BY DAYO OKETOLA
A manned locally-made boat containing crude oil near River Nun in Bayelsa
| credits: Reuters
| credits: Reuters
Poor accountability of oil revenues and continued crude theft have constituted major threats to the Nigerian economy,DAYO OKETOLA reports
Nigeria’s economic survival is closely tied to its oil revenue and the demonstration of accountability and probity in the management of the oil proceeds.
But there are indications that not all oil revenues ever get to the government coffers and as such the issue of non-remittance or missing petrol dollars has become the cause of regular public outcry and government concern over the years.
Analysts are of the opinion the lion’s share of Nigeria’s oil earnings has found its way into private pockets over the past decades of oil exploration and production.
“Over $400bn was generated from the oil and gas sector in the country between 1999 and 2011. But will you say this fund was adequately used?” a board member, Extractive Industries Transparency Initiative, Ms. Faith Nwadishi, asked. The initiative is a global body for the improvement of openness and accountability in the management of revenues from natural resources.
According to analysts, there is more than meet the eye in oil revenue remittances in Nigeria.
For the instance, the Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, recently accused the Nigerian National Petroleum Corporation of not remitting $49.8bn (about N8tn) to the Federation Account between 2012 and July, 2013. He said, in a letter to President Goodluck Jonathan dated September 25, 2013, that the amount represented 76 per cent of the value of crude oil lifting during the period.
Sanusi stated, “Our analysis of the value of crude oil export proceeds based on the documentation received from pre-shipment inspectors shows that between January 2012 and July 2013, the NNPC lifted 594,024,107 barrels of crude valued at $65,332,350,514.57.
“Out of this amount, the NNPC repatriated only $15,528,410,098.77, representing 24 per cent of the value. This means the NNPC has yet to account for, and repatriate to the Federation Account, an amount in excess of $49.804bn of the value of oil lifted in the same period.”
The CBN governor asked the government to investigate the NNPC, vis-à-vis the crude oil lifting and swap contracts.
But the General Manager, Media Relations Department, NNPC, Dr. Omar Ibrahim, in a swift response, explained that the revenues from crude oil lifting fell into categories such as equity crude, Petroleum Profit Tax, royalty, third party financing and the Nigerian Petroleum Development Company.
“The Petroleum Profit Tax is collected by the Federal Inland Revenue Service; royalty goes to the Department of Petroleum Resources; third party financing goes for the research and development programme and satellite fields development, while the NPDC goes to the NPDC for upstream development,” he said.
Ibrahim said while the NNPC was paying proceeds from equity crude directly to the Federation Account with the CBN, the FIRS and the DPR were paying the PPT and royalty respectively into the same account. The sum total of the proceeds makes up the alleged unremitted revenues, according to him.
“The 24 per cent 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,” he added.
Sanusi, thereafter, told the Senate that the reconciliation of accounts carried out by the CBN, the Ministry of Petroleum Resources and the Ministry of Finance showed that what was unremitted to the Federation Account was only $12bn as against the initial $49.8bn.
The Minister of Finance, Dr. Ngozi Okonjo-Iweala, however, faulted Sanusi at the Senate Committee on Finance’s public hearing, which was also attended by the Petroleum Resources Minister, Mrs. Deziani Alison-Madueke, saying that records in her ministry showed that it was $10.8bn that had not been fully reconciled.
Experts are worried by the seeming silence from the government concerning the alleged missing oil revenue. They, therefore, call for deeper probe into the oil earnings.
Nwadishi, the EITI board member, said the audit reports of the initiative had often revealed the shortcomings of the NNPC and other oil firms in the nation’s petroleum industry.
Similarly, Okonjo-Iweala had in July 2013 questioned the rationale behind the non-remittance of over $8bn into the Federation Account by the NNPC. This followed the report by NEITI in the 2009 to 2011 oil and gas physical and process audit report that the NNPC, Petroleum Products Pricing Regulatory Agency and two other companies had yet to remit N272.9bn into the Federation Account.
The NEITI Chairman, Mr. Ledum Mitee, said findings contained in the audit report indicated that N8.173bn, being over-recovery collected from some oil marketers, had yet to be remitted to the Federation Account by the NNPC and two other companies.
