Journalism of Courage

NNPC frowns at Auditor General’s report of “missing” 22,929.84 litres of petrol, says lost to pipeline vandals

.. report to paint NNPC in a bad light

Following the queries by the Auditor General of the Federation (AuGF), Mr Adolphus Aghughu, that the Nigerian National Petroleum Company Ltd (NNPC) had failed to account for about 107,239,439 barrels of Crude oil lifted for domestic consumption in 2019, the company has denied the report, saying its part of moves to paint it in a bad light.

NNPC Ltd also faulted the observation of the Auditor-General in the report that it could not account for 22,929.84 litres of Premium Motor Spirit (petrol) valued at N7.06 billion allegedly pumped into two depots (Ibadan-Ilorin and Aba-Enugu) in June and July 2019.

The oil company’s clarifications are contained in a letter to the AuGF dated March 18, 2022 which seek among others to provide additional facts and clarity on the audit issues raised on the inflows and outflows into the federation account by the NNPC for the year ended  December 31, 2019, including the alleged 107 million barrels “missing/unaccounted’’ crude oil.

The letter sent to the Director, Treasury Audit Department in the Office of the Auditor-General was received on September 2, 2021 recalls that misconceptions followed a submission made by the Auditor-General to the Public Accounts Committee of the National Assembly.

The audit queries were earlier raised and brought to the attention of the NNPC management and a series of engagements were made between officials of the NNPC and the Office of the Auditor-General.

The meetings were to enable the NNPC to provide further clarifications on the financial statements.

After the several meetings between the NNPC and the AuGF’s Audit to reconcile the alleged “discrepancies’’ raised by the Auditors on the NNPC’s inflows and outflows into the Federation Account and supporting documents provided, the company said it was surprised to see Auditor-General going to “indict’’ it before the National Assembly.

Based on the schedule of responses and documentation for a clearer understanding of the NNPC’s operations on the queries, NNPC had written: “We refer to your letter dated 28th July 2021, outlining audit issues and recommendations on the inflow and outflow into the Federation Account by NNPC for the year ended 31st December 2019.

“Accordingly, we forward herewith schedule of responses and documentation to aid clear understanding as regards to observations raised.

“We believe that the explanation provided alongside the supporting documents will deliver a better understanding of NNPC operations and exonerate the corporation from any perceived wrongdoings.”

Again on March 18, 2022, the company while providing more clarification on the issue reminded the Auditor-General of the Federation of the several engagements between its team and his Audit Team.

“For the avoidance of doubt, we have attached further clarification to assist the AUGF in ensuring that correct and valid information concerning the inflows and outflows into the Federation Account by NNPC for the year ended 31st December 2019 is reflected in the AuGF’s reports and presentations to all relevant stakeholders.

“The AUGF is kindly invited to note that NNPC cherishes the enormous trust the Federation has in its capacity to effectively manage Nigeria’s hydrocarbon resources for the benefit of all Nigerians, and as a promoter of transparency and accountability, NNPC will never ignore audit observation of such gravity,” it said.

The NNPC, however, expressed its commitment to the Federation Account remittances and to continue to improve its internal processes and controls through a series of process redesign and automation to sustainably drive excellence in both operations and compliance.

The letter added: “To the best of our knowledge, NNPC’s exit meeting with the office AUGF on NNPC’s inflows & outflows into the federation account for the year ended 31 December 2019 has addressed all the audit observations under investigation.

“The AUGF may kindly review the premise of the submission to National Assembly which contradicts the exit meeting referred above.

“NNPC welcomes and appreciates the support of all stakeholders in entrenching transparency and accountability in the business we do and is open to provide any additional clarification that may be required by the AuGF in respect of the above subject matter.”

Putting the records straight, NNPC stated: “To the claims that the NNPC Ltd failed to account for about 107,239,439 bbls of Crude oil lifted for domestic consumption in 2019, as of 2019, the total domestic crude of 107,239,439 bbls was lifted, valued at N2,145,512,821,445.49.’’

The figures, according to Persecondnews, were fully accounted for and adopted at the monthly Federation Account Allocation Committee meetings.

Chaired by the Minister of Finance, Mrs. Zainab Ahmed, the committee comprises Commissioners of Finance from the 36 states, representatives of revenue-generating agencies such as NNPC, Federal Inland Revenue Service, Department of Petroleum Resources, Central Bank of Nigeria, Nigeria Customs Service among others.

