Since President Muhammadu Buhari assumed office, Nigeria’s state oil firm, NNPC, has withheld over 25 per cent of revenues realised from domestic crude oil sales, refusing to pay same into the Federation Account, a PREMIUM TIMES investigation shows.
The hefty deductions, a longstanding controversial practice, has continued despite the Buhari administration’s declared commitment to transparency and accountability, and reform initiatives at the corporation.
Oil and gas industry experts well briefed on NNPC operations have condemned the provision in the NNPC enabling Act, which allows the corporation to first recover its operational cost from oil sales before remitting whatever is left to the Federation Account.
The Nigerian Extractive Industries Transparency Initiative (NEITI) in one of its Occasional Paper series on “Review of NNPC’s Monthly Financial and Operations Report” noted that such a practice, which does not set the limit for such cost recovery was “not transparent and fraught with corruption.”
A review of documents prepared by the Federal Ministry of Finance for members of the Federation Accounts Allocation Committee (FAAC) shows that between June 1, 2015 and April 30, 2018, the NNPC earned about N4.7 trillion from domestic crude oil sales.
However, out of that figure, the corporation remitted about N3.4 trillion, or 72.3 per cent into the Federation Account, pocketing a whopping N1.3 trillion (about 27.7 per cent) in less than two years.
The records showed that no other amount was paid into the Federation Account by the NNPC despite continued liftings and sales of Nigeria’s crude oil over the period.
Practice pre-dates Buhari
The documents revealed that the practice pre-dated the Buhari administration.
Out of over N8 trillion realised from domestic crude oil sales between May 30, 2012 and May 30, 2015, the document showed only N4.57 trillion (about 57.13 per cent) was paid into the Federation Account. About N3.4 trillion was withheld by the NNPC.
Besides, the Office of the Auditor General of the Federation in its 2014 Accounts report said the corporation was also owing about N4.9 trillion between January 2011 and December 2015.
In 2017, NEITI urged the Nigerian government to take steps to recover over $21.8 billion (about N7.2 trillion) unremitted oil revenue from the NNPC.
The latest revelation is in stark contrast with last Thursday’s claim by the Group Managing Director of the corporation, Maikanti Baru, that the state-owned oil firm has been remitting “faithfully” all revenues from its operations to the federation account.
Mr Baru told members of the Senate Committee on Petroleum (Upstream) who visited him in his office in Abuja that accusations of non-remittance of revenue to the federation against the NNPC were wrong.
In a statement sent to PREMIUM TIMES later, the NNPC spokesperson, Ndu Ughamadu, quoted Mr Baru as saying such accusations were bound to happen due to the nature of NNPC’s business, which involved credit lines requiring constant audits and reconciliations.
“While the process of audit and reconciliation of accounts is ongoing, a lot of accusations of short payments and non-remittances are usually traded. We endeavour to keep our cool on these allegations, because we know we remit whatever is due to the Federation Account,” the statement quoted Mr Baru as saying.
The NNPC GMD said such allegations usually arose from disagreements over expenses borne by NNPC on behalf of the federal government, particularly with the Joint Venture (JV) and Production Sharing Contract (PSC) partners.
The president, Nigerian Association of Energy Economics (NAEE), Wumi Iledare, said the NNPC should not be blamed, as the NNPC Act allows the corporation to undertake certain business practices and recover cost.
Although the law allows the NNPC to operate and recover cost, the NEITI report said the challenge has been the limit and how transparent the process of that cost recovery is.
“Apart from selling government’s equity crude (about 445,000 barrels allocated every day for local refining), the NNPC also lifts and sells statutory crude oil allocations for Department of Petroleum Resources (DPR) and Federal Inland Revenue Service (FIRS).
“Beyond that, after allocations for local refining, NNPC also lifts crude oil under various schemes, including the (now defunct) Offshore Processing Agreements (OPA) and Direct Sales/Direct Purchase (DSDP) scheme,” the NEITI report noted.
However, a senior official of the corporation who agreed to speak on anonymity said the challenge was in making returns from such sales, as the corporation would always take into consideration different the costs of providing services to the different parties, which could not be verified.