He said there was also a revenue loss by the Federal Government of over $1.7bn (N264.79bn) following the non-renewal of Memoranda of Understanding between the Joint Venture companies and the NNPC.
He said, “The report noted that the amount of N4.423bn, being over-recovery collected from some marketers, has yet to be remitted to the Federation Account, while the NNPC and two other companies have yet to refund N3.715bn, being over-recovery for the period under review.
“The audit report also revealed revenue loss by the Federal Government of over $1.7bn following the non-renewal of MoUs between the Joint Venture companies and the NNPC, which made the JVs to transact business with MoUs, which had expired since 2008.”
Mittee had put the total unremitted funds to N272.9bn after calculating the subsidy payments made through the NNPC between 2009 and 2011.
He said, “From the findings of the report, the subsidy payments made through the NNPC increased from N198bn in 2009 to N416bn in 2010, and nearly doubled in 2011 to N786bn.
“During the same period, subsidy paid through the PPPRA increased from N208bn in 2009 to N278bn in 2010, and astronomically to N1.12tn in 2011.”
NEITI also exposed a disparity of N175.9bn between the subsidy claims paid from the Federation Account and the amount the PPPRA made.
Mittee said, “The Office of the Accountant-General of the Federation reported to NEITI auditors a total subsidy payment of N2.825tn, while the PPPRA disbursed N3tn to marketers during the same period.
“Some marketers disagreed with the amount ascribed to them by the PPPRA, especially in 2010, when a marketer claimed N2.56bn as fuel subsidy. The PPPRA recorded payment of N1.5bn, leaving an un-reconciled difference of N1.04bn.”
After a fierce media battle between NEITI and PPPRA over the N4.423bn debt in July, 2013, that arose from over-recovery collected from independent oil marketers between 2008 and 2009, NEITI absolved the PPPRA of responsibility after it said it had traced the money to the Petroleum Support Fund account domiciled with the CBN.
A joint statement, signed by the Executive Secretaries of NEITI and PPPRA, Mrs. Zainab Ahmed, and Mr. Reginald Stanley, respectively, had said, “The joint reconciliation meeting, after exhaustive and useful deliberations, resolved that the sum of N4.423bn in dispute has been reconciled and traced to the Petroleum Support Fund account domiciled with the Central Bank of Nigeria.”
Whether unremitted or missing, experts noted that there had been low accountability in the oil revenues and called for a deeper probe.
They expressed worry about the persistent controversies over the non-remitted oil revenues that were often quickly resolved without any detailed explanation to the public.
The Chairman, House Committee on Public Affairs, Mr. Adeola Olamilekan, before the beginning of a recent probe of the NNPC by the House, had noted the issue of accounting for the crude oil sales by the NNPC had been on for the last seven years without a solution.
He said, “One of the areas of concern is the NNPC’s Joint Venture operations. There are several billions of dollars that are unaccounted for. Some JV partners will come before the committee and give you information that the NNPC cannot contradict. Now, when you confront the NNPC with this information, they don’t address the issues at stake. “Reports from the Auditor-General’s Office have many cases against the NNPC. When this investigation is being conducted, I urge the ad-hoc committee to liaise with the Public Accounts Committee. We have information we can give to the committee to assist the investigation.”
Amid the confusion, the Financial Times of London advised President Goodluck Jonathan to order a forensic audit of the oil and gas earnings in the country to enhance transparency and avert unnecessary oil price shock.
The FT said, “Jonathan should order a forensic, external audit of the oil accounts to clear up the confusion. This could go two ways. It could expose the real extent of losses owing to gross mismanagement and knock a further dent in public confidence. However, it could also show that government is serious about plugging the holes, while adding urgency to the passage of legislation meant to restore the industry to health.”
The FT said pruning the unremitted revenue to $11bn was not enough; adding that the forensic audit would reveal the extent of oil revenue losses in the country.
It said, “As it turns out, the central bank’s calculations contained big omissions. After poring over the data, officials have whittled the figure for related shortfalls down to more like $11bn. There are big questions still left to answer, however.
“The first is how the state oil company justifies withholding the $11bn identified. This, in turn, is part of a bigger puzzle over falling oil revenues that drove the central bank governor to raise the alarm in the first place.”
