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Tag: PwC

  • Lagos PWC working on Berliet Bus stop

    The Lagos State government through the Public Works Corporation (PWC) has resolved to continue to embark on periodic palliative work on the Apapa-Oshodi Expressway, especially the bad portion of the long stretch of Berliet Bus stop.

    The Special Adviser/CEO (LSPWC), Ayotunde Sodeinde, debunked a statement by the Federal Roads Maintenance Agency (FERMA) that it is the sole agency fixing the bad portion.

    The LSPWC Boss added that the palliative work on the bad spot was carried out by LSPWC in February and this will continue until FERMA begins a total reconstruction of the bad spot.

    Sodeinde re-affirmed Governor Akinwunmi Ambode’s commitment to continue to provide good roads, adding that the government has just completed the re-construction of Kernel Street, Suenu Street, Animashaun Street in Surulere. Excavation work has begun at Olumegbon Street, Gbaja, also in Surulere Local Government.

  • LCCI, PwC identify priority sectors for diversification

    LCCI, PwC identify priority sectors for diversification

    Experts have advised the Federal Government to give priority to four sectors – agriculture, petroleum (petrochemical and refining), retail and Information and Communications Technology (ICT) – in its  efforts at weaning the economy off its over-dependence on oil.

    At a stakeholders’ forum in Lagos on the state of the economy, experts noted that the sectors have the most dominant transmission links to the economy.

    “These sectors in the medium-to-long term are key to boosting other sectors like manufacturing,” Country and Regional Senior Partner, PwC Nigeria and West Africa, Mr. Uyi Akpata, said.

    The theme of the forum was “Nigeria: Looking beyond oil”

    At the event organised by the Lagos Chamber of Commerce and Industry (LCCI) in collaboration with PwC Nigeria, Akpata said the need to target the agric sector, for instance, was because of its forward linkages to agro-processing and other services, such as logistics as well as backward integration to input supply sectors, which could improve farm incomes, increase employment and improve domestic food security.

    He projected that, potentially, Nigeria’s global agriculture exports could take-off at a rate similar to Brazil’s, with $59 billion in export revenues by 2030.

    The senior partner of the leading consulting firm also said value added to oil and gas output needs to urgently improve by implementing diversification within the sector. According to him, this requires investments across the downstream sector to develop petrochemicals, fertilisers, methanol and refining, industries relevant in both industrial and consumer products, which Nigeria imports.

    Similarly, the retail sector, he said, holds promises. While pointing out that consumer spending is the largest driver of the economy, accounting for about 70 per cent of Gross Domestic Product (GDP), he said the firm expects that this will be the boost for the retail sector growth even as population continues to expand.

    “Thus, as incomes rise along with rapid urbanisation, we project that household consumption expenditure could reach $1.1 trillion by 2030, from $317 billion in 2014, which implies a growth of nine per cent through 2030,” he said.

    Also, with Nigeria’s teledensity at 107.87, a large population of young urban people and massive scope to improve Internet broadband penetration, the expert projected that Nigeria is likely to see accelerated growth of its digital economy. He said more importantly, the opportunity to leverage technology to generate improved social and economic outcomes across other sectors has been created.

    Mr. Akpata said Nigeria is the largest economy in Africa and 22nd globally. “We project that the economy could rise through the world rankings to top 10 in 2050 with a projected GDP of $6.4 trillion, surpassing Germany, the United Kingdom, France and Saudi Arabia,” he said.

    He, however, said to achieve this diversification of the economic from its over dependence on crude oil is required. “Nigeria’s intrinsic potential lies beyond oil; harnessing this potential has become an imperative given the expectations of lower oil prices,” he stated.

    LCCI President, Chief Nike Akande, could not agree less. Describing the stakeholders’ forum as “strategic, timely and significant”, she said “it was an opportunity to discuss and to pool our wisdom together regarding how our country can navigate the lingering economic challenges and proffer alternative paths towards sustainable economic growth and development.”

    According to her, the sustained decline in global oil prices since 2014 has put the nation in difficult position and consequently led to various fiscal and economic challenges such as the drop in foreign earnings, decline in foreign reserves, huge financial bailout for some state governments and unstable macroeconomic environment.

    Mrs. Akande said a holistic and sustainable economic diversification strategy is desirable and in fact, inevitable at this time. “We need to put an end to the high dependence on oil. Strategic decisions and policies that will put the Nigerian economy on a path of sustainable recovery have become imperative.

    “Without doubt we need to pay greater attention to manufacturing, agriculture and agro allied industries, solid minerals, ICT, entertainment, tourism and many other areas in the non-oil sector,” she added.

    Vice President Yemi Osinbajo, said the topic of the forum was in line with President Muhammadu  Buhari administration’s determination to boost economic growth through effective policies.

    He said the administration was already making important strides to actualise the administration’s commitment in delivering the change agenda.

    “Indeed, we are repositioning the economy for exclusive growth and successful development by getting the fundamentals right be it fiscal, monetary, trade and investment policy reform,” the Vice President said.

    Osinbajo, who was represented by a Senior Special Assistant, Dr. Jumoke Oduwole, added that the administration remained committed to diversifying the economy away from over-dependence on oil and creating an enabling environment that will aid private sectors set goals and development.

    “We are investing in critical infrastructure, embracing and encouraging the private sector and advocating for greater inclusion particularly through job creation. To attain this, our administration is prioritising key areas such as industrialisation, agriculture and agro-allied processing and solid minerals. We are determined to diversify this economy through export promotion, our support in promoting local raw materials and pressing needs for made in Nigeria goods,” the Vice President said.

  • Fowler, PwC, others to speak at RCCG economic summit

    Fowler, PwC, others to speak at RCCG economic summit

    The Chairman Federal Board of Inland Revenue, Tunde Fowler; Head of Tax Services at PwC Partners, Taiwo Oyedele will be speaking at the forthcoming economic summit being hosted by the Redeemed Christian Church of God (RCCG), Victory Chapel, Lagos Province 21 Headquarters, Magodo.

    The theme for the one-day economic summit is: Thriving in a Period of Economic Uncertainty.

    In a statement, the church said the event will be taking place on Saturday February 20, 2016 at the church auditorium, in Maye Ogundana Street, Magodo GRA phase 11, Lagos between 9am and 1.00pm.

    The event, it said, is meant to boost the socio-economic/spiritual development of its members and support for its host community.

    According to the organiser, Bisi Olowoyo, the summit will give participants opportunity to discuss Tax Revenue and You where Tunde Fowler, Chairman Federal Board of Inland Revenue; Folarin Ogunsanwo, Chairman, Lagos State Board of Inland Revenue; Albert Folorunsho, CEO Pedabo and Taiwo Oyedele, Head of Tax Services at PwC Partners will be speaking.

    Changes in business models will be discussed by Tonye Cole, Co Founder and Managing Director, Sahara Group; Hakeem Ogunniran, CEO UACN Property Development Company Plc; Dolapo Oni, Head Energy Research, Ecobank Nigeria and Gbenga Sesan, Executive Director, Paradigm Initiative Nigeria.

    On the foreign exchange trade and commerce, speakers include Opeyemi Agbaje, CEO RTC Advisory; Muda Yusuf, Director-General Lagos Chamber of Commerce and Industry; George Onafowokan, CEO Coleman Wires and Remi Ogunmefun, Director General, Manufacturers Association of Nigeria.

