federation Account: “$14 billion as equity crude and $15 billion as payment to FIRS by International Oil Companies (IOCs).

    “They paid in crude, which was lifted by NNPC on behalf of FIRS. There was nothing in our records linking the two transactions; $2 billion Royalty payment to DPR by IOCs under similar arrangements as in (2) above and $16 billion out of the N428 billion taken as Domestic Crude Paid in Naira, not dollar,” Sanusi said.

    “The outstanding $20 billion the whereabouts of which needs to be proven by NNPC include: $12 billion out of domestic crude sales yet to be remitted. NNPC has already disclosed N180 billion as subsidy payment in the first quarter of. 2012. If PPPRA confirms this number, we will adjust the balance accordingly. As for the balance of $10.8 billion, NNPC has publicly disclosed that 80 per cent applied to petrol and kerosene subsidy.

    This explanation, Sanusi said, is “not tenable and the NNPC needs to provide the proof. The $6 billion shipped on behalf of NNPC belongs to the Federation Account and the need to investigate and audit the Strategic Alliance Agreement (SAAs) to recover amounts unconstitutionally diverted and $2 billion “third-party” financing” “we have not been given any documents explaining or proving this along with other claims around pipeline repairs, maintenance, strategic reserves etc. There was no appropriation for these expenses and NNPC also needs to substantiate them,” Sanusi said.

    Sanusi told the Committee that “a major source of revenue leakage from the system is NNPC’s unverified claims for subsidy and unilateral deduction from the Federation Account”. “If we take the PPPRA template, subsidy/litre of PMS is about 1,136litre/MT, the subsidy is around N1.5 billion. This means that for every $1 billion claimed by NNPC as subsidy deduction, the corporation is claiming to have imported at least 100 vessels of PMS.”

    In addition to the N180 billion reported in Q1:2011. NNPC had deducted N845 billion in 2011 and, according to the Farouk Lawan report, NNPC’s deduction for PMS subsidy in 2011 alone amounted to N1.7 trillion, if we add claims on Excess Crude naira account.

    Any serious investigation into these matters, Sanusi said, “will require an audit of NNPC’s database, which it is statutorily required to keep, based on subsidy guidelines. Only verification of the legitimacy of these claims can form the basis for a true reconciliation.”

    The CBN governor added that the NNPC, in paying what it calls kerosene subsidy, is confessing to a number of serious infractions. First, I have shown, based on NBS data, that Kerosene is not a subsidised product, and therefore the so-called subsidy is rent generated for the benefit of those in the kerosene business. Second, there is evidence that President Yar’Adua had issued a presidential directive eliminating this subsidy payment as from July, 2009. Third, these huge losses inflicted on the Federation Account have not been appropriated.”

    The burden of proof, Sanusi exploded, is “on NNPC to show where they obtained authorization to purchase Kerosene at N150/litre from Federation Funds and sell at about N40/litre, knowing well that this product sells in the market at N170-N220/litre. At what point was the presidential directive reversed? NPA records would suggest that NNPC imports about 4-6 vessels of kerosene a month. Industry sources place the value of each vessel at $30 million and the amount of “subsidy” per vessel at $20 million. This means, at an average of five vessels a month, the Federation Account loses $100 million every month to this racket.”

    The CBN governor then recommended that:

    •the NNPC should stop collecting 440,000bbl daily as “Domestic Crude”. The amount of crude should be reduced to the refining capacity of its refineries based on a signed refining contract that clearly states what products are to be delivered for each barrel;

    •Sale proceeds net of recognised processing costs are to go to the Federation Account;

    •All Crude for Product Swaps should be terminated and crude should be exported and sold at market price; and

    •Where NNPC needs to generate cash flow to fund PMS imports, it can “borrow” crude, on the approval of the Finance Minister, for 90 – 120 days. This crude is to be valued at the ruling market price. NNPC may sell the crude, import PMS and sell through its outlets. It should claim subsidy from PPPRA like every other marketer and present all required documents. Thereafter NNPC should pay back the full value of crude lifted to the Federation Account and retain the profit. Where NNPC delays payment, the amount outstanding should attract interest at commercial rates, until payment;

    •All the SAAs entered into by NPDC should be investigated for constitutionality. The production numbers, Opex and Capex, and profit shares should be audited. The tax arrangements entered into with these parties should be reviewed and all revenues due to the Federation collected. If possible, the SAAs should be terminated. Certainly, NNPC should be prohibited from entering into any SAAs in the future and; NNPC should account for subsidies claimed in 2010-13 by producing documentary proof of legitimacy.

