05 January 2016, Abuja — The insolvency of the Nigerian National Petroleum Corporation, NNPC, has been brought to the fore, with its inability to fund its obligation to International Oil Companies, IOCs, as it owes its Joint Venture (JV) partners $2.839 billion, about N567.76 billion, between January and November 2015.
The NNPC, in its Monthly Financial and Operations Report for November 2015, obtained from its website, yesterday, stated that it was only able to pay $3.395 billion to fund its JV cash call obligation with IOCs, instead of a total of $6.774 billion.
Specifically, the NNPC stated that JV cash call is a first line charge to Federation Account, adding that the 2015 approved budget requires monthly funding of about $615.8 million.
To this end, a monthly funding of $615.8 million translates to $567.76 billion for the 11-month period.
The huge indebtedness to the IOCs in the JV arrangement was irrespective of the fact that the NNPC last remitted dollar proceeds from its crude oil export to the Federation Account in the month of March 2015.
Giving a breakdown of JV cash call funding and amount remitted to the Federation Account, the report stated that the NNPC paid $300 million for its JV obligation in January and $320.8 million each for February and March, while it remitted $76.642 million, $346.21 million and $184.98 million to the Federation Account for January, February and March respectively.
From April till November, no single remittance was made to the Federation Account, while it paid $502.386 million, $338.103 million, $387.93 million, $419.411 million and $225.74 million for the months of April, May, June, July and August respectively.
For the months of September, October and November, it paid $271.994 million, $445.79 million and $402.55 million respectively, for its JV cash call funding obligation.
NNPC blames declining crude oil export revenue
The NNPC blamed the development on its declining crude oil export revenue, occasioned by the persistent decline in the prices of crude oil in the international market.
According to the NNPC, the crude oil export proceeds are no longer sufficient to service the JV Cash call obligation and remit to Federation Account.
It said: “JV cash call is a first line charge to Federation Account and 2015 approved budget requires monthly funding of about $615.8 million. NNPC is, therefore, mandated to sweep all the export receipt to JV Cash Call funding implying a zero remittance to Federation Account.”
The NNPC stated that current total export receipt was 9.7 per cent lower than previous receipt by $43.24 million, noting that the outlook is attributable to 11 per cent drop in export lifting relative to previous month lifting.
It said: “Total export crude oil and gas receipt for the period of January-November 2015 is $4.54 billion. Of the total receipts, the sum of $0.61billion was remitted to Federation Account while the balance of $3.94 billion was used to fund the JV Cash Call for the period. Thus, JV funding has gulped more than 86 per cent of the proceeds.”
Conversely, on the allocation of Naira proceeds, the report stated that the NNPCremitted N1.003 trillion to the Federation Account from January to November 2015 from the sale of domestic crude oil.
Giving a breakdown of NNPC Naira remittances, the report disclosed that N69.634 billion was for debt repayment while N933.097 billion was for transfers to the Federation Account.
*Michael Eboh – Vanguard