    Others who will be speaking on sourcing of funds for industries and Micro Small and Medium Enterprises are Obaro Osah, Head Small and Medium Enterprises Group, Bank of Industry; Oladimeji Owofemi, President Cocoa Producers Association of Nigeria; Abiola Lawal, CEO Exequte Partners Inc; Ijeoma Rita Obu, Managing Consultant/CEO Clement Ashley Consulting and Ayodele Olojede, Head Small Business Group, Skye Bank Plc.

    Keynote address will be delivered by Dr. Temitope Oshikoya, CEO Nextnomics and Dean, Nigeria Economic Summit Group Faculty of Economics while the Programme will be moderated by the founder and CEO of Proshare Nigeria Ltd, Olufemi Awoyemi. A communique will be issued at the end of the summit.

     

  • Second chance

    • PwC’s fresh opportunity to lay bare the NNPC morass

    The nation would appear set on another phase of the journey to resolve the riddle behind the $20 billion alleged to be missing from the coffers of the Nigeria National Petroleum Corporation (NNPC).

    Last week, Uyi Akpata, Country Senior Partner, Nigeria and Regional West Market Area for PricewaterCoopers (PwC), told journalists at a workshop that his firm had been re-engaged by the Federal Government for another round of audit; but this time, with a much wider scope.

    He gave a picture of what to expect: “What I think that may be different from this audit, compared to the first one, is that there may be strong learning points in terms of plugging revenue leakages or erosions that may be minimised going forward, especially in the face of dwindling revenue that is available to government… People have seen that report and for the benefit of hindsight…have suggested to government that there is a need to widen the scope because NNPC may not be the only organisation involved in this governance issue. There may be a need to extend it to Ministries, Departments and Agencies (MDAs)”.

    The above justification – or rationalisation – obviously makes eminent sense only in the context of the disappointing outcome of the previous exercise.  Although that took 18 months to conclude, it yielded practically very little in terms of establishing if indeed anything was missing; and if so, how much; and by extension, the individuals and entities responsible for them. It goes without saying, therefore, that the latest exercise only became necessary because the past effort failed.

    The reasons behind that failure are certainly not far-fetched. Whereas Nigerians were, quite rightly, outraged by the allegation that a whopping $20 billion was missing from the NNPC accounts, the Jonathan administration left no one in doubt that the last thing it wanted was an investigation to establish the veracity or otherwise of the weighty allegation. Indeed, it took relentless pressure mounted by civil society and a broad section of Nigerians to get the administration to agree on the need for a forensic audit.

    Even at that, the procedure it prescribed for the auditors turned out to be rather restrictive – deliberately so – for a supposedly forensic undertaking.  Worse, however, was the bad faith by officials – with tacit support at the highest levels of government, of course – which guaranteed that the key agencies central to the investigations refused to cooperate.  So, in the end, an exercise touted as a forensic one was reduced to a mockery of its essence.

    And so PwC, in what amounted to repudiation of the entire work, could only aver in its covering note to the Auditor-General of the Federation that:  “The procedures we performed did not constitute an examination or a review in accordance with generally accepted auditing standards or attestation standards”!

    The good thing is that PwC now has an opportunity to make good on its earlier effort. This time around, we expect that PwC will follow every trail, as indeed every transaction within its expanded scope. Time was when auditors took shelter behind technicalese to produce reports that are neither relevant nor actionable.

    But Nigerians will recognise the difference when they see the masquerades behind the plunder of the commonwealth unmasked and punished – the so-called Strategic Alliance Agreements (SAA), reported to have bled the treasury to the tune of billions of dollars.  Or when the opaque practices, which allowed highly connected individuals to defraud the nation, are finally dismantled.

    That would be a good test of PwC’s commitments, not just to highest professional standards but to Nigeria.  That should be the most compelling argument for justifying its re-engagement after its last outing.

  • KPMG, PWC to audit NNPC, others

    KPMG, PWC to audit NNPC, others

    TWO international audit firms – KPMG and PricewaterhouseCooper (PwC) – were yesterday appointed by the Federal Government to examine the books of the Nigerian National Petroleum Corporation (NNPC) and other revenue generating agencies.

    They are to forensically audit the accounts of the NNPC, Federal Inland Revenue Service (FIRS), Nigerian Customs Service (NCS) and other revenue generating agencies.

    Edo State Governor Adams Oshiomhole made the disclosure after the meeting of the committee of five set up by the Vice President Yemi Osinbajo-led National Economic Council (NEC).

    The committee, which has Oshiomhole as its chair, has governors Ibrahim Dakwambo (Gombe), Nasiru El-Rufai (Kaduna) and Udom Emmanuel (Akwa Ibom) as members.

    Oshiomhole said appointment of the firms was to allow for professionalism.

    He said that the revenue generating agencies were supposed to remit their revenues to the Federation Account in line with Sections 80 and 162 of the 1999 Constitution.

    Oshiomhole said: “Having looked at the size of the assignment and the issues that have been raised, we are convinced that we need a professional approach. And so, we have decided to appoint two audit firms including KPMG and PWC to carry out a forensic audit of all the agencies under reference and to establish all the facts that we need.

    “And at the end of the exercise, government will decide what to do with the findings of the audit firms. Like we said last week, we are doing this first because we are sitting governors. Even if we are not sitting governors, some of us are not professional accountants.

    “We expect that the audit firms will carry out a professional work. We are convinced they have what it takes to do it and their findings will help government first to lay out new rules to ensure that the laws of the land are complied with. And if anything has gone wrong, identify who has done what. And then we take it from there.”

    A time-frame was not given for the auditors’ assignment but Oshiomhole said they had been told to be fast and thorough in the discharge of their duties without compromising standards.

    While disclosing that KPMG declined to do the auditing when approached by the administration of former President Goodluck Jonathan as the political environment was not conducive, he said PwC which agreed to do the job then confirmed that some organisations refused to open their books.

    “There is room now to do a more thorough audit because we now have a completely new political environment. We have a president that is absolutely committed to transparency and one that has demonstrated enormous political will to ensure that these public institutions are run, not only in compliance with the laws of the land, but they are run on the basis of international best practices.

    “I think the audit companies, this time around, will have no excuse. We expect all those involved to cooperate. This is not about finding out what is right, or wrong, it is about making Nigeria work for the benefit of Nigeria.

    “And we have to bear in mind in other climes governments are not run on the basis of collections from crude oil, government regardless of their colour, or political affiliation. They are funded exclusively through taxes.

    “And so if you have tax generating agencies that are not remitting money, government can’t run like that. So, on the long run, Nigeria has to live on taxes.

    “First, it is not about yesterday, it is more about tomorrow. Nigeria can’t continue with business as usual. And that is why ‘change’ is the word in President Buhari’s promise to Nigerians.”

    On whether his committee has the power to appoint the two audit firms, he said, it derives its powers from the mandate given to it by the NEC.

    The government agencies at the committee’s session yesterday included: the Nigerian Maritime Administration and Safety Agency (NIMASA), Central Bank of Nigeria (CBN), Department of Petroleum Resources (DPR), FIRS, Security and Exchange Commission (SEC), NCS, Ministry of Finance and the Office of the Accountant-General of the Federation.

