19 January 2012, Sweetcrude, LAGOS — Auditors, who looked into the processes and procedures of the Nigerian National Petroleum Corporation (NNPC), have disclosed that the corporation ripped off the nation of N11.8 billion as subsidy on lost petroleum products not consumed by anybody.
The audit report by KPMG, SS Afemikhe and Co said the NNPC also collected subsidy on locally produced petrol which was not the intention of the subsidy programme.
The auditors in their report said: “We observed that NNPC’s subsidy claim and PPPRA’s verification are based on volume of petroleum products available for sale which comprises volume of products imported and actual production from the refineries, as against duly verified volume of products lifted out of the depots, meaning volume of petroleum products sold as stipulated in the subsidy guidelines.”
“The implication of this unwholesome practice, the auditor said, was the payment of subsidy on products not consumed by end users due to losses from pipelines vandalism, theft etc.
“They told the government that in their ‘rough estimation of subsidy payment on products losses for the period under review, 2007-2009, N11.8 billion was paid out. They further informed the Federal Government, in their report, that the practices going on at the NNPC had the risk of payment of subsidy on locally refined products which is not the intent of subsidy and that it encourages inefficiency.”
The auditors thus urged the government to ensure that there is more clarity with regards to interpretations and applications of subsidy to achieve the intent of the law. Also, they suggested that government should enforce compliance with the provisions of the approved guidelines for the administration of the Petroleum Support Fund (PSF).
According to the findings of the auditors, the NNPC practice is to remit to the federation account, amount payable for domestic crude less subsidy claims. It then requests the Federal Ministry of Finance to pay the subsidy amount due to it from PSF into the federation account, being the balance of the cost of domestic crude. This makes NNPC actual remittance of proceeds of domestic crude sales to the federation account less than expected.
This, they said, should not be, instead, subsidy claims should be remitted to NNPC from the PSF by the Federal Ministry of Finance based on claims approved by PPPRA.
Minister of Finance Dr. Ngozi Okonjo-Iweala, on Tuesday, while appearing before House of Representatives probing the subsidy issue confirmed the auditors report, saying all monies made from crude oil through NNPC and partners were not paid directly into the federation accounts.
But the Petroleum Resources Minister’s appearance before the adhoc committee discounts the Finance Minister’s accession as untrue.
The Minister pointed blame to the finance minister for the authorisation of the N1.3 trillion payment for oil subsidy. This she noted repeatedly while adding that the N1.3 trillion may have been misleading to the Nigerian public.
According to KPMG, there are instances of delays in receipt of subsidy advice from PPPRA resulting in the estimation of subsidy claims by NNPC which resulted in over/under deduction from proceeds of domestic crude sales.
Giving instances the auditors said that the sum of N25 billion was deducted as subsidy estimate for September 2009 from domestic crude sales proceeds while PPPRA approved a subsidy of N23.8 billion. It further said that the sum of N35 billion was deducted as subsidy estimate for November 2009 but PPPRA approved N21.3 billion. As a result over deductions from the two months amounted to N14.9 billion.
The report said however that only N4.2 billion was swept into the Federation Account by NNPC as adjustment for subsidy claimable in the said two months.
The auditors said “Based on our analysis, subsidy over deduction for 2007, 2008 and 2009 was estimated at N2 billion, N10.3 billion and N16.2 billion respectively stating that high risk of loss of subsidy adjustment trail specifically in instances of under remittance.