NNPC clears air on alleged withholding of 48% of national oil revenue

NNPC-Refinery

NNPC refinery

Concerns mount over ban on 113 vessels from crude lifting

IN the wake of allegations leveled against it, ranging from non-remittance of a N3.8 trillion revenue from January 2012 to May 2015 constituting 48 per cent of total income for the period to withholding of dividends from the Nigerian Liquefied Natural Gas (NLNG), the country’s giant oil corporation has clarified that there was no iota of truth in the claims, saying they are all borne out of a denial of the reality of dwindling petroleum earnings arising from the global fall in prices.

In a position paper that it presented at a recent meeting with President Muhammadu Buhari, the embattled Nigerian National Petroleum Corporation (NNPC) contended that contrary to the general impression that it “spent the balance of N3.8 trillion (after remitting the sum of N4.65 trillion into the Federation Account) on its operations, the truth is that a bulk of that amount was unrealized revenue owing to the fuel subsidy regime which is a Federal Government policy.”

In the document, the corporation stated that the N3.8tn was not remitted because it was unrealized revenue and likened it to a situation where an agency like the Customs Service could not meet its revenue generation target because of duty waivers granted by the Federal Government to some companies on a certain category of goods.

“When petrol and kerosene are imported at say N130 and N140 per litre respectively and the subsidy regime dictates that they be sold at N87 and N50 per litre respectively, the balance of N43 and N110 per litre that is lost (not realized) over the period of review is what makes up a bulk of the N3.8tn that was allegedly not remitted and which Nigerians are being made to believe was willfully withheld by NNPC and ignorantly referred to as operation expense by NNPC,” the document explained.

Putting the losses or unrealised revenue incurred from petroleum subsidy in the period under review at 2.14tn, the Corporation further explained that crude oil and products losses as a result of theft and pipeline vandalism also constitute another stream of unrealized revenue amounting to a total of N250.2bn.

“It is grossly erroneous for people to think that pipeline vandalism and its twin evils of crude and products theft do not have any implication on what accrues to the Federation Account at the end of the day, but unfortunately, that appears to be the thinking,” the document stated.

On the other cost elements that make up the alleged unremitted N3.8tn, NNPC explained that the cost of pipeline management and repairs and the supply of crude to the refineries by vessels as a result of the frequent attacks on the crude supply pipelines by oil thieves amount to N460.1bn and N732.35 bn respectively.

“It needs to be understood that the PPPRA template does not make provision for cost recovery in the transportation of products through the pipelines. Even though the pipelines and the tankers perform the same role of bridging, the PPPRA template makes provision for bridging fee for tankers without a similar fee for product transportation though the pipelines. This has denied the Corporation of a ready pool of resources to draw upon for maintenance and repairs of the pipelines which have lately been under heavy and frequent attacks and consequently has led to a spike in the cost of maintenance and repairs”, the document explained.

It further explained that because pipeline repairs are by nature not what can be delayed while awaiting the normal appropriation process considering the fire and terrible impacts on the environment, the cost is usually defrayed from oil revenue in keeping with “Section 7 Sub-section A and B of the NNPC Act states inter-alia:

“The Corporation shall maintain a fund which shall consist of—
(a) such monies 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 monies 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.”

“NNPC is a creation of the law and a law-abiding corporate entity whose processes and procedures are guided by the provisions of the law and would not engage in expenditure and defray same from revenues generated if there was no legal basis for such”, the document clarified.
On the issue of NLNG dividends, it explained that the investment in NLNG was made by the Federal tier of government as distinct from the Federation and that by law the dividends from that investment are meant to be paid into the Consolidated Revenue Account of the Federal tier of government as internally generated revenue.

“However, it has been the policy of the Federal Government to utilize NLNG dividends first for LNG expansion projects. The NLNG plant for example, expanded from 2 trains in 1999, to six trains by 2006 – one of the fastest growths in LNG expansion in the world at that time. The NLNG dividend was used to finance the Federal Government equity in the expansion project.

“Consistent with that policy, NNPC sought and obtained the President’s permission to utilize funds from the dividend account to fund the Brass LNG project.