  • FG appoints KPMG, PWC to audit NNPC, other agencies

    The Federal Government on Thursday appointed international audit firms, KPMG and PriceWaterhouse Cooper to conduct comprehensive audit of the accounts of the Nigerian National Petroleum Corporation (NNPC) and other revenue generating agencies.

    The appointment was disclosed to State House correspondents by Edo State Governor, Adams Oshiomhole at the end of the second meeting of the four man panel set up by the National Economic Council (NEC).

    The decision to appoint the two audit firms, he said, was taken to allow for professionalism.

    DETAILS LATER

  • Cyber risk, others threaten CEOs, says PwC

    The findings of two reports by PwC that chart the top risks in the global insurance sector and the growth concerns of insurance  chief executive officers shows that cyber risk, interest rates and growing tax burden are now among the top risks for insurers.

    This is indicative of how high a concern these issues have become for the industry when looked at in conjunction with regulatory developments and the broader macro-economy.

    One of the reports, Insurance Banana Skins 2015, a global study by Centre for the Study of Financial Innovation (CSFI) in conjunction with PwC polled over 800 insurance practitioners and industry observers in 54 countries, including Nigeria, to find out where they saw the greatest risks over the next two-three years.

    Regulatory risk emerged as the overall top risk for participants in the survey for the third successive time, underlining the deep impact regulatory change is having. The report says that new rules governing solvency and market conduct could swamp the industry with costs and compliance problems. It could also distract management from the task of running healthy businesses at a time when the industry faces radical structural change. Similarly, the second report ‘Insurance 2020: Equipping your business for the global tax revolution noted that the reputation and well-being of companies, including insurance groups, is not just being impacted by governments, taxpayers and other stakeholders but also by external perceptions of how they manage their tax affairs.

    PwC Nigeria Financial Services Leader, Patrick Obianwa, said: “The insurance industry faces enormous challenges in the growth of regulation, a difficult operating environment, increased taxation and the looming threat of structural change. This is reflected in the negative sentiment behind these survey results. Given the current speed of regulatory, technological and social change, the challenge for the insurance industry globally is less about what is already happening, and more about how to anticipate what further changes could happen between now and 2020.

    Very few tax teams appear to have evaluated the likely future alternative scenarios, let alone made plans or put them into implementation.” Tax is firmly under the spotlight and in the global insurance industry, the ramifications for finance and tax teams will be felt in both a new set of business demands and an overhaul of how these functions interact and operate.

    PwC’s report says that globally, this industry will find it difficult to cope due to the accelerating shift in market expectations, and challenges to existing business models, in a sector where operational processes are already stretched.

    Head, Tax & Regulatory Services at PwC Nigeria, Taiwo Oyedele, also said: “Tax has always been one of an insurer’s most significant expenses, comparable to payroll and claims. CFOs and CEOs have looked to their tax professionals to find ways to manage their tax liabilities, and as transactions and legislation become more complex and sophisticated, so do tax arrangements.

    ‘’As companies focus on maximising return on equity and managing capital under new solvency regimes, the value that can be created by tax professionals is becoming increasingly recognised and highly prized.”

    “The certainties and demands that have shaped tax management over the past 30 years are being swept aside. What tax teams are required to do, how they do it, who does it and where they do it will all change as a result. The challenges of managing risk and tax costs are heightened by a raft of new tax compliance demands.

    Key developments in place or on the near horizon include the EU’s Common Reporting Standard (CRS), the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan and US Foreign Account Tax Compliance Act (FATCA). Tax teams also face a host of local reforms – the UK’s Diverted Profits Tax, new anti-avoidance rules in Australia and new controls on related party payments in Mexico are just some of the many examples.

    “While some of these developments have been on the radar for some time, the operational impact of so much disruptive change in so short a period is now becoming increasingly evident. Insurance CEOs globally are clearly concerned as evidenced in PwC’s global CEO survey in which 64 per cent said they see the increasing tax burden as a threat to their growth, compared to 57 per cent two years ago.

    Obianwa adds: “The long-term prospects for insurers are positive as people around the world live longer and have more wealth to protect. Yet they also face the disruptive impact of new technology, changing customer expectations, more exacting regulation and enduring economic uncertainty. Insurers’ ability to identify and manage emerging as well as familiar risks will be one of the key differentiators for success in this volatile competitive environment.

    ‘’It is vital that the insurance industry responds in a clear and thoughtful way to a much wider base of stakeholders than before, including not only tax authorities and governments, but also regulators, investors, non-governmental organisations (NGOs), the media and the public.’’

     

  • PwC: real estate value to hit $13.65b in 2016

    PwC: real estate value to hit $13.65b in 2016

    ACCOUNTING and auditing giant PricewaterhouseCoopers (PwC) has   predicted that the real estate sector’s value will next year rise from $9.16billion to $13.65 billion next year.

    In its report, titled: Real Estate: Building the future of Africa, it said the sector is growing at a rate of 8.7 per cent, making it the sixth largest in the economy. The reasons for the expected growth are not far-fetched.  Apart from the volatility in crude oil price since July,  high networth individuals (HNWIs), going by  PwC’s report, invest 25 per cent of their assets in real estate. This is seven per cent more than the 18 per cent or less investors in this category that invest in equities and other instruments.

    PwC also noted that in commercial real estate, the influx of institutional, foreign and private businesses into the country and the growth of indigenous businesses and multinational oil companies in Lagos, Abuja and Port Harcourt have kept the segment vibrant. It observed that rents in Lagos are among  the highest in the world with achievable rents of more than $1,020/m2 (about N200, 000/m2) yearly.

    But as expensive as Lagos appears, the city does not rank among the top five on the continent. PwC, in a separate study, titled: “Into Africa”, a comparative research study of 20 African cities of opportunity deemed to be among the most dynamic and focused on the future, ranked Lagos as seventh. The overall ranking of cities by the report placed the top five cities as Cairo (Egypt), Tunis (Tunisia), Johannesburg (South Africa), Casablanca (Morocco) and Algiers (Algeria).

    The study, based on the methodology, research, and analytical framework of PwC’s global Cities of Opportunity report – the seventh edition of which will be released next year, ranked the 20 cities on 29 variables grouped into infrastructure, human capital, economics, society and demographics.

    Jonathan Cawood, Capital Projects and Infrastructure leader for PwC Africa, observed that from the study, a strong correlation among infrastructure, human capital and economics is noticeable. He said cities that score well in infrastructure also score well in human capital and, expectedly, also score well in economics.

    He explained that with city infrastructure under pressure, many of Africa’s cities cannot maintain their current levels of population and economic growth without enhancing their infrastructure.

    ”The demands for infrastructure vary from city to city based on stage of development, priorities and affordability.The basic needs for power, water and sanitation, transport and logistics, housing and ICT top the list for most.  The wisdom of the choices Africa’s cities make in balancing political, social and economic agendas will become even more critical in managing finite financial and environmental resources,” Cawood warned, adding that smart, creative, ambitious human beings will congregate and invest their labour and capital where it is most advantageous and livable for them to do so.

    For him, and other experts involved in the study, the focus should not be all about more infrastructure, but better infrastructure. Therefore, they submit, rethinking urban design that  improves the way people work, live and play, integrating energy efficiency and renewable resources, leveraging technology and smart city thinking, promoting sustainability and the green agenda, smarter public transportation and supply chain solutions are all part of the recipe for Africa’s cities of opportunity.