These cost elements, he said, range from technical cost of operations, to under-recovery for subsidy, operational losses, pipelines maintenance and repairs.
A member of the Petroleum Industry Governance Bill (PIGB) of the Nigerian Natural Resource Charter (NNRC) who spoke with PREMIUM TIMES on Thursday also on condition of anonymity said although there was nothing illegal about cost recovery, for transparency and accountability, there must be a process to verify and agree on what is deductible.
“We can adopt the current arrangement with DPR and FIRS, which are granted specified percentage for cost of revenue collection. Similarly, NNPC could be allowed a certain percentage from the revenue it realizes from domestic crude sales for cost recovery,” the official said.
NNPC claims $6.85bn against FAAC
Curiously, the NNPC has continued to claim the federation account was owing it almost $6.9 billion (about N2.1 trillion at N306/$1) either as arrears of cash call obligations to its JV partners, or for services it said it rendered on behalf of government.
The corporation said the $6.9 billion covered arrears of government portion of the cash call obligations by the government to its JV partners for the period between January 2000 and December 2015.
However, details of some of the other debts are still subjects of huge debates among FAAC members, who frown at the continued deductions from revenues the NNPC should pay into the federation account.
The deductions mean funds available every month for sharing among the three tiers of government would continue to shrink to the detriment of development and the people.
A source close to the FAAC secretariat told PREMIUM TIMES the amount was later cut to about $5 billion following a negotiated settlement between the government and the NNPC JV partners.
The source, who is familiar with the details of the negotiations, said part of the resolutions was for the federation account to repay the under-funding cash call arrears to the NNPC JVs through incremental crude oil and gas outputs.
The source, who requested that his name should not be revealed, as he was not authorised to speak on the issue, confirmed implementation of the repayment plan has since January this year commenced.
Under the plan, NNPC and its JV partners lifted the first consignment of about 807,539 barrels of crude oil worth about $55 million.
Such lifting is expected to continue till the full value of the alleged indebtedness was exhausted. The exact outstanding arrears remain debatable as the latest figure has not been published since last February.
Source of constant friction with States
Apart from the JV cash call arrears, NNPC also claims various costs incurred on behalf of the federal government.
At the moment, one major cost the NNPC says it is bearing on behalf of the federal government is “under-recovery” (fuel subsidy) on petroleum products supply.
With petrol landing cost almost double of government fixed retail pump price of N145 per litre, the NNPC says it spends billions to sustain imports and guarantee stability in supply.
Deduction to defray such costs has always been a source of friction betwen NNPC and representatives of the state governments.
Prior to last month’s FAAC meeting, two previous meetings in March and April ended in a stalemate due to unreconciled revenue issues.
In March, members walked out in protest after they observed discrepancies in NNPC’s revenue remittance to the federation account.
The chairman, Commissioners of Finance Forum in FAAC, Mahmoud Yunusa, told reporters in Abuja the amount presented by NNPC fell far short of what was actually realised from crude oil sales for the month.
The committee only agreed to return the following day to share about N647.39 billion after Vice President Yemi Osinbajo, Minister of Finance, Kemi Adeosun, and some governors and members of the National Economic Council (NEC) intervened.
Although the Permanent Secretary, Federal Ministry of Finance, Mahmoud Isa-Dutse, said during last FAAC meeting that discussions were ongoing to reconcile the records, PREMIUM TIMES learnt members expect NNPC to bring additional N12 billion as revenue for that month.
In his reaction, Mr Ughamadu insisted the NNPC has been remitting its portion of revenue into the federation account at the end of every period.
“If we (NNPC) have been withholding the revenues that should be remitted to the federation account, how come the FAAC has been sharing money every month? From where do they always have the money to share every month?” Mr Ughamadu asked.
Reminded that the amount shared by FAAC could have been more if all revenues realised by NNPC were paid into the federation account, Mr Ughamadu said the “NNPC’s remittances are only a portion in a basket that also includes the contribution of other (revenue) agencies.”