    Sanusi said his submission to the committee investigating the whereabouts of the missing funds was to “protect the economy from these unsustainable losses”.

    As for what action needed to be taken on what has happened in the past, the decision on what to do in this case rests entirely with the Government, Sanusi said. His task, he said, is limited to raising the alarm over what he thinks is a development that is harmful to the economy, and establishing that the alarm was neither spurious nor baseless.

    He rounded off by insisting “that an investigation is needed to establish the extent of the losses and the nature of offence committed”.

    “The amount in 19 months may be $12 billion or $19 billion or $21 billion, we do not know at this point, but if we extend the period, the amount will increase anyway, since this has been going on for a long time. The first priority is to stop it. It is unsustainable, and it will, ultimately, if not stopped, bring the entire economy to its knees,” Sanusi said.

    The Director General of the Budget Office of the Federation, who represented the Minister of Finance, pleaded with the committee for an additional one week to allow the inter-agency reconciliation team complete its job.

    A similar request was made by the representative of the PPPRA, who said the Authority was working with figures and data on what has been imported, but he expressed hope that it might be concluded next week.

    The committee resumes its investigation on February 13.

     

  • Illegalities in NNPC, by CBN Governor Sanusi

    Illegalities in NNPC, by CBN Governor Sanusi

    Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi appeared yesterday at the Senate’s Investigative Public Hearing on Unremitted Oil Revenue. He gave details of his grouse about the accounting system of the Nigerian National Petroleum Corporation (NNPC).

    I Am pleased to stand before you and present a summary of my latest submission on this subject. The submission itself is about 20 pages long with 30 Appendices, providing documentary backing for all material statements. The background to this session remains my letter to the President in which I indicated that there was a difference between the value of crude lifted by NNPC between January 2012 and July 2013 and the amount of foreign exchange repatriated into the Federation Account. This difference was placed at almost $50 billion and I respectfully advised the President to order an investigation into a number of areas I suspected were responsible for leakages in oil revenue.

    My letter was, sadly, leaked and published in a highly politically-charged atmosphere. The Central Bank was practically accused of involvement in politics and in December it was clear to me that no tempered and positive discussion would take place. In order to calm nerves and avert major crisis I agreed to a joint press conference with Finance Ministry, the Petroleum Ministry and also to present a common front at the National Assembly.

    Since December, however, there has been an orchestrated campaign aimed at undermining our credibility and misleading Nigerians into believing that all monies due to the Federation Account have been either remitted or accounted for. I am, therefore, compelled to present to this committee detailed evidence that NNPC has in violation of the law and constitution been diverting money from the Federation Account, and involving itself in activities that warrant full investigation for more serious violations of the law.

    I have established, in my presentation, the following:

    1. That NNPC, in paying what it calls kerosene subsidy, is confessing to a number of serious infractions. First, I have shown, based on NBS data, that kerosene is not a subsidised product, and, therefore, the so-called subsidy is rent generated for the benefit of those in the kerosene business. Second, I have produced evidence that President Yar’Adua had issued a presidential directive eliminating this subsidy payment as from July, 2009. Third, these huge losses inflicted on the Federation Account have not been appropriated.

    The burden of proof on NNPC is to show where they obtained authorisation to purchase kerosene at N150/litre from Federation Funds and sell at about N40/litre, knowing fully well that this product sells in the market at N170-N220/litre. At what point was the presidential directive revered? NPA records would suggest that NNPC imports about 4-6 vessels of kerosene a month. Industry sources place the value of each vessel at $30m and the amount of “subsidy” per vessel at $20m. This means, at an average of 5 vessels a month, the Federation Account loses $100m every month to this racket.

    2. I have also shown, in my submission, that claims by NNPC of spending the money on PMS subsidy are not credible. I have submitted proof that as from April, 2012, NNPC has consistently rendered returns to FAC indicating that it made no deduction for subsidy. This is after rendering returns on amount deducted monthly for 20 consecutive months to March, 2012. NNPC had previously explained that it had stopped deductions from 2011 and that the N180b taken in Q1:2012 related to fuel imports for Q4:2011. As from 2012, the directive was for NNPC to submit its papers to PPPRA, the relevant government agency set up and given the responsibility for verifying and paying subsidy claims. Having officially reported that it was not making deduction for fuel in 2012 and 2013, it is surprising that the GMD and GED of NNPC would now claim that $8.49b was used to pay for subsidy.