    The PwC’s study did not however fail to highlight the problems facing the real estate industry. These, it noted, to include problems with access to finance, especially with a lack of long-term debt financing and underdeveloped mortgage market, as mortgage loans represent less than one per cent of the nation’s gross domestic product (GDP). The cumbersome and time-consuming processes for land acquisition and ownership documentation; expensive land in urban areas; high cost of building materials and construction; reliance on expatriate workers resulting from a shortage of expertise in the local construction industry, and security considerations as a result of local unrest, need to be tackled for the sector to attain its full potential.

    PwC, in its report, also indicated that there is considerable room for profitable investments in the real estate sector due to the huge housing deficit in the country. It noted that if this growth pattern is sustained and improved on, numerous jobs will be created in the process and the housing deficit will be bridged sooner than later.

    PwC further noted that African cities offer  opportunities for economic enterprise. The consistent growth of its cities over the next decade will alter the continent’s socioeconomic landscape, it said.

  • How NPDC frustrated forensic report on missing $20b, by PwC

    How NPDC frustrated forensic report on missing $20b, by PwC

    The Presidency yesterday released the report of the forensic audit carried out by Pricewaterhouse Coopers (PwC) on the alleged missing $20 billion oil cash. From the report, it is clear that the Nigerian Petroleum Development Company (NPDC) did not aid the diligent implementation of the audit firm’s mandate.  PwC ran into some brickwalls in the course of its work. The key limitations were: inavailability of relevant NPDC personnel to give information on the company’s operations and NPDC’s failure to provide it with detailed breakdown of the crude oil assets, volume of allocations to Strategic Alliance Partners and list of receiving banks, account numbers and bank statements for crude proceeds. Excerpts of the report:

    Based on the work conducted by our team from the commencement of this mandate up until 29 January 2015, our conclusions are as follows;
    •Total gross revenues generated from FGN crude oil liftings was $69.34bn and NOT $67 billion as earlier stated by the Reconciliation Committee for the period from January
    2012 to July 2013.
    • Total cash remitted into the Federation accounts in relation to crude oil liftings was $50.81bn and NOT $47bn as earlier stated by the Reconciliation Committee for the period from January 2012 to July 2013.
    • NNPC has provided information on the difference leading to a potential excess remittance of $0.74 billion (without considering expected remittances from NPDC). Other indirect costs of $2.81 billion which were not part of the submission to the Senate Committee hearing have been defrayed to arrive at this position.
    • The resulting potential excess remittance indicates that the Corporation operates an unsustainable model. Forty six percent (46%) of proceeds of domestic crude 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 (FAAC), and also meet its operational costs entirely from the proceeds of domestic crude oil revenues, and have had to incur third party liabilities to bridge the funding gap. Furthermore, the review period recorded international crude oil prices averaging $122.5 per barrel (Average Platts prices for 2012). As at the time of concluding this report, international crude oil prices average about $46.07 per barrel2, which is about sixty two percent (62%) reduction when compared to the crude oil prices for the review period. If the NNPC overhead costs and subsidies are maintained (assuming crude oil production volumes are maintained), the corporation may have to exhaust all the proceeds of domestic crude oil sales, and may still require third party liabilities to meet costs of operations and subsidies, and may not be able to make any remittances to FAAC.
    • We therefore recommend that the NNPCmodel of operationmust 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 reflects the fact that $3.38 billion was spent on DPK subsidy for the review period.
    We also confirmed using third party vessel tracking platforms that all vessels carrying NNPC cargoes arrived in Nigeria within the periods disclosed by PPPRA.
    •A major consideration centers on the ownership of oil and gas assets controlled by NPDC.
    Subject to additional information being provided, we estimate that the NNPC and NPDC should refund to the Federation Account a minimum of $1.48 billion as summarised in the next page.
    • A determination is required as to whether all, or a portion of other costs not directly attributable to crude oil operations can be defrayed by NNPC.
    We did not have access to NPDC’s full accounts and records and we have not ascertained the amount of costs and expenses which should be applied to the US$5.11 billion crude oil revenue (net of royalties and PPT paid) per the NPDC submission to the Senate Committee which should be considered as dividend payment by NPDC to NNPC for ultimate remittance to the Federation Account.
    • Between 12 January and 29 January 2015, 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 such deductions. Clarity is required on whether such deductions should be made by NNPC as a first line charge, before remitting the net proceeds of domestic crude to the federation accounts. If these are deemed not to be valid deductions, then the amount due from NNPC would be estimated at $2.07 billion (without considering expected known remittances from NPDC) or $4.29 billion (if expected known remittances from NPDC are considered).
    • The Corporation provided details of expenses to the tune of $12.97 billion related to the review period, funded from the proceeds of domestic crude oil revenues.
    •The Corporation represented that the potential excess remittance of $0.74 billion was funded from proceeds of PMS sales for which the suppliers of the PMS are yet to be paid in cash or crude oil. As at the time of concluding this report, details of the affected suppliers that funded this potential excess remittance are yet to be provided by the Corporation.
    • The analysis above and resulting potential excess remittance suggest the existence of liabilitiesto third parties incurred by the Corporation.We recommend the Corporation be required todisclose details of all existing liabilities and impact on proceeds of future crude oil sales.
    • The Corporation is expected to operate in accordance with the NNPC Act LFN No 33 of 1977 which states in Chapter 320 Part I subsection 7(4) as follows:
    “The Corporation shall maintain a fund which shall consist of-
    (a) such moneys as may from time to time be provided by the Federal Government for the purposes of this Act by way of grants or loans or otherwise howsoever; and (b) such moneys as may be received by the Corporation in the course of its operations or in relation to the exercise by the Corporation of any of its functions under this Act, and from such fund there shall be defrayed all expenses incurred by the Corporation.”
    Accordingly, all the Corporations costs, and those of its loss making subsidiaries have been defrayed in the analysis provided by the Corporation for the review period. However, the profit making subsidiaries and dividends received have been excluded from the analysis provided. This suggests that there are other sources of net revenues available to the Corporation not currently disclosed. A proper estimate of the actual potential excess remittance/under-remittance can only be arrived at if all revenues and all costs of the Corporation and all its subsidiaries are accounted for in a consolidated position. A detailed review of this was beyond the scope of our mandate.
    We therefore recommend that NNPC be required to disclose the consolidated position of the Group and its subsidiaries, and expected remittances to the Federation accounts be determined from the available consolidated net revenues. Furthermore, the nature of costs that are allowable should be pre-determined by all relevant parties.
    We also recommend that the NNPC act be reviewed as the content contradicts the requirement for NNPC to be run as a commercially viable entity. It appears the act has given the Corporation a “Blank” cheque to spend money without limit or control. This is untenable and unsustainable and must be addressed immediately. The Corporation should be required to create value, and meet its expenses entirely from the value created. Proceeds from the FGN’s crude oil sales should be remitted entirely to the Federation accounts. Commisions for the Corporation services can then be paid based on agreed terms.
    Comments
    (I). We did not obtain any information directly from NPDC, but in accordance with NPDC former Managing Director’s (Mr Briggs Victor) submission to the Senate Committee hearing on the subject matter, for the period, NPDC generated $5.11billion (net of royalties and petroleum profits tax paid).
    We have relied on the legal opinion provided to the Senate Committee by the Attorney-General (AG) on the subject of the transfers of various NNPC (55%) portion of Oil Leases (OMLs) involved in the Shell (SPDC) Divestments which impact crude oil flows in the period. The AG’s opinion indicated that these transfers were within the authority of the Minister to make. Thus, these assets were validly transferred to NPDC. The same AG’s legal opinion also indicated that NPDC was to make payments for Net Revenue (dividend) to NNPC, which should ultimately be remitted to the Federation Account. A sale will mean the following should be due to be remitted to the Federation accounts
    1. Petroleum Profit Taxes (PPT)
    2. Royalties
    3. Signature bonus payment
    4. Dividend from profit for the period (according to dividend declared in line with NPDC’s dividend policy)
    We have not obtained any information that suggests that NPDC has been assessed for PPT and Royalty for the review period. However, as disclosed by the former MD of NPDC at the senate hearing, NPDC had done a self assessment of PPT and Royalty and had unpaid self assessed PPT and Royalty to the tune of $0.47 billion related to the review period.
    In January 2015 (subsequent to our initial reported conclusions), we were availed with copies of Deeds of Assignment for OML’s 26,30,40,42.We were not provided with copies of Deeds of Assignment for OML’s 4,38,41,34.We were also provided with information which indicated that the various NNPC (55%) portion of Oil leases (OMLs) involved in the Shell Divestments related to the eight (8) OML’s aforestated, were transferred to NPDC for an aggregate Sum of US$1.85billion. So far, only the amount of US$100m had been remitted in relation to these assets. This means that the amount of US$1.75billion is yet to be remitted in relation to this transfer. In addition, by a comparison of the aggregate amount of US$1.85billion determined by DPR as the transfer value , and the (arm’s length) commercial value paid for by 3rd parties for between 30% to 45% divested by Shell, we arrive at an estimated Alternative Commercial Valuation of US$3.4 billion for the NNPC 55%. The point here is that while we appreciate that this is a government entity to government entity transaction, we had expected a transfer basis higher than the US$1.85 billion commercial value determined by DPR. We have not performed a professional valuation and therefore recommend that the valuation done by DPR be re-assessed.
    NNPC explained that these OML transfers were in the bid to encourage local participation in the Nigerian upstream Oil and Gas Industry.
    We also expect that NPDC should remit dividends to NNPC and ultimately the Federation Accounts, based on NPDC’s dividend policy and declaration of dividend for the review period. We did not have access to NPDC’s full accounts and records and we have not ascertained the amount of costs and expenses which should be applied to the US$5.11 billion crude oil revenue (net of royalties and PPT paid) per the NPDC submission to the Senate Committee hearing in order to arrive at the Net Revenue (in line with the AG’s opinion), which should be subjected to dividend remittance.We are also not aware that NPDC declared dividend for the review period.
    These matters need to be followed up for final resolution in terms of the NPDC Net Revenue (dividend) for crude oil relating to the transfers, PPT and royalty unremitted, and the transfer price valuation and remittance.
    (II). We determined from information obtained from PPPRA that $3.38 billion relating to DPK subsidy cost was incurred by the NNPC for the review period.We obtained a letter, dated 19 October 2009 written by the Principal Secretary to the President, to the National Security Adviser (The following were in copy: Honourable Minister for Petroleum Resources, Honourable Minister of State for Petroleum Resources, Group Managing Director NNPC, and the Executive Secretary PPPRA), confirming a Presidential directive of 15 June 2009 instructing that subsidy on DPK be stopped (Exhibit D7).We also obtained a letter dated 16 December 2010 from the Executive Secretary PPPRA to the CBN Governor clarifying that PPPRA had ceased granting subsidy on Kerosene since the Presidential directive of 15 June 2009 (Exhibit D8).
    Furthermore, Kerosene subsidy was not appropriated for in the 2012 and 2013 FGN budget.
    However, the Presidential directive was not gazetted and there has been no other legal instrument cancelling the subsidy on DPK.
    In a Presidential media chat on 24 February 2014, the President and Commander-in-Chief of the Armed Forces of the Federal Republic of Nigeria, President Goodluck Ebele Jonathan, asserted that kerosene subsidies have not been disallowed.
    We therefore recommend 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 costs.

