Nigeria’s petroleum industry has been plagued by different
allegations of improprieties and for years, the country’s main source of
revenue generation has also been the biggest drainpipe through which
Nigeria’s money is siphoned. It is an open secret that the corruption
did not just start-it has been part of the system for years.
Though Dr.
Doyin Okupe, the President’s Special Assistant on Public Affairs has
opined that the report is inconclusive and has not indicted anyone, the
report of the Malam Nuhu Ribadu-led Petroleum Revenue Task Force has
further confirmed the long spoken about rot in Nigeria’s petroleum
sector.
His statement is however not enough to change some things about the
oil industry as well as Nigerians’ perception about events in the
industry. Back in 2011, The House of Representatives Joint Committee on
Finance, Petroleum Upstream, Petroleum Downstream and Gas Resources
was mandated to investigate the remittance of oil revenue into the
Federation Account by the Nigerian National Petroleum Corporation (NNPC)
and also ascertain the Corporation’s compliance with the constitution
on the issue. In its report then, the House Joint Committee revealed
that NNPC under-remitted funds to the tune of N 3.08 trillion between
2004 and 2011.
According to the House Joint Committee’s report, “in 2005, NNPC
short-changed the federation by $193.645m through domestic crude sale at
a discount of $1.211 per barrel on the 159,898,543 barrels of crude
taken in 2005. The loss of $193.645m was an equivalent of N25.473bn
based on the prevailing exchange rate then.
NNPC further compounded the federation’s woes by under-remitting the
under-invoiced domestic crude revenue by N289bn in 2005. Out of the
total revenue of N1.145tn accruable to the federation from domestic
crude oil sales to NNPC in 2005, NNPC remitted only N0.856tn.”
The NNPC’s N 354 billion as subsidy for 2005 was described as a
“false claim” in the report. The House Committee went further to state
that instead of making such claim, it was the NNPC that owed the country
the sum of N 687 billion through under remittances. It was also
revealed in that report that “between 2006 and 2008, NNPC short-changed
the federation by N1.214tn through unauthorized discount and
under-remittance of under-invoiced domestic crude revenue.”
The report also stated that “NNPC in 2009 to June 2011 followed the
same trend of taking unauthorized discount on domestic crude it
allocated to itself and continued to underpay the under-invoiced
domestic crude sales. While the federation lost N67bn on unauthorized
discount between 2009 and June 2011, the loss through under-payment of
under-invoiced value is N1.388tn, resulting in total loss to the
federation of N1.455tn on domestic crude supplies to NNPC between 2009
and June 2011.”
Multinationals were not left out of the rot as the report added that
based on NNPC’s audited accounts, it was clear that the nation lost over
$3.675bn through false claims by multinational oil companies under
dubious Carry Agreements. It was found out by the committee that such
carry arrangements were the Joint Venture operators to confuse and
create an avenue to short-change the nation.
Back then, the committee advised the Federal Government to review the
concept of Carry Agreements with the international oil companies as it
had become an avenue for wastage and corruption.
Shell, Elf, Mobil and Chevron were named as the Carry Partners whose
over-bloated claims to reimbursement amounted to $3.675bn between 2004
and 2006.It was recommended “that NNPC should refund the sum of N44.932bn,
which it paid to itself as cash call in 2006. NNPC should refund the sum
of $3.273bn, which accrued from 48 million barrels of crude, which the
corporation concealed in 2006.”
The NNPC was also found to be operating an account which has been
described as “illegal” in JP Morgan bank in the United States.
Investigations revealed that instead of paying directly into the
federation Account, proceeds from the sale of crude oil are first kept
in that account before being transferred into the Federation Account.
The report of the Petroleum Revenue Task Force has also gone a long
way to confirm that unless drastic steps are taken to sanitize the oil
sector, Nigeria will continue to lose trillions to corrupt individuals
who are making fortunes at the country’s expense.
In its submission about 10% of Nigeria’s crude oil production being
stolen daily, the Ribadu-led Task Force revealed that “volumes stolen
have risen dramatically in the past 12-18 months. The Royal Dutch Shell
Company, Shell in its presentation to the Task Force stated that an
estimated 150,000 barrels of crude oil are stolen per day (about 6% of
Nigeria’s total annual production) causing a revenue loss of $13.5
million per day (at $100 per barrel) which amounts to $5billion per year
of lost revenue.
The Task Force also made it known that the theft is
not limited to crude petroleum alone. Findings of the Task Force
revealed that “organized theft of products has also spread far beyond
the Niger Delta. PPMC recorded sizable losses on its
Mosinmi-Ibadan-Lokoja line in 2011. The Jos-Gombe-Maiduguri line also
saw theft, and pipeline sabotage around Atlas Cove in Lagos is chronic”.
To solve the problem, the Task Force pointed out that the Government has a lot of work to do. Its report stated that “legislation governing the industry and agreements with third parties are outdated, do not reflect current economic or legal realities; or include ambiguous clauses.
To solve the problem, the Task Force pointed out that the Government has a lot of work to do. Its report stated that “legislation governing the industry and agreements with third parties are outdated, do not reflect current economic or legal realities; or include ambiguous clauses.
Also,
there are some provisions within the legislation that could
significantly improve government’s revenue that the government is yet to
take advantage of. Examples include a provision to ensure that the
share of the Government of the Federation in the additional revenue
shall be adjusted under the Production Sharing Contracts if the price of
crude oil at any time exceeds $20 per barrel; and the requirement for a
periodic review of provisions in specified time frames.
It was also observed that some traders lifted crude oil although they were not listed on the approved master list of customers who had a valid contract and were selected through an annual bidding process. The Task Force research also found that quite a number of traders did not demonstrate renowned expertise in the business of crude oil trading. Furthermore, the Task Force found that the use of crude oil traders was contrary to the global trend wherein national oil companies develop their own trading arms, such as the various NNPC trading subsidiaries which currently have limited capacity.
The Task Force identified various
concerns in this area with Nigeria being the world’s only major oil
producer that sells 100 percent of its crude to private commodities
traders, rather than directly to refineries.”
One of the observations made by the Task Force was that “NNPCs fiscal
health has weakened dramatically in recent years. Between 2007 and 2009
the Corporations closing net balance sheet liabilities grew from N952bn
to N1.36tn.
Gross margins turned to deficit, capital reserves shrunk by half and
nearly all SBUs appeared to be running at growing losses. NNPCs asset
base appears stagnant from age and absence of strategic investment.”
Incidentally, Today's gist had reported earlier that the fraud
being perpetrated in Nigeria’s oil sector defies competent description.
The whole structure has been eroded by corruption thereby leaving the
Government at the mercy of corrupt marketers, fraudulent staff and even
not so clean government officials.
Today's gist investigations also revealed that at times,
marketers inflate the quantity of the products they imported, just to
make extra cash, and where documentation is inadequate, it is easy to
get away with such practices. Central Bank Governor, Sanusi Lamido
Sanusi also confirmed recently that it is quite possible to “just forge
documents and have them stamped without bringing in anything and collect
the subsidy-PPPRA pays based on documents,” Sanusi stated.
A startling
revelation that indicted the government agencies was also made when the
Customs Department disclosed that the NNPC imports petroleum products
without valid documentation thereby making it easy for the products to
be moved without being tracked. Where that happens, it is impossible to
have accurate data on imported products.
