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NNPC, Sanusi Clash over New Charge on Unremitted $20bn

05 Feb 2014

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Mrs. Diezani Alison-Madueke, Petroleum  Minister


Omololu Ogumade and Chineme Okafor 
The Nigerian National Petroleum Corporation (NNPC) and the Governor of Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, were again at each other’s throats Tuesday over the latter’s latest allegation made during the Senate’s resumed hearing on the non-repatriation of oil revenue to the Federation Account that the amount yet to be remitted by NNPC now stands at $20 billion.

The new figure thrown up by Sanusi is in contrast to the $10.8 billion that was said to have been in dispute and had not been remitted when the CBN governor, the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, and Minister of Petroleum Resouces, Mrs. Diezani Alison-Madueke, held a joint press briefing last December.

The press briefing was triggered by a letter written by Sanusi to President Goodluck Jonathan last September, in which he alleged that the corporation had failed to remit $49.8 billion in oil proceeds to the Federation Account over a 19-month period.

His letter, which was leaked to former President Olusegun Obasanjo, other opposition politicians and the press, prompted an outcry and compelled the relevant agencies of government to meet to reconcile NNPC’s remittances, a process which is said to be still ongoing.

However, NNPC in a swift riposte to Sanusi’s testimony yesterday dismissed the allegation, saying this was not the first time that the central bank governor had made a wild allegation about the corporation, only to admit later to his mistake.

During the public hearing organised by the Senate Committee on Finance at the National Assembly, those present left the venue confused after Sanusi said the unremitted amount by NNPC now stood at $20 billion.

The audience looked confused as Sanusi reeled out the new figure, more so after he had submitted to the committee late last year that of the $49.8 billion said to have been unremitted to the Federation Account by NNPC in his letter to the president, only $12.8 billion was yet to be accounted for.

But Okonjo-Iweala had interrupted him at the time, saying it was $10.8 billion that was actually yet to be reconciled and not $12.8 billion as claimed by Sanusi.
During the hearing, the CBN governor had agreed and did not raise any objection to Okonjo-Iweala's submission that afternoon.

It was against this backdrop that Sanusi’s new revelation of $20 billion unremitted revenue, as against the earlier $10.8 billion yet to be reconciled, left people confused yesterday.

According to Sanusi, NNPC between January 2012 and July 2013 shipped $67 billion worth of crude oil but remitted only $47 billion into the Federation Account, arguing that the corporation was yet to account for the balance of $20 billion.

Accusing NNPC of trying to mislead Nigerians, Sanusi in the executive summary of his written memo presented to the Senate committee said: “I am therefore compelled to present to this committee detailed evidence that NNPC has in violation of the law and the constitution been diverting money from the Federation Account, and involving itself in activities that warrant full investigation for more serious violations of the law.”

He further accused NNPC of serious infractions in the handling of the kerosene subsidy. He argued that “based on National Bureau of Statistics (NBS) data, kerosene is not a subsidised product, and therefore the so-called subsidy is rent generated for the benefit of those in the kerosene business”.

Revealing that the Federation Account was made to lose $100 million every month to the subsidy racket, he urged the committee to insist that NNPC provides evidence of presidential authorisation to buy kerosene at N150 per litre and to sell same at N40 per litre, whereas the product sells at between N170 to N220 per litre in the open market.

On the NNPC’s claims of paying subsidy on behalf of government, he said the claims were not credible and indeed contradicted by the fact that the NNPC had consistently rendered returns to the Federation Account Allocation Committee (FAAC) indicating that it made no deductions for subsidy.

He identified NNPC’s unverified claims for subsidy and unilateral deductions from the Federation Account as a major source of revenues from the system and urged the committee to order a thorough independent investigation into the activities of NNPC.

He said $14 billion was remitted directly into the Federation Account out of the total figure in addition to $16 billion he said came from the Federal Inland Revenue Service (FIRS).
He also accused NNPC of claiming that some monies belong to its upstream subsidiary, the Nigerian Petroleum Development Company (NPDC), and other companies such as Atlantic Energy, alleging that such companies shipped crude oil from the nation's oil wells without remitting the money.

