A Review of the Nigerian Energy Industry

NNPC spends N5trn on ‘Cash Calls’, subsidy payments in 5yrs

NNPC towers27 June 2014, Abuja – Total revenue from oil mineral sources for the five years period was N23.763 trillion.

The Nigerian National Petroleum Corporation, NNPC, took about N5.279 trillion from the Federation Account to settle financial obligations and petroleum subsidy payment between 2007 and 2011.

This is contained in a 210-page publication of an independent Fiscal Allocation and Statutory Audit by the Nigeria Extractive Industries Transparency Initiative, NEITI, released on Wednesday in Abuja.

The report showed that the deduction for the two payments was from about N17.125 trillion remittances by the NNPC into the Federation Account for the five year period.

A breakdown of the deductions showed that from about N3.0117 trillion remittances, about N552.068 billion, or 18 per cent, went for cash call payment for the six joint venture operations in the oil industry.

With no deduction made for subsidy for the year 2007, the balance of N2.46 trillion, or 82 per cent, was transferred to the Federation Account.

In 2008, total revenue remittance by NNPC was N3.643 trillion, from where N590.9 billion, or 16 per cent, was set aside for JV cash call, leaving a balance of N3.052 trillion, 84 per cent, transferred into the Federation Account.

No subsidy was also removed.

In 2009, the total remittance declined significantly to N1.921 trillion, from where N78.652 billion, or 4 per cent, was removed for subsidy payment, and N846.529 billion, or 44 per cent, for JV cash call. A total of N995.803 billion or 52 per cent was transferred to the Federation Account.

In 2010, about N402.423 billion, or 12 per cent, and N947.323 billion, or 27 per cent, for Subsidy and JV Cash call payments respectively, were deducted from a total remittance of about N3.499 trillion; while the balance of N2.149 trillion, or 61 per cent, was transferred to the Federation Account.

From about N5.051 trillion realized as total remittance in 2011, about N844.944 billion, or 20 per cent, was deducted for subsidy payment, and N1.017 trillion or 17 per cent, for JV cash call, while about N3.189 trillion, about 63 per cent was put into the Federation Account.

A further analysis of the figures, according to the report showed that while JV cash call payment increased from 16 per cent of total remittances in 2008 to 44 per cent in 2009, NNPC subsidy claims grew from 4 per cent of total remittances in 2009 to 12 per cent in 2010, and 17 per cent in 2011.

Other remittances to the Federation Account showed that the Department of Petroleum Resources, DPR, paid about N3.405 trillion for the five years period, while the Federal Inland Revenue Service, FIRS, remitted about N8.512 trillion for the corresponding period.

The total revenue from mineral sources for the five-year period was N23.763 trillion.

The report also showed that about N8.532 trillion was transferred to the Excess Crude Account, ECA, during the five years, with N15.2 trillion as total revenue realised from oil, including payments to the nine oil producing states as 13 per cent derivation fund.

The remittances from value added tax, VAT, revenues for the period was about N2.413 trillion, while the FIRS took a total of about N96.127 billion in lieu of 4 per cent collection fees for the period.

Apart from a total of about N2.317 trillion realized as the Federal Government share of the VAT revenue, about N4.013 trillion came from non-mineral revenue sources, while N198.6 billion was realised as gain from the exchange rate difference between budgeted and the prevailing market rates.

The revenues realised from the Nigeria Customs Service, NCS, FIRS, and NNPC refunds of about N32.1.3 billion and other sources of about N230.653 billion, brought total revenue available for distribution in the Federation Accounts for the five years period to about N21.762 trillion.

An analysis of the revenues realised by the NNPC Crude oil marketing department, COMD, showed that about $69.201 billion was realised from the export of about 848.273 million barrels of crude oil between 2007 and 2011.

Details of the export showed that about $61.521 billion was realized from the export of about 710.438 million barrels of crude oil, while about $172.796 million was raised from the export of 2.687 million barrels of Forcados Condensate, and $7.518 billion from the export of 135.148 million barrels of oil through the alternative payment arrangement.

Other incomes from gas sale and Nigeria LNG feedstock exports, according to the report, showed that the country realised about $2.234 billion from the export of about 3.426 million metric tons of natural gas from the oil industry during the period.

When about $4.582 billion realised from the export of 3.056 billion British thermal unit, BTU, of NLNG feed stock is added, total revenue realised by Nigeria from gas exports for the period stood at about $6.816 billion.

The report showed that total oil and gas revenue flows to the Federation Account for the period was about $68.622 billion.

On revenue from the 445,000 barrels per day domestic crude oil allocated to NNPC for local refining and offshore processing, product exchange and export, the report showed that a total of $68.719 billion was realised from the sale of about 814.926 million barrels of crude oil during the period.

The total transfers to the Federation Account from domestic crude oil revenue flows for the period was put at about N6.794 billion.

On DPR remittances to the Federation Account, the report showed that from a total of about $26.262 billion realised for the five year period, about $101.81 million came from gas flaring penalties; $24.684 billion from oil royalties; $850.49 million from signature bonuses; $8.82 million from concession rental, and $617.38 million from other sources.

The audit carried out by SIAO, a chartered accounting firm, was to help match revenue payments from the extractive industry companies with disbursements from the Federal Government in accordance with the provisions of the country’s constitution.
*Bassey Udo-Premium Times

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