Why Finance Ministry was stopped from forensic audit of NNPC – Makarfi

NNPC14 March 2014, Abuja – For the first time since the Senate Committee on Finance stopped the Ministry of Finance from conducting a forensic audit on the $8.76 billion spent on fuel subsidy by the Nigerian National Petroleum Corporation (NNPC), the committee chairman, Senator Ahmed Makarfi, opened up, Thursday on why the decision was taken.

Makarfi, while answering questions from journalists after the committee had concluded the first phase of its investigation into the alleged unremitted $20 billion into the Federation Account by NNPC, following the alarm raised by the suspended Governor of Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, said the ministry lacked the constitutional powers to carry out such exercise.

Sanusi, who had first alleged in a letter to President Goodluck Jonathan in September 2013 that NNPC failed to remit $49.8 billion into the Federation Account, later alleged that between January 2012 and July 2013, NNPC had failed to remit $12 billion, then $10.8 billion, before reviewing the amount to $20 billion.

Following the certification by the Petroleum Products Pricing Regulatory Agency (PPPRA) that $8.76 billion was expended on fuel and kerosene subsidies by NNPC between January 2012 and July 2013, the committee ordered the Ministry of Finance to engage forensic experts to audit NNPC’s claim.

But about 48 hours later, the committee asked the ministry to halt moves to conduct the forensic examination, promising instead, to take over the exercise without giving reasons.

While breaking his silence on the decision yesterday, Makarfi said the committee discovered after the initial directive that the ministry lacked the legal authority to organise a forensic examination, adding that its decision was aimed at avoiding exposing the outcome of the audit to litigation in the future.

According to him, the committee decided to play safe by halting the ministry from going ahead to avoid the presentation of an illegal report, bearing in mind that some people might need to be prosecuted after the audit report.

If the legality of the report is questioned, he argued, the entire effort put into the exercise would be a nullity.

He however added that the National Assembly had its own limitations, explaining that whereas it had the constitutional right to examine the accounts of NNPC, it did not possess the powers to appoint auditors to audit the executive arm of government and lacks the technical capacity to undertake the audit.

Makarfi said given the circumstances, the committee had asked the Auditor-General of the Federation (AuGF), Samuel Ukura, to refer the result of the scrutiny by his office to the committee, in order to give it the basis on which it could predicate its action.

He said: “The figure could be more than $8.76 billion and until we receive the certification on the remaining six months (July 2013 – December 2013), we will not know the size of what needs to be forensically audited in relation to subsidies.

“Everything that needs to be done, needs to be done legally and constitutionally. Having directed the Ministry of Finance, the question that arose was: do they have the legal basis to do so?

“Can the National Assembly do so? Yes, we can, if we as a committee go by ourselves. But we cannot appoint auditors to go into the executive arm. However, we can go anywhere and ask anything. But if we go, do we have the technical capacity to do that?

“Yet there must be a forensic audit. The president can give a directive for a forensic audit. The auditor-general, even though the constitution says he cannot appoint the auditor, can recommend auditors from corporations.

“But he can do this special investigation which technically is the same thing as auditing.
“You have to find a legal and constitutional way of doing something so that someone would not challenge it on the basis of law, because you don’t know what you are going to find out. That was why we demanded that the report of the auditor-general on the forensic audit should be made directly to the National Assembly so that it can form the basis for whatever action that the National Assembly may wish to take because it can rely on the auditor-general’s report.

“All of this is done so that even if you have the desire, you have to do it in such a way that it does not become worthless. Supposing a legal issue arises in court and you submit a report which is not admissible, it would come to nothing.

“So you must do it in a way and manner that should the need to prosecute anybody arises, the report you have is legal and constitutional.”

On Wednesday’s directive for the audit of NNPC’s accounts by the president, Makarfi who said even though the president reserved the right to issue such a directive, he could only give such order to the auditor-general, contending, however, that the president does not have the powers to appoint auditors to audit NNPC.

“I don’t think that the president has any other body than the auditor-general because he cannot appoint auditors for NNPC or the Nigeria Port Authority (NPA).

“In everything, you have to be very careful so that it does not become a worthless exercise. If you do it for your own internal consumption, you may end up with a document that even though it will give you a picture of something, you may not be able to present it before a court of law because of how you went about it,” he said.

