The Nigeria Extractive Industries Transparency Initiative has accused the Nigerian National Petroleum Corporation of not remitting $3.8bn (about N748.6bn at the current official rate of N197 to a dollar) and N358.3bn to the Federation Account in 2013 in its latest audit report.

According to the report, the NNPC also received a total of $12.9bn from the Nigeria Liquefied and Natural Gas Company between 2005 and 2013 but did not remit anything to the Federal Government.

The report also stated that the country recorded a loss of revenue of N20.4bn and $5.966bn in 2013, adding that oil and gas companies underpaid the federation by $599.8m in the same period.

The Chairman of NEITI, Dr. Kayode Fayemi, who disclosed this on Monday while presenting the 2013 audit reports of the agency in Abuja, stated that 41 oil and gas companies and 16 government agencies participated in the audit.

Citing the audit report, Fayemi said some revenues that should have gone to the federation in 2013 were not made or lost due to a number of reasons.

He said, “These revenues were broken down as follows: sums of $3.8bn and N358.3bn as outstanding revenues from the NNPC and its sub-units in 2013. These outstanding payments were due from unpaid consideration from the divested OMLs, cash call refunds from NAPIMS, and NPDC liftings from NAOC JV, etc.

“The sums of $5.966bn and N20.4bn as revenue losses to the federation. These losses were due to offshore processing agreements, crude swap, crude theft, etc. The sum of $599.8m as under-assessment/under-payment of petroleum profit taxes and royalties by oil and gas companies as a result of the use of different pricing methodology by the government and the companies because of the absence of a new fiscal regime.”

Fayemi, who doubles as the Minister of Solid Minerals, stated that the total crude oil production in 2013 was 800,488,000 barrels, adding that this was made up of production from all sources and various agreements.

He, however, noted that the total volume of crude lifted through the different contract arrangements was 800,338,000 barrels, while the difference of 150,000 barrels was because not barrel produced was lifted.

According to the report, the total revenue flows to the federation from all sources in 2013 was $58.07bn, which represented a decline of eight per cent when compared with the $62.9bn realised in 2012.

The audit revealed that the NLNG paid the sum of $1.289bn as dividends, interest and loan repayment for 2013, adding that the NNPC acknowledged receipt of this amount but did not remit it to either the Federal Government or the Federation Account.

The NLNG payment, according to NEITI, was captured under the N358.3bn revenue that was not remitted by the corporation.

“However, it is important to also note that the 2013 figure brings to $12.9bn the total NLNG payment received by the NNPC between 2005 and 2013, but not remitted by the NNPC to the Federal Government or the federation,” it added.

On the transfer of the federation’s equity by the NNPC to NPDC, NEITI stated that between 2010 and 2011, the corporation divested 55 per cent of the federation’s equity in eight Oil Mining Leases from the Shell Joint Venture to its subsidiary, the NPDC.

It said the eight OMLs were valued by the Department of Petroleum Resources at $1.8bn, out of which only $100m was paid in April 2014, leaving a balance of $1.7bn.

Also, the audit discovered that the NNPC assigned four OMLs (60, 61, 62 & 63) from the NAOC JV to the NPDC in December 2012, but no amount had been paid on them as of the conclusion of the 2013 audit, neither was the value of the consideration stated in the deed of assignment.

Meanwhile, the NNPC lifted crude on behalf of the NPDC (not the federation) from the OMLs that were not fully paid for or were not even paid for at all.

According to the audit report, no justification was provided by the NNPC for these transactions except that it was within the powers of the Minister of Petroleum Resources to do so to support the NPDC to develop upstream capacity.

The report further asserted that the assignments of the OMLs were not transparent and competitive.

NEITI stated that the continuous allocation of 445,000 barrels of crude oil per day to the refineries was not beneficial to the federation, because the refineries were operating at a combined capacity of about 24 per cent as of the review period.

It stated that in order to meet the shortfall in product supply, the NNPC introduced the Offshore Processing Arrangement and crude for product swap arrangement, but argued that these transactions were not cost-efficient as the value of the products received minus all the costs incurred was still less than the value of the original crude.

“The loss to the federation incurred through the OPA and swap came to $211.8m and $306m respectively, both totalling $518m,” it said.

On petrol subsidy payment, the report stated that N1.3tn was processed for the NNPC and independent marketers in 2013.

The NEITI audit put the total value of crude oil losses to the federation as reported by three JV companies in 2013 at $4.7bn, which represents an increase of 46 per cent over that of 2012, adding that these figures were captured in the total amount not remitted by the NNPC as earlier mentioned.

In its recommendations, NEITI urged the Federal Government to conduct a comprehensive investigation into the divestments of the federation’s assets by the corporation to the NPDC.

It said a scientific technology such as finger printing should be put in place to track Nigeria’s crude oil trade to check theft, adding that the Federal Government should quickly resolve the issue of pricing methodology by enacting appropriate laws to forestall under assessments of royalties.

The report stated, “The NNPC and its sub-units should refund outstanding payments to the federation. Gas should be invoiced in dollars, not naira, to avoid exchange losses. The NNPC should discontinue alternative importation arrangements and limit itself to export of crude and import of refined products.

“The NNPC should abide by the Federal Government’s financial regulations and always comply with the 90-day credit period. Pioneer status should not be granted to companies in the oil and gas sector, except a company is actually pioneering an aspect of the industry. Government should investigate the status of the NLNG dividends. The NNPC, DPR, FIRS, OAGF and CBN should prioritise fixing remedial issues identified in their operations.”

On the highlights of the solid minerals audit report, Fayemi said 619 entities made payments to the government in 2013, but the audit reconciled payments by only 65 entities, including 63 companies and two buying centres that paid N2m and above.

He said a total of N33.86bn accrued to the federation from the solid minerals sector in 2013 and noted that out of this, payments from cement manufacturing companies accounted for N30.47bn or 89.98 per cent; construction companies, N1.98bn (5.83 per cent); and mining and quarrying companies, N1.42bn (4.19 per cent).

The report stated, “The distribution of revenues among government agencies showed that N28.954bn was collected by the Federal Inland Revenue Service; N1.343bn by the Mines Inspectorate Department; and N704m by the Mining Cadastre Office.

“Unilateral disclosures by companies not reconciled in the audit scope came to N2.861bn, while N748m was reported as unilateral disclosures by government entities. Revenues from solid minerals rose by 7.6 per cent from N31.5bn in 2012 to N33.9bn in 2013.”

The report revealed that payments from the solid minerals sector were not well dispersed.

For example, five companies accounted for 93 per cent of the reconciled payments and they were Dangote Cement, 53 per cent; WAPCO, 19 per cent; Ashaka Cement, 10 per cent; UNICEM, seven per cent; and CCNN, four per cent.

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