    Other Findings
    • For the period reviewed, we identified possible errors in the computation of crude oil prices at the NNPC that resulted in a $3.6 million shortfall in incomes to the Federation account. The major beneficiaries were Fujairah Refinery – $805,545, NNPC (KRPC/WRPC) – $697,995 and NNPC (COMD) – $2,107,275. Subsequent to our identification of this issue, NNPC has amended the errors, and have reflected the amendments in the remittances to FAAC in October 2014.
    • Our review of the DPK sales process revealed that NNPC sells DPK to bulk DPK marketers in Nigeria at N40.90 per litre at a location on the coastal waterways (off shore Lagos). The expected/official regulated retail price of DPK in Nigeria is N50 per litre. This retail price of N50 comprises the Ex-depot price of N34.51 and aMargin of N15.49. NNPC should be required to explain the reason for selling DPK at N40.90, rather than the regulated ex-depot price of N34.51. The Corporation should also be required to explain the reason for selling DPK to bulk DPK marketers at a location on the coastal waterways (off shore Lagos) rather than at the in-country depots.
    •The accounting and reconciliation system for crude oil revenues used by government agencies appear to be inaccurate and weak.We noted significant discrepancies in data from different sources. The lack of independent audit and reconciliation led to over reliance on data produced from NNPC. This matter is further compounded by the lack of independence within NNPC as the business has conflicting interests of being a stand-alone self-funding entity and also the main source of revenue to the Federation account.

