A Review of the Nigerian Energy Industry

JV cash calls cost NNPC over $17.64 billion in 4 years – NEITI

Oscarline Onwuemenyi

2 November 2011, Sweetcrude, ABUJA – The Executive Secretary of the Nigerian Extractive Industry Transparency Initiative, NEITI, Mrs. Zainab Ahmed, has disclosed that over $17.64 billion (about N2.7 trillion) was spent by the Nigerian National Petroleum Corporation as Joint Venture cash calls over a period of four years (2005 – 2008).

Ahmed disclosed this during a presentation to the Joint Committee on Finance, Petroleum Resources, Upstream, Down Stream and Gas Resources at an Investigative Hearing on the Remittance of NNPC’s N450 billion debt to the Federation Account, in Abuja.

NEITI’s presentation also showed shortfalls from the amount sold (expected) and what was eventually paid into the Federation Account by the NNPC.
She explained that the amount was received from export crude and other lodgements including what is paid as cash calls and amount transferred to the federation account for distribution.

“It also reveals outstanding balances in our Export Debtors (Dollar) Control Account (amount owed from those who bought Nigeria’s oil). Export Crude is marketed on behalf of the Federation by NNPC Crude Oil Marketing Division (COMD) while Domestic Crude is sold to NNPC to be refined at the refineries for domestic consumption. “The proceeds from the sale of the Crude oil and Gas including other receipts are received into CBN/NNPC JP Morgan Crude Oil and Gas Revenue Account. From this account, NNPC transfers money to JV cash call Account and the balance swept to the Federation Account each month. These transfers and sweepings are carried out by CBN on receiving instructions or mandates from NNPC,” she said.

She explained that the audits by NEITI carried out an extensive month by month summary movement on the NNPC/Central Bank of Nigeria (CBN) and JP Morgan Oil and Gas Revenue Account for the three years under review adding that balances at the end of each month were reconciled with the monthly balances in the CBN statements.

According to Ahmed, “This exercise was carried out in order to ensure that all payments for Export Crude and Other proceeds received from the respective customers into the JP Morgan Oil and Gas Revenue Account were correctly transferred and swept into cash call bank account and federation account respectively. The control account balance as at 31st December 2008.”

The Executive Secretary pointed out that NEITI audit reports are independent and conform to the best international standards, adding that the goal is to provide information and data on what companies paid and what government receives.
“It also reveals if companies paid what they are expected to pay and if government received what it is expected to receive,” she stated.

She added that the information and data usually contained in audits can only contribute to national development if the National and State Houses of Assembly take interest to discuss and debate on the reports on the floor when they are presented.

“But regrettably none of our audit reports have ever attracted the attention it deserves and privileges of debate on the floor of the NASS since inception, even though we have always presented them. This is why we congratulate the chairman and members of this committee for inviting us to make presentations. We hope this will be sustained as we get set to lay the 2006 -2008 Audit Report before the National Assembly any moment from now.”

According to Ahmed, in the search for answers and concerns to enthrone transparency and accountability, NEITI has conducted three audits in the oil and gas sector. These include 1999 – 2004 audit, the 2005 audit, and the present audit just concluded, that covers the period 2006 – 2008.

She explained that the focus of the presentation taken from NEITI Audit Reports is on crude oil and gas revenue. “It is designed to explain the amount earned by the Federation from the sales of crude oil and gas in each of the years ended 31 December 2004 to 31st December 2008.

“It is also to explain the amount remitted to the Federation Account by NNPC during the period under review. The presentation has also separated Export Crude financial flows from that of Domestic Crude. This is because Export Crude transactions are carried out in US Dollars while Domestic Crude transactions are carried out mostly in Naira. In the Presentation the following issues are also specifically addressed.

NEITI, therefore, recommended that adequate measures be put in place by the Federation to restrict any un-authorised deductions from crude oil proceeds.

It stated, “The NNPC should increase the frequency of sweeping the proceeds into the Federation account so as to avail the Federation of funds on a timelier basis. The terms for domestic crude oil allocation to NNPC should clearly state the implications of non payment and untimely payments for domestic crude sales by NNPC.
Ahmed further noted that, “The Federation should make efforts to collect the amount due but not yet paid from NNPC.”

Nigeria signed up to the global Extractive Industries Transparency Initiative in 2003, began implementation in 2004 and supported the initiative with legislation by the National Assembly with the NEITI Act of 2007.

According to Ahmed, NEITI’s major objective is enthroning good governance, accountability and transparency to ensure that revenues from Nigeria’s abundant natural resources including oil, gas and solid minerals translate to good roads, water supply, housing, reliable electricity, security, health care, education and improvement of general well being of all Nigerians.

“This can only be possible if the legislature as representatives of the people, the civil society and the public at large use NEITI independent audit reports in the extractive sector especially in the oil, and gas to ask informed questions about how much companies doing business in the sector paid to government in terms of profit tax, signature bonuses, levies, royalties.
What about quantity of liftings of crude? How do we know what quantity from the well head through the flow stations to the terminals? What about transparency and corporate governance of the sector.
These and more are the questions which NEITI audit asks and demand for answers. The NEITI Act in section 4 (3) requires the NEITI to table the Reports directly before the National Assembly, to debate and discuss the information and data contained in the report which we believe would always provide the law makers with information.

In this article

Join the Conversation