29 May 2014, Abuja – The Senate Committee on Finance yesterday recommended that the Nigerian National Petroleum Corporation (NNPC) should refund $262 million to the Federation Account. The committee said $665.896m was yet to be remitted by the NNPC. It also asked the Nigerian Petroleum Development Company (NPDC) to remit to the Federation Account $447.817,884, being balance of royalty and Petroleum Profit tax (PPT).
The committee urged the Federal Government to remove fuel subsidy. The committee, headed by Senator Ahmed Makarfi, since was never any unremitted $49.8billion as alleged by the suspended Governor of the Central Bank of Nigeria, Mallam Sanusi Lamido Sanusi. It stated that the Central Bank of Nigeria, NNPC, Ministries of Finance and Petroleum agreed that the NNPC should account for $20billion. These assertions were contained in the report of the committee, which was laid before the Senate yesterday. The committee noted that the sum of $218.069 million remains unremitted, being Federation Account share from the Third Party Financing arrangement.
It said that royalties and taxes amounting to $447.827million, being Federation Account share from the $6.815billion liftings by NNPC on behalf of NPDC, remain unremitted. The report urged the Senate to note, among others, that the “total crude oil liftings January to July 2013 was $67 billion and not $65billion as the CBN Governor had presented. There was never any unremitted $49.8billion. All the agencies: CBN, NNPC, Ministry of Finance and Ministry of Petroleum Resources had agreed after reconciliation meeting that $47billion out of the $67billion had been credited to the Federation Account. Amount to be accounted for therefore was $20billion. The sum of $5.254billion PMS subsidy certified by PPPRA, part of the $20billion to be accounted for, was adequately covered by the Appropriation Acts 2012 and 2013.
“The sum of $3,512billion DPK subsidy certified by PPPRA for the period January 2012 – July 2013, being part of the $20billion to be accounted for, was not appropriated for by the National Assembly. The total sum certified by PPPRA for Kerosene DPK) subsidy not appropriated for by the National Assembly was N353.370billion ($2.148billion) for 2013 respectively, making total for the two years N685.91billion ($4.430billion).”
The committee report only covers accounting for $67billion crude oil revenue between January 2012- July 2013. “The Committee together with Appropriations Committee will continue its investigation on causes of shortfall in revenues, which covers issues such as SWAP, Strategic Alliance etc, as relates to the petroleum industry as par Senate Resolution S/RES/007/03/13.” The committee recommended among others that the Senate should accept the subsidy deducted by NNPC from January 2012 – July 2013 of $5.254billion (N823,803billion) since it was certified by PPPRA and appropriated by National Assembly.
“This is without prejudice to the outcome of the Forensic Audit conducted by the Office of the Auditor-General for the Federation and Pricewaterkhouse Coopers Limited (PWC),” the report added. It said further that: “whereas it may be good policy to encourage indigenous players by giving them greater participation, however continuing transfer of Federation OMLs to NPDC who in turn transfer same to Third Parties with lots of tax and other revenue concessions will deprive the federation of vital income. Therefore, all such transactions should be conducted in a transparent and competitive manner and devoid of revenue concessions. NNPC to refund and remit to the Federation Account the sum of $262million being expenses it could not satisfactorily defend in respect of Holding Strategic Stock Reserve; Pipeline Maintenance and Management Cost; and Capital Expenditure. There is the need for the subsidy regime to be totally discontinued with. All stakeholders should be consulted and carried along as much as possible before abolishing the subsidy.
“Further legislative action by the Senate should be taken after receipt of the forensic check/audit currently being undertaken at NNPC by the Auditor-General of the Federation and PWC. The NNPC should strictly adhere to international best practices in keeping records. NNPC should not control the revenue account of NPDC in order not to undermine its separate legal status and make accountability more difficult. That PPPRA should henceforth not certify subsidy payments/deductions when there is no appropriation for such.
“NNPC should always ensure due process and diligence in their operations. The Senate also mandates the Committed to follow up and receive the forensic audit/checks reports from the Auditor-General for the Federation and PWC, study same and report back to Senate.”