    (2.2). Our approach to this mandate
    • It is important to note that although PwC has reviewed documents submitted by the key stakeholders involved, our work was conducted independently, and our findings are based on the review of documentation, analytical reviews of data, and interviews conducted.
    • Due to this approach, our findings and the way we presented them in this report may not necessarily reflect the formats of the various submissions made by the different stakeholders.
    • In certain instances where we were not provided with information or access to key stakeholders (Section 6.3.2 ) we leveraged on external and available sources of information to reach our conclusions. These external and available sources of information are clearly highlighted in the relevant sections of this report.
    • Any information and/or documentation which may come to our attention subsequent to the date of this report may alter our findings.
    • We have also listed some of the limitations to our scope in Section 3.2.
    •The procedures performed and specific limitations to scope are also discussed under thevarious work stream sections.
    •Based on specific instructions from the Auditor General for the Federation, we returned to do additional work, after NNPC had represented that our initial process did not provide an opportunity for formal discussions of our findings with top management, in the form of an exit interview.
    • With the exception of the Deputy Group Managing Director/Group Executive Director Finance and Accounts of NNPC, the Auditor-General for the Federation, and the Honourable Minister of Petroleum Resources, we have not discussed the findings of this report with any stakeholder.
    •Our work was split into two work streams as follows;
    (1). We estimated how much revenue is due to the FGN from crude oil liftings; and (2). We reconciled the revenues due to the FGN against the actual cash received by the federation.
    • Our findings and conclusions considered the impact of some matters which require legal opinion to be sought by the FGN.
    PwC estimated revenue from crude oil lifting ($69.34 billion) This is the total amount of revenue from crude oil liftings during the review period, after increasing A by the adjustments in B.
    (D) Direct Costs ($2.65 billion)
    This represents the total expenses incurred and/deducted directly by NNPC (from crude oil revenues) where supporting documents were provided to PwC.
    Source: PPMC’s Schedule of Costs, Reconciliations signed off by traders and NNPC, PwC Analysis
    These costs relate to amounts incurred by NNPC (and its subsidiaries) in executing its mandate. We observed that there were documents supporting these expenses.
    For the purpose of this report, PwC has included these expenses as verified, andtreated them as legitimately incurred in the process of the Corporation executing its mandate.
    (E) This represents the revenues due to NPDC from crude oil sale for the period from January 2012 to July 2013. The balances used in this analysis were obtained from the submissions made by the former MD of NPDC Mr Victor Briggs, during the Senate Committee hearings.We could not find proof or evidence that these revenues were remitted by NPDC/NNPC into the Federation Accounts Verified costs (NPDC yet to complete payment for assigned assets).
    It is important to note that the relationship between NNPC and NPDC as itrelates to OMLs 30, 34, 40, 26, 4, 38, 41, 42 controlled by NPDC, is a key limitation to our scope.We had no access to NPDC management; our work relied on discussions with NNPC management (Section 6.3.2) and review of submissions to the senate (Exhibit A1).
    From our reviews of the NNPC Act (section 6(1 c & d)), we noted that the
    Corporation is empowered:
    (c) to enter into contracts or partnerships with any company, firm or person
    which in the opinion of the Corporation will facilitate the discharge of the said duties under this Act;
    (d) to establish and maintain subsidiaries for the discharge of such functions as the Corporation may determine;
    Sections 6(1c & d) are critical to establishing the nature of sale of these OMLs.
    We have analysed these as follows:
    Factors supporting a sale
    (1). NPDC paid taxes and royalties with a total of $1.7 billion.We have not been able to establish the assets on which these taxes and royalties were paid. However, the practice of payment of these statutory deductions suggests that the revenues from the related assets belong to the company. According to NPDC’s submission at the senate hearing, NPDC has not been assessed for royalty and PPT for the review period by DPR and FIRS respectively. The Company made part payments based on estimates.
    (2). Existence of a Deed of Assignment: As part of our work, we were informed of a document (Deed of Assignment) that transferred the assets from NNPC to NPDC.We were availed with copies of Deeds of Assignment for OML’s 26,30,40,42.We were not provided with copies of Deeds of Assignment for OML’s 4,38,41,34.
    (3). An outright sale to NPDC means that NPDC would be expected to make a payment to the Federation accounts for procuring the asset.
    DPR assigned a total value of $1.85 billion dollars as reasonable amounts to be paid for the eight OML’s in consideration, out of which the Corporation had paid $100 million.
    An outright sale will also require dividend remittance by NPDC to NNPC (and thus the FGN), depending on the dividend policy of NPDC (NNPC is the sole owner of NPDC). See analysis of NPDC’s submission at the Senate hearing below:
    Analysis of NPDC submissions
    Description Amount ($).
    Total revenues from NPDC assets 6,815,188,626.
    Total PPT paid (863,000,000).
    Total Royalties paid (838,991,619).
    Total revenues less payment already made 5,113,197,007.
    Senate hearing submissions, PwC analysis.
    Total amounts estimated to have been withheld by NPDC on assumption of a sale of the divested assets is $5.11 billion.
    (F). This reflects amounts deducted by NNPC as subsidy claims on PMS –
    $5.32 billion & DPK – $3.38 billion (Total $8.70 billion).
    These costs were verified based on documents received from PPPRA.We have however deducted the errors noted in these documents, before arriving at the verified amounts.
    Verified costs requiring legal opinion.
    The FGN should seek legal opinion on:
    (1). Legitimacy of DPK subsidy
    We were not provided with any document evidencing the Federal Government’s approval for the continuation of DPK subsidy. However, in a Presidential media chat on 24 February 2014, The President and Commander-in-Chief of the Armed Forces of the Federal Republic of Nigeria, President Goodluck Ebele Jonathan, confirmed the Federal Government’s position, that the kerosene subsidies have not been disallowed.
    (2). NNPC’s right to deduct subsidy fromamounts due to the FGN for the sale of domestic crude, instead of retrospective claims done by othermarketers. The role of NNPC in the downstream sector is to refine petroleum products and subsequently sell to bulk traders and retailers. Due to the decline in local refining capacity and increased domestic consumption, NNPC has resorted to importing products to compensate for the shortfall.
    The FGN subsidises the cost of petroleum products imported or refined locally. Typical process preceding subsidy claims includes verification and certification by PPPRA of the product type, volume and specification of the imported or refined petroleum product before the subsidy is claimed and paid.
    NNPC (PPMC) does not claim subsidy retrospectively as done by other marketers. PPMC buys 445,000 bpd of domestic crude oil from the FGN.
    PPMC is expected to pay for the domestic crude oil three months after the purchase from the FGN. This period is to allow PPMC convert the crude oil to refined products, sell the refined products, and pay the FGN for the crude purchased, from the proceeds of sale of the refined products.However, NNPC (PPMC) sells the refined products at a subsidised amount, and pays the FGN for the crude purchased less subsidy incurred during the sale of the refined products.
    (G). Amount Due ($52.88 billion)
    Amount expected to be remitted to the Federation after deducting the total verified costs from the total revenues from crude lifting. i.e., C-D-E-F.
    (H). Other costs not directly attributable to domestic crude oil ($2.81billion) After the submission of our initial report to the Auditor-General of the Federation on 28 November 2014, these costs were brought to our attention by NNPC; stating that it had understated its costs in the submissions made to the Senate Committee and had not included all the costs defrayed from the proceeds of domestic crude revenue in meeting its mandate in accordance with the NNPC Act. These costs comprise of what was incurred by NNPC and its loss making subsidiaries.
    We obtained physical records of these costs and compared them to the Group’s accounting records on SAP.
    (I). Expected remittance ($50.07billion). This is the total amount of revenue expected in the Federation Account after deducting H from G.
    (4). Obtained from discussions with NNPC and Revenue Mobilisation and Fiscal Allocation Commission
    (J). NNPC Potential excess Remittance ($0.74 billion).This amount represents the additional costs incurred by the Corporation and its subsidiaries not funded from the proceeds of domestic crude oil sale. The Corporation claims the potential excess remittance was funded from proceeds of PMS sales for which the suppliers of the PMS are yet to be paid in cash or crude oil Details of the affected suppliers that funded this potential excess remittance are yet to be provided by the Corporation.
