It took the anti-subsidy protest for President Goodluck Jonathan to order an inquisition into a forensic audit report on the Nigerian National Petroleum Corporation(NNPC). The scope of the audit include among others to determine the accuracy and completeness of reported crude oil and gas revenues accruing to the NNPC (both Federation and NNPC crude) during the period 2007 to 2009; as well as to review a sample of past transactions for accuracy, validity, appropriateness and efficiency.
The forensic audit of NNPC books was a response by President Goodluck Jonathan to the complaints of governors of the 36 states that the corporation was undercutting them through illicit deductions of their accruals from source. The government through the Federal Ministry of Finance in July 2010, engaged KPMG Professional Services and S.S. Afemikhe & Co., an indigenous auditing firm, to vet the ledgers of NNPC. The interim report has so far confirmed the anxieties of the governors: NNPC is being clever by a half with their funds.
An aspect of the report that is worrisome is the use of a strangely low exchange rate by NNPC to remit money into the federation account. Here is how: NNPC transactions at the international market are denominated in dollar but the corporation is expected to remit the Naira equivalent of its sales to the federation account. Curiously, at the point of remittance, rather than use the prevailing exchange rate as published by CBN, NNPC officials will use a lower exchange rate. What happens to the differential which cumulatively runs into billions of Naira is anybody’s guess.
Specifically, the report said: “NNPC is invoiced in US$ for domestic crude allocations but is expected to remit the equivalent Naira value to the Federation Account. However we observed that exchange rates used by NNPC were lower than the average exchange rates published by the CBN during the review period.
Exchange rate variances for 2007, 2008 and 2009 were estimated at N25.7 billion, N33.8 billion and N26.7 billion respectively. (using CBN rates for the month of transaction)
- NNPC claimed they obtained the exchange rates from CBN via phone but there was no document to substantiate the claim”.
The report also queried the sloppy manner NNPC contracts for the sale of crude are renewed every year. The report was emphatic: “evaluation criteria for renewal of contracts are not clearly stated in the contract document… the selection exercises were based on individual discretion and wrong assumptions and criteria.” This is a clear negation of globally acceptable rules of corporate governance.
NNPC is supposed to serve public interest. It has the sole responsibility for upstream and downstream activities, in addition to regulating and supervising the oil industry on behalf of the Nigerian government. This places a high degree of responsibility on the corporation especially in the context of Nigeria being a monoculture economy sustained by crude oil sales.
There are several other findings of the audit which advertise the NNPC as a corporation steeped in operational tardiness. A few would suffice here:
• Production /commercial allowable volumes have been observed to consistently exceed OPEC quota of 1,673,000 barrels per day for a six-month period (April to September 2010) reviewed.
• No centralized location for storing electronic copies of historical production and allocation data. This information is stored on personnel (individual) workstations.
The audit revealed clear instances of delays in receipt of subsidy advice from PPPRA resulting in the estimation of subsidy claims by NNPC. This leads to over/ under-deduction from proceeds of domestic crude sales. For example, N25bn was deducted as subsidy estimate for September 2009 from domestic crude sales proceeds while PPPRA approved a subsidy of N23.8bn. In like manner, N35bn was also deducted as subsidy estimate for November 2009 but PPPRA approved a subsidy of N21.3bn.
Over-deduction for these two months amounted to N14.9bn. However, only N4.2bn was credited into the Federation Account by NNPC as adjustment for subsidy claimable in the two months. Again, you ask: where is the remaining N10.7 billion. Remember, this is just for two months.
NNPC is very strategic to the continued economic existence of the nation. Therefore matters concerning the corporation, especially issues that border on graft, should not be treated with disdain. The audit report contains grave indictment on the corporation. It behoves of the NNPC as a responsible corporate organisation to open its doors for further scrutiny. The president has directed further inquiry into the report.
The presidential directive has compelled the Minister of Petroleum Resources, Diezani Alison-Madueke, to set up a task force to review the operations of the corporation and other adjunct parastatals. This is splendid, but a mere review of the operational processes of the corporation without bringing to book those indicted in the KPMG report amounts to papering a crack. It would rather widen the gulf of distrust between Nigerians and the government. President Jonathan should ensure that those indicted in the report are made to face the law. He who offends must be ready to atone for the levity of his conduct. This is the only to deter others from walking the path of graft.