Makarfi, who said the committee had exhausted its mandate on the controversy surrounding the unremitted funds, however, added that the only outstanding issue that the committee would await before filing its report is the certification of subsidy withdrawals from source by NNPC from PPPRA for the period covering July 2013 to December 2013.

He also disclosed that the committee had engaged the services of some forensic auditors, whose assignment, he said, was to carry out the audit on $2.1 billion losses and expenses claimed by NNPC, adding that the team would submit its report next week.

He also said even though the committee would await the final report of the audit from the auditor-general’s office, this would not stop it from drawing up its own report.
“We believe all submissions have been made except one. The report we are waiting for from the PPPRA is on the certification of subsidy from July 2013 to December 2013 both for kerosene and PMS (Premium Motor Spirit).

“It is to enable the committee establish how much the total expenditure on subsidies was for the two years running. We have given them up to the end of next week. They requested three weeks but we gave them only two weeks and the two weeks will expire next week.

“The other report we are expecting is one with respect to the independent consultants appointed by the committee to do the forensic examination and audit on the volume of expenses NNPC incurred.

“We expect their report by the end of next week. And their independent report is what will help us form an opinion on the expenses and losses totalling about $2.1 billion, based on NNPC’s submission.

“The other issue which we don’t have to wait for before we make our report is that the Auditor-General of the Federation has written formally to the committee confirming he is conducting forensic checks and that the forensic checks comprehensively cover our areas of concern and that he is going to send the report to us,” he added.

Meanwhile, during the committee’s hearing, two international oil companies (IOCs) – Mobil and Total – yesterday absolved NNPC of any underhand deals on third party financing to the tune of $2 billion, which was remitted to the joint venture partners.

While speaking to journalists, the Group Managing Director of NNPC, Mr. Andrew Yakubu, said so far, the corporation had given a detailed breakdown of its expenditure and remittances, adding that after paying back the various parties involved in its operations including banks and IOCs, no amount of money was missing.

Buttressing this position, NNPC also in a statement yesterday, said it had been adjudged to have remitted all the statutory revenue owed to the relevant agencies and accounts of the federation by the Office of the Accountant General of the Federation (OAGF), the Department of Petroleum Resources (DPR) and third party partners.

This occurred during the Senate committee’s hearing on the unremitted oil revenue to the Federation Account, when all the three institutions summoned by the committee over the unaccounted funds confirmed that NNPC’s claim of remittances to the Federation Account and third parties were intact.

A statement from the acting Group General Manager, Public Affair of NNPC, Omar Ibrahim, in Abuja, stated that first to make a presentation was the OAGF, which was represented by its Director, Fiscal, Mr. Salawu Zubairu.

Zubairu told the committee that from their records, NNPC had remitted all the amounts due to the Federation Account within the period under review.

The statement explained that he was followed by the DPR, whose submission was made by Alfred Ohiani and who affirmed that all royalties on crude oil liftings in the period under review were paid into the DPR Account with the CBN.

Similarly, Total and Mobil, which were represented by Chidi Momah and Olusegun Banwo respectively, also confirmed receiving the amounts stated by NNPC during the period under review.

Ibrahim said NNPC’s GMD, during his final submission to the committee, reaffirmed that all equity holders in the oil and gas value chain including the Federation Account were duly paid their revenue between January 2012 and July 2013.
“Yakubu also commended the Senate for the opportunity to explain to Nigerians how the various streams of revenue flow from the oil and gas industry to the Federation Account and the other equity stakeholders involved in the petroleum business were used.

“For us this is a wonderful opportunity to give a detailed account of what we do, because like we always say, there is a huge misunderstanding about the industry. Today we gave a clear and detailed breakdown of what we remitted to the Federation Account and to the third parties which have been confirmed by all of them present here today,” Yakubu was quoted to have said.

He equally solicited for the support of the media to correct the erroneous impression that money was missing in the Federation Account, adding that the country needed direct foreign investment and negative reports about its activities tend to send negative message to prospective investors.

In his closing remarks, Makarfi acknowledged the testimonies by the invited parties, adding that the committee would go into a technical session to review all the presentations and come up with its conclusions.


 – This Day
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