The committee noted that after a careful study of all submissions, it found: “That all parties, i.e. CBN, NNPC, Ministry of Finance and Ministry of Petroleum Resources had resolved through reconciliation undertaken by them that $47billion had been received into the Federation Account out of the total oil lifting valued at $67billion between January 2012 and July 2013. That on the remaining $20billion to be reconciled, the committee’s findings are as follows:
“The amount deducted /withheld/expended by NNPC on fuel subsidy between January 2012 to July 2013 was $5.254billion (N823.802billion). This was certified by PPPRA and the National Assembly has appropriated funds in 2012 and 2013 fuel subsidy in the sums of N888.101 billion ($5.737billion) and $971.274 billion ($6.274billion respectively. The amount expended on subsidy on kerosene (DPK) between January to July 2013 was $3.512billion (N543.890billion). This was certified by PPPRA. This was not appropriated for by the National Assembly in both 2012 and 2013 Appropriation Acts.
“The subsidy deduction in the sum of N180billion ($1.2billion) by NNPC in 2012 bug relating to fourth quarter 2011 was certified by PPPRA. The CBN position was that this deduction needed PPPRA certification. PPPRA verification alluded to on the NNPC subsidy claims are in practice book keeping verification rather than physical verification of products and claims.” The committee said it also found that on Third Part Financing liftings by NNPC which CBN put at $2billion and called for more explanations, as follows: “That the actual value of Third Party Financing lifting was $2,430,750,973. That the amount confirmed by the Accountant-General as having been remitted into the Federation Account between January, 2012 and July, 2013 was $1,370,172,650.36. That the share belonging to Mobile Producing Nigeria Limited in Third Party Financing arrangement with NNPC confirmed by them orally and in writing was $848,687,581.
“That the amount confirmed by the Accountant-General of the Federation as having been remitted into the Federation Account in December, 2013 which is outside the period January 2012 – July 2013 was $300,000,000. Therefore, the sum of $218,069,354 remains outstanding or unremitted by NNPC which it explained was in escrow account and will be remitted when it matures.” On the $6billion liftings by NNPC on behalf of NPDC, which CBN observed that part of the revenue belongs to the Federation Account, the committee said it found as follows:
“NPDC strategic alliance are within the laws of the Federation as submitted by the Attorney-General for the Federation and Minister of Justice. Total liftings during the period in question was $6,815,188,626. Share of revenue to go to the Federation A. Lung was $2,175,635,436. Amount of Petroleum Profit Tax (PPT) confirmed received by Federal Inland Revenue Service (FIRS) from the NPDC and remitted to the Federation Account was $863,000,000. Amount of Royalty confirmed received by Department of Petroleum Resources (DPR) from NPDC and remitted to the Federation Account was $864,817,552. Royalties and Taxes not remitted to the Federation Account by NPDC within the period under consideration was $447,817,884.”
On other expenses and crude losses, which the Committee appointed Independent Professional Accountants to audit, the committee said it found as follows: “Crude and refined oil losses were certified by Committee Consultants as $0.809billion against the $0.760 reported by NNPC. Pipeline surveillance cost increased from $2.23million in 2012 to $11.15million in 2013 without corresponding decrease in pipeline oil losses. Actual PPMC’s Staff Salaries and upfront benefit claimed in NNPC submission were overstated by $7.58million and $29.35million for the 2012 and 2013 respectively.”
The committee gave the amount expended above budgeted or not budgeted for at all in respect of PMS and DPK in 2012 and 2013 as follows: “2012 PMS = N90.693billion ($585million)
2013 PMS = “Over expenditure expected since certification of Aug-Dec 2013 was only an interim one. 2012 Kerosene (Expended but not budgeted) N353,370,145,245.07 ($2.282billion),
2013 kerosene (amount expended but not budgeted) N332,539,367,830.95 ($2.148billion).” In respect of a motion moved by Senator Babajide Omoworare (Osun East) that N700million was expended illegally on Kerosene subsidy daily, the committee said it found based on PPPRA certification that: “In year 2012 amount expended was N353.370billion which gives N965.49million daily; and
“In year 2013 (interim) amount expended was N332.539 billion which gives N908.578 million daily.”
– The Punch