    (K). Revenue remitted ($50.81billion)
    Total amount remitted as traced to the Federation Account.
    The sections below explain the differences in data submitted by the Reconciliation Committee and PwC data used in our analysis. We were not provided with the source of the data used by the Reconciliation Committee in arriving at its conclusions
    (2.4). Revenue Generated
    •$2.34 billion under-reported revenue generated
    The total revenue generated from our analysis of all crude oil revenue streams amounted to $69.34 billion. This was $2.34billion higher than the amount reported by the Reconciliation Committee. The difference was as a result of the following;
    (A). FIRS – Data received from both COMD and FIRS put revenue generated from FIRS tax oil lifting at $16 billion which is $1 billion higher than the amount quoted by the Reconciliation Committee.
    (B). NPDC – Information submitted by NPDC to the Senate Committee stated total revenue generated from lifting at $6.82 billion. This is $0.82 billion higher than the Senate Reconciliation Committee’s figure.
    (C). Third Party Financing – Data received from COMD and confirmed by Mobil Producing Nigeria Limited (MPNL) and Total E&P Nigeria Limited (TEPNL) during their submissions at the senate hearing, revealed total revenue figures of $2.43 billion. This is $0.43 billion higher than the amount reported by the Reconciliation Committee.
    (D). Our analysis also revealed increased revenue of $0.29 billion and $0.22 billion from Equity and Domestic crude oil lifting respectively, and a reduction of $0.42 billion from DPR royalty revenue, when compared to Reconciliation Committee’s figures.
    (2.5). Revenue Remitted
    Under-reported revenue remittance of $3.81 billion.
    The total cash remitted into the Federation accounts from crude oil liftings for the period under review amounted to $50.81 billion.We were able to trace $49.33bn of this amount to the FGN bank accounts listed in Appendix 6.1.33. The balance of $1.48 billion was also traced to the FAAC report for subsequent months. Please refer to Section 4.2.7 for more details.
    $3.81 billion is the difference between $50.81billion and the $47 billion amount reported by the Senate Reconciliation Committee. This difference was as a result of the following:
    (A). FIRS remittance –We verified additional $1 billion revenue generated by FIRS which was not reported by the Reconciliation Committee.We also traced the payment of this amount to the CBN/FIRS JP Morgan account.
    (B). Other third party financing remittance – $1.37 billion was received from the third party financing arrangements. The arrangement with TEPNL resulted in the payment of $211million to the Federation from the USAN Field TMP project which represents Royalty and Profit oil, while the sum of $1.16billion was received from MPNL from the Satellite Field and Reserve Development projects.
    (C). NPDC remittance – Cash payments of $1.7billion representing Petroleum Profit Tax and Royalties had been remitted.
    (D). Equity crude and DPR royalty oil remittance – The remittance received from Equity crude sales, and in favour of DPR royalty oil, was $0.16 billion higher and $0.42billion lower than the Senate Reconciliation Committee figures respectively.
    2.6. Other Third Party Financing Arrangements.
    • Under-reported Third Party Financing Revenue of $0.43 billion
    Mobil Producing Nigeria Limited, in its submission to the Senate, reported revenue figures of $518million5 and $859 million in respect of the Reserve Development Project (RDP) and Satellite Field Development Project (SFD) respectively. Total E&P reported a revenue figure of $1.053 billion in respect of the USAN project. These amounts represent royalty and profit oil due to the Federation from these third party financing arrangements. The total revenue generated from third party financing arrangement was $2.43 billion and not $2 billion reported by the Reconciliation Committee.
    • Undisclosed remittance to the Federation account
    Out of the total revenue reported by MPNL, $1.158billion had been remitted to the Federation Account as at November 2013. This was confirmed by the Office of the Accountant General of the Federation at the presentation to the Senate Committee.We also traced these payments to the CBN/NNPC JP Morgan account. The total of $858,750,972 relating to SFD had been remitted while $300,000,000 out of the $518,069,354 relating to RDP had been remitted. The balance of $218,069,354 was withheld to service the project finance cost and subsequent remittance of the net amount, in accordance with the contract terms.
    In respect of the USAN project handled by Total E&P Nigeria Limited, the sum of $193,478,061.15 and $17,943,616 totaling $211,421,6779, being Royalty and Profit Oil was remitted to the Federation account
    2.7. PMS and DPK Subsidy
    • $0.98 billion over claimof subsidy by NNPC.
    Our review of the subsidy documentation revealed that the subsidy due to NNPC between January 2012 and July 2013 on PMS and DPK import was $8.99 billion compared to the $9.97 billion stated by the Reconciliation Committee. The difference was due to the following:
    •Exclusion of October 2011 – December 2011 subsidy claims of $1.2 billion. This does notrelate to the review period of January 2012 to July 2013.
    •$0.13 billion increase in PMS subsidy claimed for the 19 months period.
    •$0.09 billion increase in DPK subsidy claimed for the 19 months period
    •Duplicated discharges noted in subsidy computations
    Our examination of the PMS and DPK import verified by PPPRA revealed that some discharges were apparently verified and subsidy advised to NNPC more than once.
    The repeated subsidy for PMS amounted to N3,709,879,190 ($23,954,796).
    The repeated subsidy for DPK amounted to N6,169,502,266 ($39,836,652).
    • $36.05 million over-statement in PPPRA’s PMS subsidy Payment Advice to NNPC
    •Our review of the Subsidy Payment Advice sent by PPPRA to NNPC for discharges between January 2012 and July 2013 revealed that PPPRA applied the pre-2012 ex-depot Price (N49.51) on some discharges in 2012 instead of the approved ex-depot Price of N81.51.
    •A total of 174,449,778 litres of PMS was affected in these PPPRA computations.
    •The error in computation resulted in an over-statement of PMS subsidy by N5.6 billion ($36.05 million).
    • Estimated $205million DPK subsidy over-charge by NNPC
    •Our review of a sample of the copies of the Pro Forma Invoices (PFIs) issued to the other marketers of DPK across different geopolitical zones of Nigeria, revealed that the other marketers bought DPK from NNPC/PPMC prior to arrival at NNPC depot in Nigeria at N40.90.
    •The marketers are thereafter required to incur the Lightering expenses, NPA charges, Jetty Throughput Charge and Storage Charges before bringing the product into Nigeria.
    •Subsidy is calculated as Landing Cost minus Ex-Depot Price; 10 NNPC claimed that this cost is incurred by both NNPC and the marketers. For the purpose of this report, we have considered this cost as a cost incurred by the marketers. Over-charge of subsidy above depends on PPPRA’s decision to either consider this cost in favour of NNPC or in favour of marketers of kerosene.
    •Per PPPRA’s template, Landing Cost also includes the extra expenses incurred by the other marketers.
    •By selling DPK to marketers at N40.90 and claiming subsidy at an Ex-depot price of N34.51 without adjusting the Landing Costs for the extra costs borne by the marketers, NNPC had over deducted subsidies to an estimated amount of N31,522,234,881.06 ($204 million).
    2.8. NPDC lifting.
    •Under-recognition of NPDC liftings by $0.82billion by Reconciliation Committee
    The Reconciliation Committee put the value of liftings in favour of NPDC at $6billion. We did not receive any supporting documentation from NPDC to validate this figure other than the submission to the Senate by the former MD of NPDC, Mr Victor Briggs, who disclosed the total value of NPDC liftings from all its assets as $6.82billion.
    While we were unable to verify the $6.82 billion directly at NPDC, we performed a recomputation of the values of liftings using information provided by COMD and arrived at a value of $5.65 billion.
    Discussions with COMD revealed that lifting data captured by COMD for NPDC might not be complete as COMD does not capture liftings done directly by NPDC’s Strategic Alliance Partners.
    Volumes recorded by DPR for NPDC did not contain the necessary pricing information for valuation.
    •Cash payments of $863 million by NPDC to FIRS not captured by Reconciliation Committee
    For the period under review, NPDC was yet to be assessed for tax by the FIRS. However, the company made several cash payments during and after the period which amounted to $863 million. These payments were confirmed by FIRS to have been received.We also traced the payments to CBN/FIRS bank statements with JP Morgan.
    •Cash payments of $839 million by NPDC to DPR not captured by Reconciliation Committee.
    For the period under review, NPDC made several payments to DPR based on self-estimated royalty.
    We traced several cash payments made by the company to CBN/ DPR JP Morgan account statement, to the tune of $839 million.

