In line with its avowed commitment to Transparency, Accountability and Performance Excellence (TAPE), the Nigerian National Petroleum Company Limited (NNPC Ltd.) says it’s ready to work with the Nigeria Extractive Industries Transparency Initiative (NEITI) and all relevant stakeholders towards reconciling all discrepancies in the 2021 Oil and Gas Industry Audit Report.
Details in NEITI Report
In the recently published report of the 2021 oil and gas industry audit, NEITI said its findings showed that out of the outstanding liabilities to the Federation of about $8.27bn, the NNPCL alone accounted for $6.923bn, or 83.8 percent, while about 47 other entities operating in the industry covered by the audit accounted for only $1.342bn, or 16.24 percent.
NEITI said details of the report showed that these liabilities excluded outstanding cash-call liabilities by the NNPCL in joint venture operations of about ₦120.439 bn payable by the Federation, and $507.949mn (₦209.524bn), totalling ₦330.007bn as well as deductions by the NNPC from Domestic Crude Account before Remittance to the Federation Account.
Others included N751.11bn ($1.94bn) that was not due for payment as at December 2021; N334.87bn ($871.15mn) that was outstanding as at December 2021; N1.20trn. ($3.15bn) deducted against the domestic sales proceeds as subsidy; crude oil & product losses incurred N16.20bn; pipeline repairs & maintenance N22.05bn and strategic stock holding N6.15bn.
Also, the NEITI report observed that none of the refineries was operational in 2021 despite NNPCL spending about N200bn between 2020 and 2021 on refinery rehabilitation, which was deducted from the Federation sales proceeds, while another $1.95bn, or 8.47% of the total revenue was not transferred to the Federation Account by the NNPCL during the year under review.
A breakdown of the withheld revenue included $722.6mn for NLNG dividend; $871.15mn from domestic crude sales, $859,583 miscellaneous revenue, and $286.42mn from export crude sales. $24.332mn and $45.76mn were withheld from transportation revenue and domestic gas proceeds.
Demand for accountability
Following the report, concerned Nigerians and civil society organisations demanded the immediate clarifications on the key findings, particularly the failure of the NNPCL to make remittances to the Federation Account, which resulted in the alleged huge liabilities and indebtedness.
In its reaction, the Presidency constituted a Reconciliation Committee charged with the mandate to investigate, review and reconcile the financial records on the qalleged indebtedness to the Federation by both NNPC Ltd. and the Federation Accounts Allocation Committee (FAAC).
NNPC Ltd. dismissed the claims by the civil society groups as “baseless”, considering that the NEITI report had similarly dismissed many of the allegations following a series of engagements with the company.
However, in a statement on Monday in Abuja, its spokesperson and Chief Corporate Communications Officer, Olufemi Soneye, said NNPCL was ready to sit with NEITI and other relevant agencies, including the Federal Inland Revenue Service (FIRS), Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to resolve all discrepancies in the report, particularly as they relate to remittances and indebtedness to the Federation Account.
Soneye said the NNPCL believes the reconciliation was necessary, because the Federation was still owing the NNPC Ltd. about N4.207 trn as net indebtedness against the company indebtedness to the Federation of only N2.852 trn, made up of mainly outstanding Good and Valuable Consideration (GVC) in respect of government upstream divestments, royalties, and Petroleum Profit Taxes (PPT).
He added: “NNPC Ltd. states that at the outset of President Bola Ahmed Tinubu’s administration, it was made to sell Premium Motor Spirit (PMS) imported into the country at one-third of its value, a development that gave rise to an average of N400 billion monthly subsidy bill, which subsequently put a strain on its revenues and finances.
“NNPC Ltd. further states, that subsidy bill accumulated to up to N3.736 trillion as of May 31st, 2023.
“With respect to gas-to-power debts, the non-payment of NNPC Ltd.’s share of upstream joint venture gas supplied to the government-owned plants led to the accumulation of indebtedness of N174.07 billion by the Federation.
“Similarly, the receivables due from the Federation to NNPC Exploration & Production Limited (NEPL) as of 31st May 2023 amount to $712 million (equivalent to N309.07 billion at N434.08/US$1) for revenues not remitted to NEPL, but paid into the Federation account.”
He reiterated the company’s commitment to transparency and accountability in its operations, saying: “NNPC Ltd.’s book remains open to all our stakeholders as we remain committed to delivering value to Nigerians with integrity as espoused in our principles of Transparency, Accountability and Performance Excellence (TAPE), bulwark of the Mele Kyari leadership of the company.”
On the company’s relationship with NEITI, Soneye clarified that over the years, NNPCL and NEITI have maintained a very cordial relationship, as seen in August 2020 when it became an EITI supporting company, joining a group of over 65 extractive companies, state-owned enterprises (SOEs), commodity traders, financial institutions and industry partners committed to observing the EITI’s supporting company expectations.
“Indeed, aside from being a signatory to several of EITI’s global ethics and standards, NNPC Ltd., on the sidelines of the United Nations General Assembly (UNGA) in New York in September this year, signed up to the United Nations Global Compact on human rights, labour, environment, and anti-corruption, thereby becoming the first state-owned oil company to join the global initiative.” Soneye said.