House panel asks NNPC to refund N3.098trn to Federation Account

2012-06-07
THE NATION Newspaper

The Joint Committee on Finance, Petroleum Resources Upstream, Downstream and Gas Committees of the House of Representatives has asked the Nigerian National Petroleum Corporation (NNPC) to refund N3.098 trillion to the Federation Account. The cash is under remittance to the account between 2004 and 2011.

Besides, the NNPC Group Managing Director, Mr. Austin Oniwon, is to apologise to the House for misinforming it and the country through alleged false claims.

The committee, however, asked the Federal Government to amend the provisions of Section 7 of NNPC Act under which the corporation hides to make direct deductions from the Federation Account.

The panel made the recommendations after an eight-month probe of alleged N450billion indebtedness of NNPC and the conflict between states and the corporation over direct deductions from the Federation Account.

The report, which has been submitted to the Speaker, Alhaji Aminu Tambuwal, was obtained by our correspondent yesterday.

The House of Representatives had in a unanimous resolution on September 22, last year mandated the Joint Committee on Finance, Petroleum Resources Upstream, Downstream and Gas Committees to investigate NNPC’s indebtedness and liability of N450billion to the Federation Account.

NNPC had earlier acknowledged the liability with Federation Account Allocation Committee (FAAC) and was expected to be making monthly remittances to defray same.

The corporation reneged leading to the failure of FAAC in May last year to make the required monthly distribution to the three tiers of government.

But the committee said from its findings, NNPC has no right to make deductions from the revenue accruing to the Federation.

It backed the position of the Nigeria Governors Forum (NGF) that NNPC had been illegally having access to the Federation Account.

The panel urged the government to review the concept of “Carry Agreements” with the International Oil Companies (IOCs) in order to reduce corruption and waste.

The committee asked Shell, ELF, Mobil and Chevron to refund $3.675billion being over-bloated claims to reimbursement between 2004 and 2006.

The report said: “NNPC should be sanctioned for taking domestic crude at discounts to itself between 2004 to 2011 to the tune of N248billion.

“The GMD of NNPC, Engineer Austin Oniwon should be sanctioned for lying on oath that NNPC does not take Domestic Crude at discount.

“The GMD of NNPC should be made to apologise to the House and the entire nation for misinforming them through his false claims which were publicised widely in the media through paid adverts.

“NNPC should refund the sum of N3.098 trillion being under remittances to the Federation Account between 2004 and 2011.

“The corporation had no right to make direct deductions from the revenue accruing to the Federation by hiding under Section 7 of NNPC. In 2006, the Petroleum Support Fund (PSF) created to take care of subsidy payments and NNPC cannot hide under the subsidy payments to make direct deductions.”

The committee highlighted the shoddy management of earnings from oil by NNPC last year.

The report said:

“From that total exported Federation Crude revenue proceeds of $10.785billion in January to September 2011, out of which NNPC and CBN appropriated $4.490billion to cash call, $3.409billion to Excess Crude Account and made available only $2.392billion for FAAC distribution, there was an unexplained shortfall of $495millio.

“These were established from the analysis of CBN, Federation Account Component Statement for the nine months in 2011.

“Further analysis and investigations of the shortfall revealed a similarity between the monthly shortfalls and what was reflected as Cash Call deducted under Gas receipts.

“The dividing line between what is right and what is wrong was found in February 2011, when no such discrepancy was observed.

“Out of the proceeds of $1.327billion that accrued from Gas receipts between January –September 2011, NNPC and CBN allocated $550.7million to Cash Call, leaving a balance of $776.5million for FAAC distribution.

“The committee should task NNPC and CBN to offer explanations to the following empirical evidence:

•Between January 2011 to September 2011, the revenue accruing from crude oil was manipulated on the Federation account Component Statement to conceal off-record deductions made from the revenue. In each of the months of January to September 2011(with the exception of February when the correct thing was done), the figures deducted off—record in each month was similar to deductions from Gas receipt as Cash Call.

•NNPC should explain therefore the whereabouts of $495,140,875 deducted off-record between January-September 2011.

•NNPC and CBN should also explain the authority based on which deductions of $550,705,447 were made from Gas receipts as Cash Call and the parameters used to determine the deductible amount.

•The duo of NNPC and CBN should submit the names of the beneficiaries of these deductions.

•Finally, based on the foregoing ugly disclosures, NNPC should be specifically made to withdraw its claims to transparency in the transfers of revenue to FAAC.

The panel also gave a damning verdict on the discounts which NNPC granted itself and under remittances to the Federation Account between 2004 and 2011.

The report added: “That the Federal Government should as a matter of urgency, critically review the whole concept of “Carry Agreements” with the International Oil Companies (IOCs) in order to reduce corruption and waste.

“That the four carry partners namely Shell, ELF, Mobil and Chevron whose over-bloated claims to reimbursement amounted to $3.675billion between 2004 and 2006 should be made to refund the sum.

“That NNPC should refund the sum of N44.932billion (an equivalent of $356million) which it paid to itself s cash call in 2006.

“That the House Committee on Petroleum Resources (Upstream) further investigates to confirm the level of crude oil losses as exemplified in 2008 when NEITI’s audit report confirmed a lifting of 414.4million barrels of crude while NNPC under-declared same as 332.1million barrels of crude.

“The under-declaration by 82.3million barrels was. Valued at $8.268billion in 2008 and should be refunded by NNPC.

“NNPC should refund the sum of $3.273billion which accrued from 48million barrels of crude, which the corporation concealed in 2006.

“NNPC should refund the sum of $3.2billion, being value of 60million barrels of crude Lila the Carry Partners took in excess of their entitlements in 2005 with the knowledge and understanding of NNPC as reported by Hart Group in NEITI’s audit report on 2005 transactions.

“That the House should expedite action on the passage of the Petroleum Industry Bill(PIB), which is the only means of unbundling NNPC and hoisting it on the part of transparency.

“The House/ relevant committee should establish close relationship with NEITI with a view to making better use of its periodic reports despite the imperfections therein.

“The House should set up a monitoring system for timely check of revenue flows and disbursement to the Federation Account. This will minimize the huge losses being incurred presently.

“That the House should take immediate steps to amend the provisions of Section 7 of NNPC Act under which the corporation hides to make direct deductions and thereby remove all ambiguities.

“Section 7 (5) of the Act mandates the corporation to submit yearly estimate of its expenditure and income to the National Council of Ministers (FEC). As this investigation has sufficiently revealed, the corporation acted more in the breach of its own Act.

“That NNPC has operated as a monopoly in an industry that has been adjudged to be opaque, has thrown up a lot of defects and deficiencies, that have impacted negatively on the nation’s revenue base as the nation’s oil revenue cannot be transparently managed.”

The panel recommended sanction for external auditors of NNPC.

“That NNPC, their external auditors, Akintola Williams Deloitte and Muhtari Dangana & Co. (Chartered Accountants) and Hart Group, the consultant to NEITI should be indicted for conspiring to overstate NNPC’s payments by N349billion on Domestic Crude take in 2004, having stated the payment as N635billion instead of N289billion

 

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