    I am convinced that a major source of revenue leakage from the system is NNPC’s unverified claims for subsidy and unilateral deduction from the Federation Account. If we take the PPPRA template, subsidy/litre of PMS is about 1,136litre/MT, the subsidy is around N1.5b. This means that for every $1b claimed by NNPC as subsidy deduction, the corporation is claiming to have imported at least 100 vessels of PMS. In addition to the N180b reported in Q1:2011, NNPC had deducted N845 billion in 2011. According to the Farouk Lawan report, NNPC deduction for PMS subsidy in 2011 alone amounted to N1.7 trillion, if we add claims on Excess crude naira account. Any serious investigation into these matters will require an audit of NNPC’s database which it is statutorily required to keep based on subsidy guidelines. Only verification of the legitimacy of these claims can form the basis for a true reconciliation.

    3. Based on NNPC’s disclosure to the effect that it shipped $6b worth of crude oil on behalf of NPDC, I have argued here that at least a part of this amount is due to the Federation Account. This part relates to oil produced from blocks operated under “Strategic Alliance Agreement”. I have given you three legal opinions that unanimously argue that these agreements merely serve to transfer revenue due to the Federation to private hands. I have also shown how, based on these arguments, NNPC has effectively given tax relief and concessions to its business partners.

    Also customs duties and levies are treated as “development costs” and recouped from “cost oil” and “cost gas”. These companies recover OPEX and COPEX from production, take 20-70 per cent of the profit and pay no tax, on JVs in which the Federation was previously entitled to 55 per cent of the entire profit oil when Shell was the operator. I have given details of these transactions and my concerns in the paper.

    4. Although the above 3 areas exhaust the areas covered in NNPC’s explanations, I have also taken time to submit my analysis of the crude-for-refined-product swap contracts entered into by PPMC. This is because a significant part of the domestic crude taken by NNPC is in these transactions. I have indicated where i believe we are losing money in these transactions.

     

    Reconciliation

     

    Having thus explained my major opinions on NNPC‘s explanations, I will come to the reconciliation.

    NNPC itself has submitted that it lifted $67b worth of Crude between January 2012 and July 2013. Of this, we have been able to agree that the following amounts have been remitted to the Federation Account:

    1. $14 billion as equity crude

    2. $15 billion as payment to FIRS by IOCs. They paid in crude which was lifted by NNPC on behalf of FIRS. There was nothing in our records linking the two transactions.

    3. $2 billion Royalty payment to DPR by IOCs under similar arrangements as in (2) above.

    4. $16 billion out of the 428b taken as Domestic Crude Paid in Naira, not dollar.

    The following items are outstanding and need to be proven by NNPC:

    1. $12 billion out of domestic crude sales yet to be remitted. NNPC has already disclosed N180 billion as subsidy payment in Q1.2012. If PPPRA confirms this number, we will adjust the balance accordingly. As for the balance of $10.8 billion, NNPC has publicly disclosed that 80 per cent applied to petrol and kerosene subsidy. We have already explained why this explanation is untenable and NNPC needs to provide the relevant proofs.

    2. $6 billion shipped on behalf of NNPC. We have explained why some this belongs to the Federation and the need to investigate and audit the SAAS to recover amounts unconstitutionally diverted.

    3. $2 billion “third-party” financing” we have not been given any documents explaining or proving this along with other claims around pipeline repairs, maintenance, strategic reserves etc.

    There was no appropriation for these expenses and NNPC also needs to substantiate them.

    In summary, it is established that of the $67 billion crude shipped by NNPC between January 2012 and July 2013, $47 billion was remitted to the Federation Account. It is now up to NNPC, given all the issues raised, to produce the proof that the $20billion unremitted either did not belong to the Federation or was legally and constitutionally spent. There is no dispute that $20 billion out of $67 billion has not been paid into any account with the CBN.

    Our recommendation remains that this matter requires thorough independent investigation, as simple explanation will not suffice.

    I concluded my submission with recommendation for the future, to protect the economy from these unsustainable losses.

    I would like to make the following recommendations going forward:

     

    Recommendations

     

    NNPC should stop collecting 440,000bbl daily as “Domestic Crude”. The amount of crude should be reduced to the refining capacity of its refineries based on a signed refining contract that clearly states what products are to be delivered for each barrel. Sale proceeds net of recognised processing costs are to go to the Federation Account;

    All Crude for Product Swaps should be terminated and crude should be exported and sold at market price.