“May I say, Mr. Chairman, that some of those issues raised are subject to investigation. They have to do with whether NNPC is repatriating money due to the Federation Account or not and because NNPC had given a number of explanations for why money has not come.
“If NNPC, for instance, says we have sold $6 billion worth of crude belonging to NPDC, and if the CBN believes that part of that money should come to the Federation Account, it is related to this matter and it has been captured in our presentation.
“We are here because they are related to the question of whether NNPC is returning to the Federation Account all the amount that it is constitutionally and legally required to return.

“I have a 20-page presentation with 30 appendages but we have to first of all agree on what has been paid to the CBN.  NNPC did a presentation. We had all agreed earlier that $14 billion out of the $67 billion they shipped came into the dollar account of the federation. That is agreed.

“We have looked at FIRS numbers and we have confirmed that $16 billion paid by international oil companies (IOCs) to the FIRS account was not paid by the NNPC but paid by IOCs.

“It was the proceeds of crude lifted in the name of NNPC but sold on behalf of the IOCs. That $16 billion has been confirmed by FIRS and has been accepted. There is $1.6 billion that DPR (Department of Petroleum Resources) also received from the IOCs which was part of that crude and which CBN had accepted.

“We have provided evidence in the naira crude account out of the $28 billion domestic crude shipped by the NNPC. It had repatriated  $16 billion. Out of the $67 billion that has accrued to the NNPC account, we have accounted for $47 billion.

“So out of the $67 billion that the NNPC shipped, $47 billion has been repatriated to the CBN. What we are talking about is the balance of the $20 billion and what explanations have been given.

“NNPC has said some of it does not belong to the Federation Account, and $6 billion belongs to NPDC. But we have held the position that some of the crude shipped by the NPDC is from the oil wells that belong to the federation.

“Oil wells that Shell sold and which NNPC took over and handed over to two Nigerian companies, Atlantic Energy and Seven Energy and transferred revenues should come into the Federation Account. I have given free legal opinions to the committee on the unconstitutionality and illegality of that transaction.

“Also, NNPC has explained that 80 per cent of that money that was not repatriated came from kerosene and fuel subsidy and I have submitted to the committee written evidence of a presidential directive eliminating subsidy since 2009, so NNPC needs to provide its authority for buying kerosene at N150 and selling at N40 and inflicting that loss on the federation,” he said.

In his response, the committee chairman, Ahmed Maikarfi, dismissed Sanusi's submission, saying there was nothing new in all he said.

He also remarked that despite his claim that kerosene subsidy had stopped since 2009, the National Assembly appropriates subsidy for the product every year.
He also asked Sanusi to wait for the ongoing reconciliation to be concluded before going any further, stating, “The bottom line is that the federation should not lose a cent, so the reconciliation must be concluded this week.”

Earlier, the Director General of Budget Office, Bright Okogu, and Peter Schlak, who represented the Petroleum Products Pricing and Regulatory Agency (PPPRA), requested one extra week from the committee to enable them conclude the reconciliation process.

The committee acceded to the request for additional one week. Maikarfi warned them that the process must not exceed the extra week granted them and asked all the agencies to return for the hearing next Wednesday to present the output of the reconciliation process.

But the Group Managing Director (GDM) of NNPC, Mr. Andrew Yakubu, while answering questions from reporters on the fresh allegation of $20 billion, which remains unremitted, said he was surprised that CBN had failed to understand some “engineering issues”.
He also accused the CBN governor of taking upon himself the job of an auditor when in the real sense, he is a banker.

“Gentlemen, you heard the chairman very well. The issues that were raised are not new at all. You see, we came out with details because we don't have anything to hide and we gave a detailed breakdown of the so-called $49.8 billion and we came out clearly to state the various streams that are associated with what he was talking about.

“Now, we also made it clear that NPDC, if we had anything to hide, we would not have made it clear that NPDC was part of the stream because NPDC which is NNPC's upstream operation, is a limited liability company registered by the Companies and Allied Matters Act (CAMA) to do upstream business just like any other independent company.

“Now, if you are in your business, will you take your gross revenue and pass it on? What we simply said was to account for the streams that the CBN governor erroneously captured.
“Let me make this point clear, CBN is a banking outfit, not a petroleum outfit. It is therefore understandable why they keep making unsubstantiated claims, which a little understanding of the technicalities of the oil industry would have saved them from making.