On the query about the “unaccounted’’ 22,929.84 litres of PMS worth N7.06 billion pumped to two depots (Ibadan-Ilorin and Aba-Enugu) in June and July 2019, the NNPC said the 22,929.84 litres were losses attributable to various reasons including pipeline vandalism in the regions.

According to NNPC, there were 37 points of pipeline vandalism in July 2019 which led to product losses as well as a major fire incident at Kom Kom during pumping operations due to valve insertions and leakages.

Other reasons for the petrol losses are the insertions of 24 valve from illegal tapping while seven weld failures occurred from the old saddle weld.

It added that there were failures by two old pegs from previously pegged points, while 11 old valves also failed.

Furthermore, the NNPC urged the Auditor-General to note that PMS was introduced to the line after many months of inactivity, adding that figures quoted for the 3-pipeline segment should be in m3 and not litres but valued in litres.

The document further explained that 496.84m3 of PMS pumped on this axis was in the month of July 2019 and not June 2019, stating that 4619m3 of PMS was however received at Aba in September 2019 from that batch pumping.

It stated further that the total amount from the transaction was N7,056, 137,190 as against the N7,056, 137,180 quoted by the Auditors.

On the N663,896,567,227.58 discrepancies between the amount reported by the NNPC as remittances to Federation Account in 2019 and what was reported by the Accountant General of the Federation, the document stated that the NNPC maintains proper records of transfers to the Federation Account.

It added that the actual reconciled balance as per the OAGF and NNPC was N1,146,493,281,781.26 as against the N1,272,606,864,000 which was being quoted.

From the document, it was revealed that NNPC FAAC Reports and NAPIMS Annual Reports showed the total remittance to Federation Account which included NNPC Profit Oil, JV Royalty and JV Tax; while the OAGF Report showed the above as a separate line item.

It added that based on the NNPC figure per transfer mandate, the remittance amounted to N568,269,416,640.86 as against N519,922,433,918.46.

It was also revealed that the schedule of transfers that the NNPC made to the Federation Account was in alignment with the records provided as per OAGF FAAC Report.

On the difference between NAPIMS Financials and OAGF report, the document revealed that this was based on a number of reasons such as timing difference as a result of the basis of accounting of the revenue/receipt due to the Federation.

The document added that while the NNPC accounts for the federation revenue on an accruals basis, the OAGF account is on the actual month of collection (cash basis).

The difference between NAPIMS Financials and OAGF Report, according to findings was also due to funding of pre-export financing in line with appropriation which was classified as remittance to the federation in the financials, adding that it has been adjusted appropriately.

The discrepancy also arose as a result of CBN’s reversal of overpayment of Cash Call arrears which, according to the NNPC’s submission had been appropriately adjusted.

“Based on these responses, no amounts are to be remitted. NNPC maintains proper records of transfers to the Federation Account,” the document added.

On the Auditor-General’s observation that the NNPC effected deductions from Federation Revenue before remittances to Federation Accounts, investigations further revealed that the NNPC duly complied with the provisions of the country’s Constitution.

By the provisions of the Constitution, Joint Venture Cash Call is regarded as production cost and the first-line charge from Federation Revenue upon which government priority projects and pipeline maintenance expenses are budgeted for.

The NNPC, according to findings, is only acting as an agent of the Federation a responsibility that enables it to transfer the balance of this charge to the Federation Account for distribution to the three tiers of government – federal, state and local.

It also noted that the production cost deduction (JV Cash Call amount) by NNPC and other deduction incidental to Crude Oil and Gas activities does not contradict the 1999 Constitution or any other Act and is in line with the provisions of NNPC Act Section 7(4){b).

On the observation of irregular transfer of the sum of N4,572,844,962.25 to the Federal Inland Revenue Service, the document showed that the NNPC is obligated on behalf of the Federation to pay Petroleum Profit Tax from Crude Oil proceeds and Companies Income Tax from gas proceeds on JV operations.

It said that the total sum of N29,470,250, 296.88 was for both PPT and CIT for the period under review

“Accordingly, the payments were made from the two revenue streams of the JV operations in the sum of N24,897,405,334.33 plus N4,572,844,962.25 from Crude Revenue Account and Gas Revenue Account respectively. The amount was paid to FIRS for subsequent remittance to Federation as appropriate,” NNPC explained.

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