CBN/NNPC Crude Oil Sales Controversy Deepens

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Andrew Yakubu, group managing director, NNPC
Andrew Yakubu, group managing director, NNPC

The Nigerian National Petroleum Corporation dismisses allegations by the Central Bank of Nigeria that it fails to account for the $49.8 billion from crude oil sales

By Maureen Chigbo  |  Dec. 23, 2013 @ 01:00 GMT

THE current controversy over remittance or non-remittance of $49 billion revenue accruing from sales of crude oil revenue might end up being much ado about nothing if the explanation of the Nigerian National Petroleum Corporation, NNPC, is anything to go by.  The NNPC has said that no money is missing and the alleged amount can be found in the accounts of other federal government agencies which deduct their revenue at source from revenue from crude oil sales. Such government agencies include Department of Petroleum Resources, DPR, Federal Inland Revenue Service, FIRS, and National Petroleum Development Company, NPDC.

The Central Bank of Nigeria, CBN, triggered off the row when it alleged recently that the NNPC failed to remit crude oil proceeds between January 2012 and July 2013. Sanusi Lamido Sanusi wrote President Goodluck Jonathan in September, complaining about NNPC’s failure to remit the money to the federation account in contravention of exant laws. The amount represented 76 percent of the value of crude oil lifting during the period. Realnews learnt that immediately Jonathan got the CBN letter, it sent a query to the NNPC which replied providing all the necessary facts to buttress its case.

Sanusi
Sanusi

However, when the letter of CBN was leaked to the press, there was an outrage with some human rights organisations calling on Jonathan to probe the matter. For instance, the Socio-Economic Rights and Accountability Project urged the president to query the NNPC over the matter and to mark the international anti-corruption day by publicly announcing to Nigerians what he is doing to find the missing funds and to bring suspected perpetrators to justice.

Again the NNPC last Tuesday went public with its defense refuting the allegations. In a statement signed by Omar Farouk Ibrahim, general manager, Media Relations Department of the NNPC, the corporation clarified that the allegation is borne out of a misunderstanding of the workings of the oil and gas industry and the modality for remitting crude oil sales revenue into the Federation Account.

“For the avoidance of doubt, it needs to be stated that the figure of 594.024 million barrels of crude oil given by the CBN as the total crude oil lifting for the period of January 2012 to July 2013 does not represent the correct picture of crude oil lifting for the period. From our records, the correct figure is 618.55 million barrels. This shows that the CBN understated the actual crude lifting by 4.13 percent, Ibrahim said.

From the NNPC’s point of view, revenues from crude oil liftings are in various categories, namely Equity Crude; Petroleum Profit Tax, Royalty, Third Party Financing and the Nigerian Petroleum Development Company, NPDC. Revenues from each of these categories are statutorily collected by different agencies of the government. The NNPC collects only one of the aforementioned categories, namely Equity Crude. Petroleum Profit Tax is collected by the Federal Inland Revenue Service, FIRS, Royalty goes to the Department of Petroleum Resources, DPR, Third Party financing goes to Research, Development, Programme and Satellite fields Development, while NPDC goes to NPDC for upstream development.

While the NNPC pays proceeds from Equity crude directly to the Federation Account with the CBN, the FIRS and DPR pay PPT and Royalty, respectively into the Federation Account with the CBN. The sum total of these proceeds make up the alleged unremitted revenues, Ibrahim explained.

“The 24 percent of total crude oil revenue receipts which the CBN governor is reported to have acknowledged that the NNPC remitted represents the proceeds from the equity lifting which the NNPC is directly responsible for. The alleged unremitted 76 percent was paid to the agencies that are statutorily empowered to receive them for onward remittance into the Federation Account”, Ibrahim said.

He stressed the need for institutions of the federal government and top government functionaries to seek understanding of issues that are not clear to them from relevant agencies rather than go public with misleading information that is capable of creating public disaffection. He expressed NNPC’s availability at all times to meet with all relevant stakeholders to clarify issues.

President Jonathan
Jonathan

Realnews gathered that the CBN, DPR, FIRS and other agencies of government are represented at the crude oil export terminal and that they all reconcile their papers there. Realnews was told that somebody just wanted to score cheap political point by raising the allegation. It was learnt that all the agencies of government including the DPR and the FIRS all have accounts with the CBN where revenue accruing to them is removed at source and credited to their accounts. “There is no money missing. The CBN is aware of this because all the accounts of the government agencies which deduct money at source and remit to the federation account are domiciled at the bank. We know that they know except that somebody just wanted to score a cheap political point, all because of 2015 general election” an official on NNPC told Realnews.

However, CBN, on Thursday, December 12, said: “it will neither deny or confirm the existence” of the letter Sanusi wrote to Jonathan on the matter. In a three-paged statement signed by Ugochukwu Okoroafor, director, Corporate Communications, the CBN said because “the matter is gathering momentum in the public space, and seems to be assuming a highly politicised dimension,” it had to make some clarifications that the CBN is statutorily mandated to establish price stability, protect the external value of our national currency, manage the external reserves of the federation and ensure the smooth functioning of our financial system, as well as adviser to the president on economic matters. According to Ugochukwu, the capacity of the CBN to perform its role effectively is strengthened or undermined by the extent to which the nation is able to increase foreign exchange earnings and savings from these earnings, thus boosting the Excess Crude Savings Account, raising reserve levels, providing currency stability and moderating interest rates with limited risks to inflation and financial stability.

“In the performance of this role, it is natural for the CBN to be concerned at the low level of accretion to reserves and the Excess Crude Account, inspite of strong international oil prices, especially as Nigeria’s performance is compared with other oil producing economies. The Central Bank of Nigeria is aware that this concern is shared by Mr. President, the federal ministry of finance, ministers, state governors, legislators, economists, analysts and all stakeholders involved in managing the economy and discussions on how to address the matter are being held at highest levels of Government”.

“The CBN is aware that, on the instruction of the honourable minister of petroleum resources, the audit firm, PwC has been directed to audit the revenues of the NNPC.  The CBN is also aware of a proposal to set up a technical team made up of representatives the federal ministry of finance, the NNPC and the CBN to examine the sources of any revenue leakages and propose appropriate fiscal controls,” it said adding that “the CBN welcomes these initiatives and believes that they represent a positive contribution to the process of improving the management of the economy, especially if they lead to greater oversight of the Finance Ministry over oil revenues and improvements in disclosure and transparency in the oil industry.”

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