    Where NNPC needs to generate cash flow to fund PMS imports, it can “borrow” crude, on the approval of the Finance Minister, for 90 – 120 days. This crude is to be valued at the ruling market price. NNPC may sell the crude, import PMS and sell through its outlets. It should claim subsidy from PPPRA like every other marketer and present all required documents. Thereafter, NNPC should pay back the full value of crude lifted to the Federation Account and retain the profit. Where NNPC delays payment, the amount outstanding should attract interest at commercial rates until payment.

    All the SAAs entered into by NPDC should be investigated for constitutionality. The production numbers, Opex and Capex, and profit shares should be audited. The tax arrangements entered into with these parties should be reviewed and all revenues due to the Federation collected. If possible the SAAs should be terminated. Certainly, NNPC should be prohibited from entering into any SAAs in the future.

    NNPC to account for subsidies claimed in 2010-13 by producing documentary proof of legitimacy.

    As for what action needs to be taken on what has happened in the past, we express no opinion. The decision on what to do in this case rests entirely with the Government. My task is limited to raising an alarm over what I think is a development that is harmful to the economy, and establishing that the alarm was neither spurious nor baseless. I still insist that an investigation is needed to establish the extent of the losses and the nature of offence committed.

    I believe I have placed enough information before this committee to make the point. The amount in 19 months may be $12 billion or $19 billion or $21 billion, we do not know at this point but if we extend the period the amount will increase anyway, since this has been going on for a long time. The first priority is to stop it. It is unsustainable, and it will ultimately, if not stopped, bring the entire economy to its knees.

     

     

  • NNPC denies CBN governor’s claims

    NNPC denies CBN governor’s claims

    At the public hearing of the Senate Committee on Finance on Tuesday on the unreconciled $10.8B,CBN’s position suddenly changed. It will be recalled, that at a news conference held by the Minister of Finance and Coordinating Minister of the Economy, the Minister of Petroleum Resources, the Governor of Central Bank and heads of DPR and FIRS, the initial figure of $49.8B was reconciled to $10.8B. On the same day, at the Senate hearing, the CBN gave a figure of $12B which was corrected by the Coordinating Minister of the Economy to $10.8B. . Yet in today’s presentation, the CBN’s figure changed again. This time the CBN alleged it is now $20B. This is a clear indication of CBN’s inconsistency, thereby presenting conflicting figures to the generality of Nigerians. We are concerned by the dynamics of the moving numbers as the Central Bank’s figures keep changing. This is a worrying trend coming from an Agency of Government charged with managing the financial affairs of Nigeria.

    “While the NNPC and other relevant government agencies are in the process of reconciling the $10.8B as accepted by all parties, we are surprised by the new $20B figure introduced by the CBN. According to the CBN,” the $20B is made up of $12B subsidy claim, $6B NPDC gross revenue and $2B third party revenue. It is worthy to note that the CBN accepted NNPC submission with respect to $16B royalty and PPT payments into the Federation Account through the FIRS. This indicates that the CBN cherry picks the figures. .

    “For example in taking the entire $6B gross revenue accruable to NPDC and allocating same to the Federation Account, CBN simply multiplied the gross production by the crude oil price; thereby failing to account for the operating costs (opex) and amortized capital expenditure that underpin the production. In other words, the CBN failed to take into account the cost of production.

    “We reiterate that NPDC has been remitting the royalty and Petroleum Profit Tax (PPT) to the Federation Account. NPDC as a subsidiary of NNPC operates a business model similar to other international companies in Nigeria and abroad and will continue to be governed by these global best practices in the execution of these assets.

    “Regarding the subsidy claim on kerosene, it is important to note that the NNPC as the supplier of last resort is the only company supplying this product in Nigeria for the benefit of the citizenry. If kerosene has been deregulated why are the independent marketers not supplying this product in line with what is applicable to diesel (AGO). NNPC owes a duty to Nigerians to ensure that there are adequate products in the country. This mandate has without question been accomplished in the past four years. The NNPC deserves to be commended rather than battered, for ensuring adequate supply of kerosene at regulated price of N50.00k.NNPC cannot be held responsible for any differential pricing from non-NNPC retailers. This is the basis for NNPC’s claim on kerosene subsidy.