It said, “Oil earnings this year are down by about a third in dollar terms compared with 2011, while the fall in exports is on average 10 per cent. Swap contracts, when crude oil allocated for domestic consumption is exchanged for refined product imports without money changing hands, may be hiding further substantial losses.
To fill the gaps in the budget this year, the finance ministry has had to draw down on the rainy day savings fund that is financed by the windfall earnings above the budgeted price of oil. This has left Nigeria unnecessarily vulnerable to shocks.”
Nwadishi, who is also Chairperson, National Stakeholders’ Working Group Civil Society Committee, called for a public probe of the accounts and records of the NNPC.
“Again, one other thing that comes out of the audit of NEITI is that there are recommendations for remediation. But these things are never done. Now, everybody is talking about the letter of the CBN governor, but you will be surprised that after a while, everything will die down,” she said.
Truthfully, it did die down but experts are seeking more answers to the questions raised.
A lawyer, Mr. Liborous Oshoma, recalled that the Senate in November, 2013, had said that N500bn Subsidy Reinvestment and Empowerment Programme was missing. The Senate accused the NNPC of not accounting for the N32 removed as subsidy on each litre of petrol sold from January 2012 to September 2013. But Okonjo-Iweala quickly said no N500bn SURE-P fund was missing and insisted the allegedly missing funds had been shared by the states and local governments in the country.
The Federal Government had recently inaugurated an Inter Ministerial Task Team, primarily charged with the responsibility of recovering $9.6bn, being the outstanding revenue due to the federation from the oil and gas sector according to findings of the various Nigeria NEITI audit reports. Previous efforts by NEITI and the FIRS had resulted in the recovery of $2bn.
The FT had said that ‘big questions’ were still left unanswered in the Sanusi/NNPC saga, but it added that part of the answer could be found in the oil theft and pipeline vandalism.
It has been established that the country is losing about 400,000 barrels of crude oil per day due to oil theft and pipeline vandalism and these amount to 63,600,000 litres or 1,927 trailer loads of products.
The menace, which has shown no sign of abating, is estimated by experts to cost the country about $7bn in revenue loss annually.
The NEITI said the country lost over $11bn to crude oil theft and pipeline vandalism between 2009 and 2011.
Similarly, the country lost N191bn ($1.23bn) to the menace in the first quarter of 2013 as crude theft continues to threaten the country’s revenue base.
The NNPC said the daily crude oil production during the period fluctuated between 2.1 million and 2.3 million barrels per day compared with the projected estimate of 2.48mbpd.
“Expectedly, this fall between actual production and forecast in first quarter 2013 has resulted in a drop in crude oil revenue of about $1.23bn (N191bn) that should have accrued to the Federation Account,” the Group Managing Director, NNPC, Mr. Andrew Yakubu, said.
The International Energy Agency also said Nigeria was losing about $7bn annually to oil theft.
Data from the National Bureau of Statistics revealed that the year-on-year GDP contribution of the oil and gas industry in the country dropped in the first quarter of 2013 from 15.80 per cent in Q1 2012 to 14.75 per cent in Q1 2013.The NBS attributed this to oil theft and vandalism.
Though the government said it had been battling the menace, experts scored it low in the efforts made in curbing oil theft in 2013.
The Vice-President, Lagos Chamber of Commerce and Industry, Mr. Babatunde Ruwase, said the Federal Government and security agencies knew the people behind oil theft.
He carpeted the government for its inability to check oil theft, which had been on the increase.
He said only the rich and the powerful could engage in oil theft, arguing that the equipment such as barges, tankers as well as manpower used in stealing crude were not cheap.
According to Ruwase, the oil thieves in Nigeria are millionaires, who can be tracked by the government.
He said, “You need to be a millionaire to be able to steal oil. The barges and tankers oil thieves use are very expensive. The government and the security agencies know them. Not until we decide to turn a different leaf, nothing will change as far as oil theft is concerned. These thieves are not ghosts.”
Ruwase, who lamented the increasing rate of oil theft in the country, blamed those he called the ‘wrong people in governance’ for the prolonged problem.
He also blamed the people in government for encouraging leakages and allowing the wealth of the nation to be taken abroad and wondered why the government could not utilise aerial surveillance to monitor the regions prone to oil theft.
Experts concluded that since the economy depended on oil, if the leakages were not blocked, the nation could be plunged into a deeper financial crisis.
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