“It is therefore not true that NLNG dividends are missing or not accounted for. An Inter-Ministerial Task Team has been set up to look at and verify expenditures from the NLNG Dividend Account. Its work is still ongoing”, the document explained.

Meanwhile, unease at present pervades Nigeria’s oil and shipping business sector following the suspension of about 113 vessels from lifting crude and operating in the nation’s territorial waters by the NNPC.

A document, allegedly signed by the Group General Manager of NNPC’s Crude Oil Marketing Division, Gbenga O. Komolafe, stated that the corporation has prohibited 113 tankers “from engaging in crude oil/gas loading activities in any of the terminals within the Nigerian territorial waters until further notice.”

The letter dated July 15, 2015 was addressed to terminal operators in Nigeria and the affected tankers listed in an attached spreadsheet.

“The affected vessels have also been barred from movements within the Nigerian territorial waters henceforth,” it said.

Although, the document did not state the reasons for the action, it noted that the enforcement of the directive takes immediate effect pending a notice to the contrary by the Federal Government.

The operators, worried about the development, have been making efforts such as calls and visits to the NNPC Towers to get to the root of the matter.

A source told The Guardian the operators are worried as to what could have necessitated such a directive.

“It is shocking. I wonder why they are issuing such directive at this time. Well, we will comply and continue to negotiate for a way forward,” the source said.

Stakeholders believe the directive is among the steps being taken by the NNPC to ensure strict compliance with measures of following due process and ultimately scrutinising the crude lifting process.

Efforts to reach the Group Managing Director, Group Public Affairs, NNPC, Ohi Alegbe, proved abortive as phone calls were not responded to.

An online medium, Platts quoted an active buyer and seller of Nigerian crude oil as confirming the directive, saying: “We have been informed about the ban and it seems terminal operators will have to take that into account.”

However, shipping and trading sources said the NNPC’s grievance with the shipping companies stems from issues surrounding controversial figures related to the crude oil exports at the port of discharge.

Sources said there have been a few incidents between Nigerian authorities and their crude oil buyers on differences between the volume of crude that was discharged and the volume on the bill of lading.

“A lot of market players have received the document and we have to take it seriously. The NNPC is asking for outturn figures but the receivers of the cargoes have this information, not the ship owners. They need to approach the cargo receivers, not the vessel owners,” one source stated.

Other sources said the ban could be related to “settling dues” such as port and maritime fees.
The majority of Nigerian crude cargoes are lifted on Suezmax and Very Large Crude Carrier (VLCC) tankers.

“We suspect it is part of a fallout from the level of scrutiny that NNPC is currently under,” another crude oil trader said, adding that it may also be part of the new government’s drive to target “vessels that have not paid dues or have been involved in incidents with the Navy. In this new administration such lapses are being corrected.”

Sources said the Nigerian Maritime Administration and Safety Agency (NIMASA) had previously issued advice to vessel operators and owners to comply with International Maritime Organisation’s (IMO) directives to countries to phase out vessels that do not meet international standards.

They said some of the vessels in the list might fall into the category of tankers that did not meet the IMO standards.



14 Comments
  • Anthony Obiagwu

    Sir, your presentation did not add up. The law said sell and remit the money into an account. Why did NNPC not pay in the money.
    Is it right if you have a budget at home for feeding and your wife instead of paying cash sells from your business into an account where you have given cheque for that budget decides to pay in some, use part of the cash and still pay in your cheque? What will you call her act?

    • Ibrahim

      I think you’re confusing what the NNPC is saying. In your budget example, it would be if you set an expected amount to go into the budget every month. But then imagine earning only half of your salary in a particular month and consequently only being able to contribute half of the budget. To an outsider, it may seem like you are refusing to pay half of the money you promised to your wife, but the truth is you did not earn what you thought you would when you set up the budget. That is the situation being described.

      • InTheBegining

        So my brother, is it only in Nigeria that accounting is no more a compilation of historical data but a financial projection? Any company in the world can collate their revenues to the penny every minute, why is it that only in Nigeria nobody can tell you exactly what any company earns? Is it just that the country is too crocked to ever be able to account for anything? At least we should be able to know the amount of YAMS the GOATS are eating.