     

  • NNPC faults Sanusi on fresh $20b allegation

    The Group Managing Director (GMD) of the Nigerian National Corporation (NNPC), Mr. Andrew Yakubu on Tuesday denied allegations that the $10.8billion outstanding from $49.8billion alleged mission oil revenue has risen to $20billion.

    Central Bank Governor, Sanusi Lamido Sanusi had told the Senate Committee on Finance probing the $49.8billion unremitted funds to the Federation Account, that the apex bank still has $20billion unaccounted for.

    But Yakubu told reporters after the meeting that Sanusi does not understand the intricacies of petroleum engineering issues.

    The GMD said the misunderstanding arose from Sanusi trying to do an auditing job instead of concentration on his banking duties.

    Yakubu said: “Gentlemen, you heard the Chairman very well! The issues that were raised are not new at all. You see, we came out in details because we don’t have anything to hide and we gave a detailed breakdown of the so called $49billion and we came out clearly to state the various streams that are associated with what he was talking about.

    “Now, we also made in clear that NPDC, if we had anything to hide we would not have made it clear that NPDC was part of the stream, because NPDC which is NNPC’s upstream operation, is a limited liability company registered the Companies and Allied Matters Act (CAMA) to do upstream business jus like any other independent company.

    “Now, if you are in your business, will you take your gross revenue and pass it on? What we simply said was to account for the streams that the CBN Governor erroneously captured. Now let me make this point very clearly: CBN is a banking outfit, so I really, really understand why they will not understand some petroleum engineering issues and the are not also an auditing outfit.

    “Now what they try to do is to audit and I heard some statements made here that they do not have this document, they don’t have that document. They are not the auditors. We have certified bodies and arms of agencies that are charged with the responsibility of auditing.

    “They are banking right? So what he said was not really new. We said clearly that we stated an amount that went to NPDC and that amount was the gross lifting. But there are other streams that go back to government in terms of taxes just like any other business player.

    “So we have Royalties, we have Petroleum Profit Tax and so on and so forth. Now these are subject of other detailed discussions and investigations and they are open.

    “We give access to the Auditor General of the Federation, we give access to Accountant-General, we give access to agencies that have business to do with auditing our own business.

    “And at the Federation Account too we render this report as you are told on monthly basis and these are issues that are subject of reconciliation on monthly basis.

    “So really for issues like this to come to the public glare again becomes worrisome that we throw away numbers, we throw away allegations that at the end of the day we clarify but then the damage would have been done,” Yakubu stated

  • House ‘ll stop massive fraud in govt, says Speaker

    House ‘ll stop massive fraud in govt, says Speaker

    House of Representatives Speaker Aminu Tambuwal has lashed out at government agencies, saying they are inefficient and ineffective. They are responsible for billions of Naira being stolen from government over the years, he said.

    According to him, the era of financial impunity is about to end, with the establishment of the Nigerian Financial Intelligence Agency that would be backed by foolproof legislations.

    There were allegations of a missing $49b (later reduced to $10b) from the Nigeria National Petroleum Corporation (NNPC). The Police Pension Commission was also enmeshed in stolen N23b among several fund mismanagement cases,

    Speaking at the public hearing by the House Committee on Drugs, Narcotic and Financial Crimes on the Nigeria Financial Intelligence Agency Bill yesterday, Tambuwal said the bill “will no doubt help in rectifying the deficiencies in our financial system, especially the sheer number of loopholes that make it possible for people to perpetrate massive fraud and go unpunished”.

    He said: “The House of Representatives is, therefore, fully in support of the effort to evolve an efficient and effective management, administration and operation of the Nigerian Financial Intelligence Agency for the purpose of generating and analysing Financial Intelligence.

    “The Bill equally seeks to institutionalise the application of best practices in Financial Intelligence Management in Nigeria. We have all seen the consequences of the reckless and cavalier manner that public officials and civil servants manage public funds.

    “Today, billions of naira go missing in this country every year as a result of mismanagement and outright theft of money belonging to the commonwealth.

    “We believe that this level of financial impunity is possible because of dubious accounting procedures and the lack of a specialised agency that is able to get facts and details of these intricate web of corrupt practices and ensure that the perpetrators are successfully prosecuted.

    “We want to move our nation from the prevailing system whereby only a select few is privy to the complex way that money gets moved around in this country and so they could hide under the shadows and perpetrate all kinds of scam.”

    The EFCC was absent from the public hearing. The anti-graft agency, via a letter to the Adams Jagaba-headed committee, asked that the event be shifted to a more convenient date for it to attend.

