09 March 2019, Sweetcrude, Abuja — The Nigerian Natural Resource Charter, NNRC, has accused the Nigerian National Petroleum Corporation, (NNPC) of consistently failing to conduct its financial audits on a timely basis and refusing to publicly disclose its audited accounts.
In its latest Policy Briefs on its Precepts 6, the NNRC said its most-recent Benchmarking Exercise Report (BER) observed that the NNPC also performed low in the area of presentation of accurate financial recorded.
According to the NNRC, the NNPC’s audited accounts are only carried out when the need arises and at the behest of political office holders especially the executive arm of government.
It said, “This is in contravention of section (7) subsection (2-3) of the NNPC Act (1977) which directs regular auditing of the corporation’s account in a financial year.
“Also, the series of previous independent audits indicted the corporation of sharp practices in accounting information, the effect of which strongly undermine sound financial judgment of audited reports.”
The NNRC further stated that the NNPC had not shown willingness in making its audited financial information publicly available — despite the existence of the Free of Information (FOI) Bill and Fiscal Responsibility Act (FRA) which promote public knowledge of the activities of the Ministries, Departments, and Agencies (MDAs).
“For example, the Fiscal Responsibility Commission (FRC) has decried non-submission by NNPC of its audited financial reports since 2014. However, the 2017 BER did observe that mild progress has been recorded in recent time. Notably, in 2016, the organization started publicizing its monthly financial and operational information. Nevertheless, doubts remain about the sustainability of this practice,” the NNRC stated.
The Initiative lamented the high level of political interference in the affairs of the NNPC, particularly, noting that incessant political meddling was observed in the recruitment into top hierarchy positions of the corporation.
According to the NNRC, this is detrimental to policy consistency and stability in the corporation as well as limiting to the effective operation of the board of directors.
It said, “Also, at the heart of corporation’s effectiveness lies its struggle to key into commercially-effective principles in its operations. Specifically, NNPC has not been incentivized to deliver commercially-viable services.
“The corporation’s commercial and non-commercial functions are not well aligned and, in most cases, conflicting each other. For example, part of the non-commercial roles discharged by the NNPC is to ensure regular supply of refined petroleum products irrespective of the prevailing economic conditions.
“This quasi-fiscal activity distorts market incentives and hampers its profitability and commercial viability – part of the explanation for the serial operational losses in the corporation.”
However, in its recommendations, the NNRC called on the government and the NNPC to, “allocate resources more efficiently. Specifically, NNPC should invest resources in income generating activities -such as the rehabilitation and effective management of existing refineries and should be encouraged by the government to do so, rather than financing the government’s mandate on subsidies.
“Commence oil sector reform by signing the PIGB into law, thus allowing new national oil companies to become more commercially oriented. Specifically, a change in the business model and ownership structure will improve efficiency in value addition and corporate governance.
“Make NNPC more commercially viable to reduce losses and unlock investments to cover financing shortfalls, by adopting an effective corporate governance system that reduces political interferences, prioritizes commercial objectives of the corporation, and enhances financial and operational efficiency.”