Forensic Auditors to the Rescue

The federal government appoints forensic auditors to examine the accounts of the Nigerian National Petroleum Corporation, its subsidiary and other agencies of government operating in the oil and gas sector in a bid to clear the air over NNPC’s non-remittance of $49.8 billion into the federation account

|  By Anayo Ezugwu  |  Feb. 24, 2014 @ 01:00 GMT

THE federal government has stepped in to end the lingering feud between the Nigerian National Petroleum Corporation, NNPC, and the Central Bank of Nigeria, CBN, over alleged non-remittance of $49.8 billion to the federation account. It has decided to engage independent forensic auditors to investigate transactions carried out in the oil and gas sector. The auditors, according to Ngozi Okonjo-Iweala, minister of finance, will examine the books of the NNPC and the Nigerian Petroleum Development Corporation, NPDC, as well as other government agencies operating in the oil and gas sector.

The move, she said, would help to unravel the controversies surrounding the alleged unremitted oil revenue by the NNPC. She said the technicalities involved in the audit of the sector as well as the special expertise needed to carry out the investigation informed the decision. The minister said since conflicting figures were being mentioned by the CBN and the NNPC, the only way to establish the truth and reassure Nigerians was to set up an independent body to verify all claims made by the parties.


“It should be emphasised that the issue of unremitted funds by the NNPC is not new; it has been an ongoing issue at every federation accounts allocation committee meeting chaired by the ministry of finance, as evidenced by reports from the monthly meetings. As of December 2013, the cumulative un-reconciled figure of shortfalls from NNPC payments stood at N1.792 trillion, or about $11 billion.

“On the original $10.8 billion, which was the shortfall we had as of July 2013, another reconciliation meeting was held at which NNPC presented data of how it utilised the balance of $10.8 billion, namely: amount withheld for subsidy, $8.766 billion; holding cost of strategic reserves, $0.4599 billion; crude oil and product losses, $0.761 billion; and pipeline management cost, $0.905 billion, for a total of $10.89bn. The data presented were all certified by the PPPRA as being accepted. We asked to see the backup documentation to enable verification. Our judgment is that a proper examination of these documents requires technical expertise beyond the capacity of the reconciliation team, and, therefore, we believe we should have an independent forensic audit managed independently of these submissions,” she said.

But Sanusi Lamido Sanusi, CBN, governor, had insisted while appearing before the Senate Committee on Finance and Inter-Agency Committee, on Thursday, February 13, that the NNPC had yet to account for $20 billion in oil sale proceeds and that the subsidy the corporation was removing on kerosene was illegal, null and void. “We established that the NNPC shipped about $67 billion worth of crude oil and about $47 billion came back to the Federation Account; so, there is $20 billion unremitted. The finance minister had explained that there was $6 billion that the NNPC said it shipped on behalf of the NPDC.

“There is the $2 billion third party finance and the balance of $12 billion from our books, and even from the NNPC submissions, it is what is outstanding from the domestic crude of $28 billion that was exported by the Nigerian Petroleum Development Company. As far as the CBN is concerned, the most important point to establish is that there is a difference of $20 billion between what the NNPC shipped and what it repatriated. We have presented documents from the PPPRA and the Presidency that, in our view, there is no subsidy on kerosene first of all, and that the payment of kerosene subsidy is a violation of a written presidential directive,” he said.

However, Diezani Alison-Madueke, minister of petroleum resources, said the ministry was on the same page with the Inter-Agency Committee submission. “The work of reconciling the alleged missing $10.8 billion has been done by the Petroleum Products Pricing Regulatory Agency, PPPRA, and the Department of Petroleum Resources, DPR, and, of course, in tandem with the NNPC, all these agencies have cleared the corporation on the issues at stake,” she said

According to Alison-Madueke, there was a presidential directive that kerosene subsidy should be withdrawn but that the directive was not gazetted, stressing that the inter-ministerial committee then comprising of the minister of finance and minister of petroleum resources in 2009 directed a stay of execution of the kerosene subsidy withdrawal.


The minister posited that should kerosene subsidy be withdrawn today, the price of kerosene will triple and that would cause pains on the Nigerian masses. “Kerosene today is imported at N150 per litre and sold at N50 per litre and this has been on for years. It will be very simple for the NNPC to withdraw subsidy and if this is done, it will cause pains on the masses.” She called for the legal interpretations of the NNPC Act in respect of the first line charge of the corporation to decide the legality of its current status in respect of kerosene subsidy deductions and the status of the Nigerian Petroleum Development Company, NPDC, the upstream subsidiary company of the NNPC.