  • Rasmonpali

    The Guardian doing this?

  • Spino

    Story for the gods

  • oloriakojo

    All these erratic explanations from NNPC officials do not add up at all. Come to think about it……….why are we still suffering from fuel shortages and “an international disgrace of a Major Oil producing nation” that has to depend on “fuel importation” by a kabal to sustain economic life of its citizenry.

    The question i beg to by answered by these people is ” How many refineries could we have built in the last 4 years with the N3.8trillion used to sustain fraudulent “fuel subsidy”

    I hope Nigerians will now see that Sanusi was right after all………..

    • Osanebi Osakuni

      My dear, the refineries stopped working since IBB era. Remember that Abacha’s son imported fake petrol. Yes it is wrong that Nigeria didn’t not invest in inequity in refineries outside Nigeria as Venezuela did in many refineries in USA. All government investments failed in Nigeria, NITEL, NEPA, NIP0ST , Daily Times, NNSL, Nigerian Railway (before Dr Goodluck). NNPC isn’t an exception. Even in the states, investments like breweries, banks, Insurance owned by government have gone into extinction. The truth is that public investments can no longer survive. You joined others to resist government policy on subsidy, the result is costly so let’s live with it. Sanusi has been disgraced because his position has continued to lack sustainable proof, I can bet you that there will never be anything provable outside NNPC positions. $1B can not be hidden in any bank. Why hasn’t one out of twenty been seen. Think with your head and not heart.

    • Ibrahim

      You will have to ask the marketers about that…

  • Paul

    Whoever drafted the FG policy to deduct oil subsidy at source must have intent to steal. How on earth can you take subsidy at source. It is extremely wrong for the NNPC to account for subsidy. Proper and sound accounting demands that you record and account for your total turnover in full and the same way NGO has been paying local importers she should have paid NNPC for its portion of the subsidy. Also, if NNPC is claiming that it cannot account for N2.4tr due to subsidy, how many stations do they have nationwide and what is the average volume of their transactions per year? I believe a forensic audit/ review can open this fraud up.

  • emmanuel kalu

    clearly this failed experiment with NNPC and subsidy has got to end. due to the complication and lack of effective control, both policy has become a massive drain on the economy and avenue for looting. they have not benefited the nation and the people, hence the main reason they should be ended immediately. deregulate the sector and let market forces determine supply and price. use the saving to invest in things that would create and give jobs to the poor. NNPC should become a publicly traded company, with the govt owning a good portion. the rest of the organzination would become a regulatory agency.

  • Okafoakpu Cyril

    http://www.Facebook.com/idemilitrading-search our website and be rewarded with free samples and free postage.Rechargeable lanterns,fans,flashlights,mp3,radio,doorbells,hair clipper,power strip etc.

  • ESB

    Realisation principle in accounting say you don earn what you dont realise. How can NNPC remit something not realised? This is simple, a projection and a realised revenue are not the same. The NNPC Act provides that subsidy be deducted at source, because it is part of operational expense. All this noise about NNPC is very strange. NNPC as govt corporation has failed so the PIB is the only option, so why are the NNPC bashers not advocating for the PIB to be passed. Or are they just asking to change the goats so other goats can eat the yam?

  • Abayomi A

    “When petrol and kerosene are imported at say N130 and N140 per litre respectively and the subsidy regime dictates that they be sold at N87 and N50 per litre respectively, the balance of N43 and N110 per litre that is lost (not realized) over the period of review is what makes up a bulk of the N3.8tn ….” … NNPC

    What kind of voodoo mathematics is NNPC pulling off here? If imported price of kerosene is N140, but NNPC is reportedly mandated to sell at N50, the difference is not NNPC’s N110; it is N90!

    If NNPC cannot reconcile simple figures such as these, how can it counted upon to be responsible with larger numbers and more complex computation? Besides, why would NNPC keep implementing a subsidy that was never gazetted into law? If any one claimed that it was gazetted, the person should be bold and responsible enough to publish his or her gazetted source.

  • truthisreallybitter

    Was the Governors’ forum informed about this? if they were ignorant, this explanation may dose off tension but further investigation would still need to be made to keep figures and records straight.

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