Oil Money: Senate Orders Independent Audit Of NNPC Account
— February 14, 2014
The Senate Committee on Finance yesterday accepted the recommendations of the minister of finance on the need to commission an independent forensic audit into the allegations of unremitted oil revenue by the Nigerian National Petroleum Corporation (NNPC) and directed the Ministry of Finance to engage the auditors and report back to the house on its findings in one month’s time.
Chairman of the committee Senator Ahmed Makarfi who gave this directive during the resumed public hearing on unremitted oil revenue, yesterday in Abuja, also said the committee had written to the attorney-general of the federation, Justice Mohammed Bello Adoke, to provide legal interpretations of relevant laws to determine whether the $6 billion which the NNPC claimed it remitted to the Nigerian Petroleum Development Company (NPDC) was legal.
Makarfi accepted the recommendations of the minister of finance, Dr Ngozi Okonjo-Iweala, following the outcome of the reconciliations conducted by a joint committee comprising NNPC, CBN and the Federal Ministry of Finance.
In attendance at the open public hearing were the minister of petroleum resources, Diezani Alison-Madueke; governor of the Central Bank of Nigeria (CBN) Sanusi Lamido Sanusi and group managing director of the NNPC Mr Andrew Yakubu.
Okonjo-Iweala, who presented the outcome of the reconciliation exercise, stated that NNPC presented data of how they utilized the balance of $10.8 billion, the initial amount earlier agreed as unaccounted for, namely, amount withheld for subsidy ($8.766 billion); holding cost of strategic reserve ($0.4599 billion); crude oil and product losses ($0.761 billion); pipeline management cost ($0.905 billion) bringing the total to $10.89 billion.
She stated that the data presented were all certified by Petroleum Products Pricing and Regulatory Agency (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 etc and therefore we believe we should have an independent forensic audit, managed independently of these submissions.
“Now going to the issue of the new figure of $20 billion, let me remind the committee that the NPDC and third-party arrangements featured in the original reconciliation effort in the cascade presented by NNPC.”
Concerning the new $20 billion alleged by the CBN last week, the finance minister said the new figures have two aspects as the crux: “namely, the amounts deemed to be due to the federation account as proceeds from NPDC operations of oil fields previously owned by Shell Petroleum Development Company (SPDC), and unremitted amounts captured as third party financing, both of which amounted to $8 billion.
“In looking at these elements, the reconciliation committee concluded that the issues are largely legal and require careful legal interpretation, which would need to be given more detailed attention by legal experts. For example, what is the legal status of NPDC and who owns the revenues earned by this entity? Is it the federation account or NNPC? The NNPC and CBN have both indicated they will give expert legal opinion on these issues.”
In her presentation, the minister of petroleum resources, Mrs Diezani Alison-Madueke, noted that though there was a written presidential order stopping the payment of subsidy on kerosene, it was never gazetted and as such it was difficult for the NNPC to act upon it.
“There was a presidential directive issued by the late president Yar’Adua that kerosene subsidy should be stopped. However, after that there was an inter-ministerial meeting in which the then ministers of finance and petroleum resources were parties to that meeting during which the decision was taken to stay action on the directive to remove kerosene subsidy for the very reason of the impact that such an action will have on the masses in the country.
“It is true that, as of today, NNPC supplies kerosene at N50 per litre, but the landing costs and other expenses — such that the product has to be transported round the country by road — makes it difficult for it to get to the masses at that amount. So kerosene subsidy is still in place.”
She also insisted that if kerosene subsidy was removed the price of kerosene would go higher than that of petrol.
But the Central Bank governor, Sanusi, expressed disappointment over the failure of the NNPC and other related agencies to provide him with documents needed to verify NNPC’s position on the alleged missing fund.
He also insisted that the claims by the NNPC that it is still paying subsidy on kerosene is illegal, adding that it showed proof of a directive by late President Umaru Yar’Adua for a halt on the payment of subsidies on kerosene.
He however informed the committee that since the Petroleum Products Pricing Regulatory Agency (PPPRA) had the authority to procure all relevant information on the subject matter, he would have no choice than to believe in its verification and submission to the committee.
Sanusi’s declaration resulted from an interrogation by Makarfi regarding the submissions made by the management of PPPRA.
He said: “ I do not know how much oil has been produced from these wells. I do not know how much crude has been taken. It is not a kind of central market. What is important is, if we agree with the finance minister, if we do establish that, legally, a part of this should come to the federation account, then, it is a question now of some oil industry experts coming to audit properly: how much crude has been taken, how much has been sold, how much money has come in and how much ought to have come into the federation account.
“That is really beyond the responsibilities of CBN but, in general, once it is accepted that this $20b has not been repatriated, for us, we have actually finished our own bit.
“PPRA says it is OK with the claims on kerosene. It is the agency that is legitimately authorized to certify claims on kerosene subsidy and it is saying that kerosene subsidy is OK, it is legal and it is allowed.
“That is the agency that has the responsibility, but I do have a letter from PPRA in 2010 telling me that they do not pay kerosene subsidy based on presidential directives.
“It is up to the committee to now decide whether that letter has been superseded by other directives and, in fact, whether there has been appropriation for kerosene in the first place because the issue is, with or without directives, can NNPC pay subsidy on kerosene without appropriation? These are questions that are not very difficult to answer,” he said.
At this point, Senator Makarfi sought to know whether there was provision for kerosene subsidy in the budget. Directing his questions at the minister of finance he asked, “Is there kerosene subsidy in the budget submitted to the National Assembly?” Following her response that there was none, Makarfi declared that the NNPC was engaging in illegality by spending money not appropriated for in the federal government budget. He therefore ordered that such illegality should be stopped immediately.
“At the moment, someone is responsible for providing illegally for kerosene subsidy without authorization from the NASS or presidential powers. This illegality must be stopped immediately. Spend what is appropriated and not what is not. If there is any expenditure that is not appropriated, then follow the legal process and obtain approval,” he said.
Makarfi said a forensic examination of the document will enable the Senate get to the root of the matter: “These bunch of documents and submissions by the NNPC, which the committee members will study, and we are going to the Ministry of Finance, the CBN and others, relate to the crude oil product losses amounting to $.76bn, cost of maintaining the national strategic reserve amounting to $.46bn and pipeline maintenance and management cost amounting to $.91bn.
“ Our own forensic examination of the document will make us take a decision as to whether the document supports the expenses incurred. The expenses are part of the accounting for the money.”
He also added: “The major issue laid to rest substantially is the issue on the subsidy on petrol which is $5.254bn, because the PPRA has satisfied it, even if to further reassure Nigerians. Ministry of Finance had suggested that and undertaken to independently have it forensically examined to further reassure Nigerians that the certification is indeed in order.
“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 to 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 also heard from the CBN that what they are questioning IS part of the $10.8bn. They believe that part of it should belong to the federation account, but that they are not technically competent at this stage to state how much it is.
“We have agreed to see how we will engage technical experts to determine which part of the amount, if any, belongs to the federation account. The question which is certain is that it is not all of it but part of it; but at this stage, we don’t know exactly. That is what is yet to be ascertained.
“We have also agreed and the attorney-general had confirmed to us that he will be available next week Thursday to give the legal opinion which also concerns the NPDC issue to give the Ministry of Finance legal advice on the issue. Those directly involved would be on ground
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