Presenting NNPC’s position to the Committee, Andrew Yakubu, group managing director, NNPC, said the corporation had presented convincing proofs to the inter-agency committee on crude oil and products losses, national strategic reserve, pipeline maintenance and management and the cost incurred on petroleum products subsidy. He said it was the incontrovertible nature of the proofs that informed the decision of the Committee to accept NNPC’s submission.

“In spite of the non-payment of subsidy, the NNPC continued to sustain petroleum products supply, even when other marketers refused to participate. This development led to the accumulation of $8.76 billion as unpaid subsidy due to the NNPC for petroleum products supplied during the period under review.  This amount is comprised of US$5.25 billion for petrol and US$3.51billion for kerosene) and has been reconciled and signed-off by statutory agencies, PPPRA, DPR and NNPC, as outlined in Appendix III, Schedule 3 of NNPC Act,” he said.

According to Yakubu, the corporation has incurred huge costs in ensuring adequate and steady supply of petroleum products in Nigeria resulting from the purchase of crude oil at international prices while selling petroleum products at regulated rates, non-payment of subsidy claims for petroleum products supplied to Nigerian domestic market and crude oil and petroleum products losses due to syndicated theft and vandalism. He called for the payment of outstanding subsidy due to NNPC, formal approval for the reimbursement of cost of holding strategic petroleum product stock, reimbursement of crude oil and petroleum products losses and sustenance of the recent momentum to end pipeline vandalism, crude oil and products theft.

In his submission, Senator Ahmed Makarfi, chairman of the committee, said the committee would study the documents and submissions by the NNPC and that “our own forensic examination of the document will make us take a decision as to whether the documents support the expenses incurred. We have also received certification for kerosene subsidy but the key issue is the appropriation to it and we have all agreed here that no appropriation has been made for it. The implication of spending money that is not appropriated is well known to everybody and the whole world is hearing this. I don’t want us to joke or play with this. It is the most central issue. All agencies that have spoken have confirmed to the whole world that this money was not appropriated and I want people to absorb the import of this confirmation. We will deliberate on how to deal with the past, how we will deal with the future is critically important and this is the best time to deal with the issue to avoid further contravention,” he said.


Meanwhile, Olusegun Adeniyi, spokesman to late President Umaru Musa Yar’Adua, said he was not surprised that the late president is being held responsible for the continued subsidy payments on kerosene estimated to have reached N1.7 trillion. He said that Nigerians should not believe the NNPC that the late Yar’Adua never conveyed any directive to the appropriate authorities that such payments be stopped or he conveyed the directive in writing but later withdrew it by word of mouth. “I would not have joined issues with the NNPC but for the cock and bull statement put out last Friday by its Group Executive Director in charge of production and exploration, Dr Abiye Membere, to the effect that Yar’Adua’s directive was not formalized before he fell sick and died. Such dishonesty against the late president is not something I can possibly allow to just pass, especially given that this same administration has already placed it on record that Yar’Adua, indeed, directed that kerosene subsidy payments be stopped in June 2009,” he said.

According to Adeniyi, the report of a Technical Committee on Payment of Fuel Subsidies, set up on April 17, 2012, revealed that the NNPC was actually instructed to stop kerosene subsidy. “The volume one of the committee’s report submitted in June 2012, revealed that in spite of a directive issued by President Yar’Adua on June 15, 2009 that NNPC should cease subsidy claims on kerosene, PPPRA resumed the processing of kerosene subsidy claims in June 2011 and NNPC resumed the deduction of kerosene subsidy claims to the tune of N331,547,318,068.06 in 2011. In addition, the distribution of kerosene which was being imported solely by NNPC was skewed in favour of depot owners who have no retail outletsナTwo-thirds of the kerosene sold by NNPC between 2009 and 2011 was sold to depot owners and ‘middle men’ who, in turn, sold the product to owners of retail outlets at inflated prices of between N115 and N125 per litre (compared to the ex-depot price of N40.90), leaving consumers to pay higher prices than the N50 per litre directed by Government. For several years now, the country has been incurring huge subsidy bills for kerosene and its citizens are not receiving the benefit – instead the country has been financing ‘rent’ for the middlemen.”