A Review of the Nigerian Energy Industry

Oil Revenue: $10.8bn, not $49.8bn unaccounted for

Sanusi Lamido Sanusi 119 December 2013, Abuja – Findings from a two-day high level reconciliation meeting between the Nigerian National Petroleum Corporation (NNPC), Central Bank of Nigeria (CBN), Ministries of Finance and Petroleum Resources, as well as other revenue agencies of the federal government have established that the bulk of the allegedly unremitted $49.8 billion oil revenue has actually been remitted to the Federation Account.

The discovery that of the $49.8 billion the CBN governor, Mallam Sanusi Lamido had alleged in a letter to President Goodluck Jonathan had not been remitted by NNPC, it was $10.8 billion from domestic crude oil receipts that had not been remitted, forced Sanusi to express regret over his letter and an admission that he was wrong.

Sanusi in the said letter that NNPC could not account for crude oil receipts to the tune of $49.8 billion between January 2012 and July 2013.

The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala; Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke; Sanusi Lamido Sanusi; and Group Managing Director (GMD) of NNPC, Andrew Yakubu, among others, addressed a crowded press conference in Abuja yesterday after a two-day reconciliation meeting.

Okonjo-Iweala, who spoke first said: “We are here to talk about the issue of $49.8 billion that has been in the press as an amount missing from the Federation Account. We just said we will come together and talk to you because we have received many enquiries and this has been in the media and topical.

“What we have done prior to talking to you is to spend two days with our staff from the Ministry of Petroleum Resources and NNPC, from the Ministry of Finance and the Central Bank and our technical teams have been working and reconciling figures so that we can get to the bottom of the questions that have arisen.

“I just want to say that this reconciliation is still an ongoing matter, but we thought at this point in time, after working till last night, that we should share with you some of our thoughts and clarifications on this issue. And that is why we are here to resolve this and get to the bottom of this matter.

“What we have done so far shows that for the $49.8 billion and that is the first point we want to make; there are some, perhaps, misconceptions or misunderstandings that led to this figure and we have been able to come to the conclusion that we can account for this amount.
“The second point is that within this, there are some shortfalls that both the NNPC and the Ministry of Finance have been working on for quite sometime. Even the CBN knows that it is an ongoing matter and we will come to that through the FAAC (Federation Account Allocation Committee).

“But the first point is the $49.8 billion, to clarify that we have been able to account for this amount.”

She stated that the reconciliation meeting over the unremitted $49.8 billion was done to make sure that Nigerians received answers to their enquiries, adding, “We have been able to get to the bottom of the $49.8 billion that was indicated in the CBN memo.”

She pointed out that due to the way crude lifting is configured, some were being lifted for other parties to the tune of $25 billion, which was said to be missing but which was actually remitted into the Federation Account.

“So the bulk of the sum of $49.8 billion has been accounted for and that is what the reconciliation exercise was about. So it is very clear that this is not missing,” Okonjo-Iweala said.

Okonjo-Iweala explained that the CBN was moved to raise the issue of an observed gap in expected revenue from crude oil lifting following its interpretation of data from pre-shipment inspection agents, which had reported that a total of 594.02 million barrels of crude oil amounting to about $65.3 billion was lifted by the NNPC over the period between January 2012 and July 2013 with only $15.53 billion paid to the Federation Account.

She, however, pointed out that the reconciliation meeting was able to discover observed sources of discrepancies, adding that NNPC’s disclosure at the meeting also indicated that CBN underestimated the actual proceeds from crude oil exports over the period by $1.79 billion possibly due to timing differences and lifting by the Nigerian Petroleum Development Company (NPDC), which was not included in the CBN report.

At the meeting, the NNPC was said to have noted that the actual proceeds from crude oil exports over the period amounted to $67.12 billion – about $1.79 billion higher than the revenues reported by the CBN.

According to the findings from the meeting, NNPC’s records showed that total revenues of $67.12 billion comprised revenue which directly accrued from NNPC to the Federation Account of $14 billion, and additional revenues lifted by NNPC on behalf of other parties: for FIRS-$15 billion; for DPR – $2 billion; for NDPC – $6 billion; and for third party financing – $2 billion.
In addition, domestic crude lifted by the NNPC amounted to about $28 billion. The domestic crude component was not reflected in the CBN’s foreign accounts but rather paid directly in naira into the Federation Account.

In Okonjo-Iweala’s words: “Taking account of these various exports conducted on behalf of the non-NNPC parties, the total of $67 billion was mostly accounted for. This substantially addresses the issues raised by the CBN.”
She noted that “the Federation Account indicates that over the period January 2012 to July 2013, a shortfall of $10.8 billion was recorded from domestic crude oil receipts” and had been acknowledged by the NNPC.