“CBN is not an auditing outfit. But what it is doing is now auditing. We have no problem with auditing, but let the professionals, the certified bodies and agencies that are charged with this responsibility of auditing, to do their work,” he said.

The GMD explained that the issues raised by Sanusi were not fresh at all and would be eventually reconciled by the Inter-agency Committee established to settle the $49.8 billion saga.
“Our position remains the same and we remain open to all stakeholders. These are issues that are currently before the reconciliation committee and before now it has been a subject of monthly verification before FAAC and other stakeholders,” he said.

The GMD reiterated what Okogu had said at the hearing that a lot of progress had been made in the reconciliation of the $10.8 billion and expressed hope that by the time the committee meets next week, the final report would be ready, and NNPC would be vindicated.
Also in a statement issued by the corporation last night, NNPC said Sanusi’s latest allegation was a clear indication of his inconsistency, thereby presenting conflicting figures to the generality of Nigerians.

“We are concerned by the dynamics of the moving numbers as the central bank’s figures keep changing. This is a worrying trend coming from an agency of government charged with managing the financial affairs of Nigeria.

“While NNPC and other relevant government agencies are in the process of reconciling the $10.8 billion as accepted by all parties, we are surprised by the new $20 billion figure introduced by the CBN.

“According to CBN the $20 billion is made up of $12 billion subsidy claim, $6 billion NPDC gross revenue and $2 billion third party revenue.

“It is worthy to note that the CBN accepted NNPC’s submission with respect to $16 billion royalty and PPT (Petroleum Profit Tax) payments into the Federation Account through the FIRS. This indicates that the CBN cherry picks the figures.

“For example, in taking the entire $6 billion gross revenue accruable to NPDC and allocating same to the Federation Account, CBN simply multiplied the gross production by the crude oil price, thereby failing to account for the operating costs (opex) and amortised capital expenditure that underpin the production.

“In other words, the CBN failed to take into account the cost of production. We reiterate that NPDC has been remitting the royalty and petroleum profit tax to the Federation Account.
“NPDC as a subsidiary of NNPC operates a business model similar to other international companies in Nigeria and abroad and will continue to be governed by these global best practices in the execution of these assets.

“Regarding the subsidy claim on kerosene, it is important to note that NNPC as the supplier of last resort is the only company supplying this product in Nigeria for the benefit of the citizenry.

“If kerosene has been deregulated why are the independent marketers not supplying this product in line with what is applicable to diesel (AGO).

“NNPC owes a duty to Nigerians to ensure that there are adequate products in the country. This mandate has without question been accomplished in the past four years. NNPC deserves to be commended rather than battered, for ensuring adequate supply of kerosene at regulated price of N50.

“NNPC cannot be held responsible for any differential pricing from non-NNPC retailers. This is the basis for NNPC’s claim on kerosene subsidy,” the corporation said.  

Also, in its reaction, Atlantic Energy, said the CBN governor was again mistaken in his testimony on the transaction between NPDC and Atlantic.

According to an official of the company, "We have had cause in recent times to explain the true position of things and this information has been in the public domain for some time now. Suffice it to say that nothing in the transaction between NPDC and Atlantic Energy involved the transfer by the NNPC or the NPDC or the Ministry of Petroleum of any portion whatsoever of NPDC’s 55 per cent participatory interest in the OMLs to Atlantic Energy.

"The operatorship of the OMLs as well as the 55 per cent participatory interest therein, remains legally and beneficially vested in the NPDC, and shall remain so throughout the duration of the Strategic Alliance Agreements with NPDC."

He further stated, that “in return for the enormous obligations assumed by Atlantic Energy under the SAA, the agreement explicitly confers on Atlantic Energy the entitlement to receive remuneration-in-kind from the NPDC in the form of allocation of a portion of NPDC’s share of profit oil from the relevant OML areas, and also independently lift, dispose of and retain proceeds of crude oil it receives from the NPDC as remuneration-in-kind.”

Tags: DPD, Featuered, News, Nigeria, NNPC, NPDC

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