    Jagaba, in his opening speech, said the bill “seeks to provide legislation for an institution responsible for generating and dispersing information on money laundering, terrorism financing and other financial crimes.

    “The bill, which is an Executive and Private member bill, is aimed at establishing an autonomous national agency that will be responsible for the receipt of information from financial institutions and designated financial bodies for analyzing and documenting such information for the purpose of converting this information into financial intelligence that could be transmitted to the relevant law enforcement agencies, such as, EFCC, ICPC, DSS, ONSA, DMI, NPF, NSCDC, NIS, NCS, NAPTIP and DIA, for the purpose of apprehending crimes within and outside the country.

    The bill received support from all the agencies and civil society organisations at the hearing. At the hearing were International Association of Criminal Justice Practitioners, Civil Society Legislative Advocacy Centre, Zero Corruption Network, Public Awareness Network, Media Initiative Against injustice, Educational Watch Centre and Change Movement Nigeria, and Citizens Centre for Integrated Development and Social Rights, amongst others.

    The CCIDSR described the bill as “another opportunity to defeat terrorism and corruption in Nigeria”.

    Educational Watch Centre said the NFIA Bill would show, for once, that Nigeria is willing to correct the flaw in its anti-corruption crusade.

    According to the organisation, Nigeria has operational and institutional deficiencies, such as “deficient Anti-Money Laundering Act; weak Terrorism Act; Absence of Mutual Legal Assistance Act; absence of Proceed of Crime/Asset Recovery and Management Body and absence of Whistle Blowers Protection Act”.

    It said the NFIA Bill would give the country a new image before the international community.

     

  • Missing $10.8b: FAAC studying issues

    Missing $10.8b: FAAC studying issues

    Members of the Federation Account Allocation Committee (FAAC) are studying the issues surrounding the whereabout of the $10.8 billion the Nigerian National Petroleum Corporation (NNPC) was supposed to remit into the Federation Account.

    Some commissioners of finance, who spoke with The Nation, said the matter was too politically charged for them to comment on. It however promised that its position would be made known soon.

    One commissioner of finance from a Peoples Democratic Party (PDP) controlled state, declined to speak on the matter on the ground that he would like to spare both his state government and the Federal Government from further controversies.

    Two finance commissioners from APC-controlled states also declined to speak on the matter and chose “to err on the side of caution”.

    At a briefing last year, where it was revealed that $10.8 billion was not paid into the Federation Account and not $49.8 billion as alleged by the outgoing governor of the Central Bank of Nigeria (CBN) Sanusi Lamido Sanusi, the Minister of Finance Dr. Ngozi Okonjo-Iweala said her ministry and the FAAC were looking into the matter.

    She reiterated this position during her 2014 budget presentation and almost gagged all parties involved from making further comments about the money until the ministry/FAAC meeting had worked on it.

    Last year, Sanusi was said to have written a letter to President Goodluck Jonathan, alleging that $49.8 billion that was supposed to be paid into the account was missing.

    However, Sanusi along with the ministers of Finance and Petroleum Resources addressed told reporters that the amount involved was no longer $49.8billion but $10.8 billion which was undergoing reconciliation by the agencies involved and FAAC.

    NNPC said it incurred the $10.8billion expenditure ”as part of statutory responsibilities which the NNPC as the National Oil Company executes on behalf of the Federal Government and by extension the entire people of Nigeria”.

    While insisting that the fund is not missing, the NNPC added that $8.49billion subsidy claim for 2012 was part of the whole component $10.8billion because for many years the NNPC has been the main supplier of the subsidised Premium Motor Spirit (PMS).

    The NNPC claimed that the Federal Government had not made payment to the corporation  in the name of subsidy during the period under review noting that ”pipeline management and repair cost is $1.22billion while product/crude oil losses is $0.72billion and cost of holding the strategic reserve stock is $.7billion”.

    The corporation said ”as long as it is a transaction, it is always work in progress” and noted that the pipelines were constantly being hacked into and there is no budget from which the corporation can recover the cost.

    According to the NNPC, “The Petroleum Products Pricing Regulatory Agency (PPPRA) offers a mechanism for which under the subsidy regime there is a certain claim to make from  importation or distribution of  petroleum products.

    “However, that template does not have any recovery mechanism for pipelines. Everyone needs to be aware that pipelines are constantly being vandalised in Nigeria, and there is a constant cost of keeping those pipelines running are the cost we are reflecting here.”