But the magnitude of the shortfall, she said, was still disputed by NNPC.
The shortfall was explained to be the result of subsidy claims, unrecovered crude/product losses and cost of strategic petroleum storage, which is currently not captured in the PPPRA template for refunds,” she added.

Sanusi, who also spoke shortly after Okonjo-Iweala, noted that the CBN had within the context of its letter to the president called for an investigative audit in revenue from crude oil following consistent drop in revenue in contrast to increasing price per barrel in the international market.
He stated that the CBN never sent out any media statement on the development, adding that as the custodian of the federal revenue, it had the responsibility to raise the alarm on possible threats to national finances.

“Since it is the first time I am speaking about this matter in the public, I think it is important to give a little context. First of all, it is important to remember that the CBN never issued a public statement or a press statement on this matter.

“The CBN wrote a letter to the president, which unfortunately found its way to the press and that letter was at best an invitation to begin investigation. It was not an end or a conclusion of an audit or investigation. Conclusions drawn before investigation were premature,” he said.

He said the CBN and finance ministry had been concerned at the decline in the Excess Crude Account (ECA) despite the fact that oil price is high, stating, “We were concerned at what we saw as a gap between what we had in our records as the value of crude shipped by NNPC and the amount repatriated as equity to the Federation Account.

“What we had in our records was $65 billion shipped by NNPC and about $15 billion returned as equity to the Federation Account. After the letter, the president asked for this meeting and we have discovered the following: that out of the $65 billion that NNPC shipped, $24 billion did not belong to NNPC, it was crude oil that was paid by oil companies as tax and royalties and shipment for them from NPDC and so on.

“So that explains half of the sum. Now where the outstanding issues are with is the $28 billion domestic crude which has been taken by NNPC. And from our records, we have received $16 billion, there is a shortfall of $12 billion and we were told that that shortfall has always been part of ongoing discussions with finance and petroleum and NNPC.”

In her comment, Alison-Madueke revealed that Nigeria’s daily crude oil output had risen from a hitherto 2.20 million barrels per day (mbpd) to 2.38mbpd following measures targeted at stemming oil theft and vandalism.

She said: “We have held very robust reconciliation meetings over the last couple of days and have come to a very clear understandings and most part of the said amount have been accounted for; there is a shortfall as mentioned but it has been known for quite sometime. It is an open record in FAAC and has been discussed severally.

“Let me add quickly that while these concerns on revenue shortfalls issues and so on, the actual base products that produces this revenue for us which is crude production has actually been under a lot of scourge to do with crude oil theft for quite some time.

“And it is critical to mention that there have been very aggressive ongoing efforts to increase our production volume and mitigate and minimise this incidence of crude theft since it is the crude that gives us physical returns in the first place.

“So I think in terms of our efforts, we have already, over the last two weeks seen an increase from a drop in 2.20mbpd to what is today 2.38mbpd and if we can keep up this level of aggression, we should see it sustained and hopefully increased.

“Let me also add that the Ministry of Petroleum Resources and NNPC have always participated in the curtailment and reconciliation meetings along with other stakeholders and that will continue and will hopefully get even more aggressive.

“The expectation of course is to ensure that the full benefit of oil is received and sustained for the benefit of all Nigerians.”

Meanwhile, a large gathering which had come to witness the investigative hearing into the alleged non-remittance of the $49.8 billion was shocked yesterday when Sanusi said the sum was not missing after all.

The hearing was organised by the Senate Committee on Finance following the CBN governor’s letter written to the president.

The allegation had raised eyebrows, resulting in the All Progressives Congress’ (APC) call for Jonathan’s impeachment early in the week.

The weight of the allegation also compelled NNPC to address the press in Abuja at the weekend where it described Sanusi’s allegation as baseless and politically motivated.

However, while appearing before the committee along with Okonjo-Iweala and Alison-Madueke, Sanusi expressed regret that the letter he wrote to the president on the matter got to the press and admitted that he was wrong.

According to him, his concerns over the low rate of money accruing to the federation account resulted in the discovery of $15 billion in the account when he thought that $63 billion actually ought to have accrued to the account.

Sanusi claimed that being the federal government’s banker, he deemed it necessary to get the president acquainted with the development, thus giving rise to the letter.
Speaking without his usual confidence, Sanusi disclosed that following his letter, a technical team was set up and had been meeting to reconcile the books.

Following Sanusi’s presentation, the chairman of the committee, Senator Ahmed Markafi, who did not allow his colleagues to question Sanusi, adjourned the meeting indefinitely.

In this article

Join the Conversation