    Pipeline maintenance and management costs
    •Additional $2.8 billion cost communicated by NNPC.
    After the submission of our initial report to the Auditor-General for the Federation on 28 November 2014, the following was brought to our attention by NNPC regarding Pipeline Maintenance and Management Costs:
    •Initial submission made to the Senate Committee was understated and did not include all the costs defrayed from the proceeds of domestic crude revenue by NNPC in accordance with the NNPC Act. These costs also largely include the amounts incurred by the Corporation’s subsidiaries.
    •The total additional costs amounting to $2.81 billion was funded from domestic crude revenue accruing from liftings of January 2012 to July 2013, and third party liabilities as follows:
    Expense type Total ($)
    Salaries and benefits 1,522,258,663
    Monthly operations 478,684,782
    Other third party payments (including training course fees, estacodes, and consultancy fees) 955,212,837

    Total costs 2,811,153,197
    2.10. Crude oil and product losses.
    •Computation of Crude Oil loss
    NNPC used a conversion rate of $100/barrel to value differences between the quantity of crude oil pumped at the terminals and quantity received at the refineries.We adopted the monthly average Platts 12 price to value the losses, considering that the revenue generated from Crude oil lifted during the review period had been accounted for using such Platts information instead of a fixed rate.
    Applying the monthly average Platts price to value the crude oil losses amounted to $73,851,144.9313 higher than PPMC’s computation.

    Limitations

    We encountered some limitations in the course of executing some aspects of our scope of work. The key limitations were:
    • Unavailability of relevant NPDC personnel to provide information on the NPDC’s processes particularly around its operations, business objectives and internal accounting/financial reporting, etc.
    Change of management at NPDC during the course of the engagement which further contributed to our inability to successfully obtain responses to our request for information.
    • Non-response of NPDC to our request letter which meant that we weren’t provided with the following requests:
    • Detailed breakdown of the crude oil assets transferred to NPDC.
    • Terms of divestment and contract documents involving the assets taken over.
    • Strategic Alliance agreements between NPDC and counterparties.
    • Monthly volume allocations to Strategic Alliance Partners per partner.
    • Monthly balance of NPDC crude over-lifts by Strategic Alliance partners.
    • List of receiving banks, account numbers and bank statements for NPDC crude proceeds.

     

  • PwC forensic audit reports and the NNPC

    PwC forensic audit reports and the NNPC

    Finally, the Pricewater-houseCoopers Forensic Audit Report draws the curtain on the 15-month drama in which the Nigeria National Petroleum Corporation (NNPC) was docked in the court of public opinion. The allegations that NNPC was not faithful to its fiduciary responsibility to the federal government and the people of Nigeria began like a child’s play. Initial steps taken to douse the issue, including the inter-agency reconciliation committee led by the Ministry of Finance, failed to get Nigerians to give NNPC a clean bill of health.

    From exchanges back and forth, during the long drawn drama, it was clear that Nigerians were angry with NNPC. Some, in bitter postulations, imagined that the corporation was a haughty, profit-minded, slave-driving multinational. However, nothing would obliterate the fact that the giant National Oil Company is 100% a Nigerian baby established and managed by Nigerians for Nigeria.

    But it bears observing that the corporation over the years had treated mildly or even whitewashed similar allegations. Perhaps unconsciously, it assumed that simply adhering strictly to its enabling legislation and internationally acceptable corporate governance standards and ethics, it owed no duty to the man on the street. For those who held this opinion, the allegation of unremitted $49.8bn became an opportunity to deflate the mighty NNPC: It was not important whether the allegation was fabricated or not, making it stick would make the corporation look bad, and lose face. Sad.

    Maybe the furore and near-panic in government circles that greeted the allegation of missing $49.8bn crude revenue could be attributed to the personality of the person who made the allegation, the former Governor of the Central Bank of Nigeria, Mallam Sanusi Lamido Sanusi (now the Emir of Kano).

    Sanusi, who was present at the hearing, expressed satisfaction with the findings of the committee.

    It was at that hearing that Dr. Okonjo-Iweala averred that the committee had no technical competence to verify the claims of $2.1bn for pipeline repairs and maintenance, and strategic reserves and suggested that forensic auditors be engaged to examine the expenditure as claimed by the NNPC.

    However, like one launching an ambush, stepping out of the Senate Chambers, Sanusi in a prepared press statement stated that $20 billion was the new amount yet to be remitted to the Federation Account by NNPC and not the $12 billion he had earlier alleged or the $10.8 billion given by the Inter-Agency Committee.

    The report asserted that the entire revenue accruable to the Federation Account during the period under investigation was $50.81 billion and not $48.9 billion as alleged by Sanusi. The amount has been fully accounted for and clearly categorised under the various components of the accruable revenue.

    The PwC report did also raise the issue of ‘outstanding $1.48 bn’ being ‘signature bonus due for divested assets and taxes/royalties’ which it recommended should be remitted by NNPC to the Federation Account. Was that not an indictment on NNPC? The NNPC Group Managing Director, Dr. Joseph T. Dawha, in his explanation described the $1.48bn as comprising signature bonus, taxes and royalties on the oil wells divested by Shell, which NNPC acquired and transferred to its upstream subsidiary, the Nigeria Petroleum Development Company, NPDC. Signature bonus, according to Dr Dawha, represents the book value of the assets and was estimated at $1.847bn by the Department of Petroleum Resources (DPR).

    However, NNPC raised issues with the parameters used in calculating the signature bonus since the assets involved were old wells. NNPC had paid $300 million pending when both parties would come to terms on a mutually acceptable estimate of the book value of the assets. The NNPC boss submits therefore that the $1.48bn was not part of the alleged unremitted revenue from crude oil sales or missing oil revenue. And going by the explanation, the $1.48bn is not an amount willingly withheld by NNPC but rather an amount which was in dispute by two sister agencies and so the recommendation of the PwC forensic audit report can be seen as a resolution of the dispute. It is therefore erroneous for anyone to see it as an indictment of the NNPC in anyway.

    Beyond the hoopla and hysteria, were there any lessons gained from the Sanusi allegations? Several! A significant lesson is that openness and transparency should be the rule of the thumb in the transactions of a public enterprise like the NNPC.

    Secondly, the public deserves to know how its oil wealth is being managed. As a matter of fact, one assumes that the NNPC has learnt the vital lesson that explanation of issues regarding its transactions does not have to be just once and that it owes it a duty to the Nigerian public to explain as many times as necessary till the people understand and assimilate the issues.

    All said and done, the legislature and executive must be proactive in terms of putting in place legislations, institutions and processes that make for robust inter-agency interactions to eliminate the kind of misunderstanding that led to the allegation in the first place. If such proactive measures had been in place, the pains and costs of the past fifteen months could have been avoided.

    – Akaniyene is a Port-Harcourt-based financial services consultant. He can be reached at ibakaniyene@aol.com.