Trading tackles

The Nigerian National Petroleum Corporation and the Central Bank of Nigeria trade tackles over an alleged non-remittance of $49.8bn (about N8tn) oil proceeds to the Federation Account

Salami Semiu

That was perhaps, the situation until about last week when the letter which he wrote to President Goodluck Jonathan to complain about what he termed as the failure of the Nigerian National Corporation (NNPC), to remit $49.8bn (about N8tn) oil proceeds to the Federation Account between January 2012 and July this year found its way into the media.

Though the letter was written in September, it drew public outrage only last last week, when an online publication, Saharareporters blew the lid off the letter.

In the letter dated September 25, 2013, according to the publication, Sanusi said that he was constrained to formally write, documenting serious concerns of the CentralBank of Nigeria (CBN) on the continued failure of the Nigerian National Petroleum Corporation (NNPC) to repatriate signifi cant proportions of the proceeds of crude oil shipments it made in gross violation of the law.

The CBN governor had in the letter said that the apex bank’s “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, NNPC lifted 594,024,107 barrels of crude valued at $65,332,350,514.57.

“Out of this amount, NNPC repatriated only $15,528,410,098.77 representing 24 per cent of the value. This means the NNPC is yet to account for, and repatriate to the Federation Account, an amount in excess of $49.804 billion or 76 per cent of the value of oil lifted in the same period.

The CBN governor had recalled in the letter that as far back as late 2010, “I had verbally expressed deep concern about what appeared to be huge shortfalls in remittances to the Federation Account in spite of the strong recovery in oil price.

“At a recent NEMT meeting in the Presidency, I also expressed a strong view that while Government needs to continue its effort to combat oil thieves, vandals and illegal refi neries in the Niger-Delta, the major problem is transactions taking place under legal cover with huge revenue leakages embedded therein.

“Your Excellency, it is my respectful view that a place to begin is to insist on NNPC to account fully for all proceeds that were diverted away from its accounts with the CBN and the Federation Account.,” Sanusi was quoted as saying in the letter.

The CBN governor had also pointed out in the letter, what he considers to be the other lines of inquiry which he believes the president should authorise and pursue to include; “A thorough audit of activity on any domiciliary accounts held by NNPC outside of the CBN. This he said, is because the CBN has no record of either the dollar proceeds of these diverted sales or the naira equivalent being transferred to the Federation Account.

“An examination of banking records of companies involved in oil lifting and swaps deals, including audit trails of regular payments to thirdparties; An independent review of the terms and condition of oil lifting and swap contracts for fairness and equity and transparency.

The CBN governor had also proposed the investigation and prosecution of Bureau de change (BDC) that have purchased hundreds of millions of dollars from the inter- bank market and are unable to account for these monies. We have compiled a list of these companies with recommendations for prosecution under Anti-money Laundering Laws;

As an indicator of how bad this situation has become, the CBN governor had reminded President Jonathan that in 2012 alone, the Federation Account received $28.51billion in Petroleum Profi ts and related taxes but only $10.13billion from crude oil proceeds.

“In the period January- July 2013, the corresponding fi gures are $16.65 billion and $5.39 billion, respectively. This means, Your Excellency, that in the fi rst seven months of the year, taxes accounted for 76 per cent of the total infl ow from this sector, while NNPC crude oil proceeds, accounted for only 24 per cent.”

“You will also note, Your Excellency that NNPC lifting amounted to 64 per cent of total oil lifting from Nigeria during the reference period, and yet its remittance represented only one-third of the taxes paid by the oil companies that exported the balance of 54 per cent.

“Finally, your Excellency, we would like to report that NNPC has failed to keep up with payments of its levies under Nigerian Export Supervision Scheme (NESS) in line with this law, and currently owes the Federal Government N22 billion.

As banker to the Federal Government and Economic adviser to the President, I am obliged to draw the President’s attention to these serious issues of which you have most probably never been aware in this detail,” Sanusi Lamido had said.

In his recommendation, the CBN governor said that the NNPC should provide evidence for disposal of all proceeds of crude sales diverted from the CBN and the Federation Account; investigate crude oil lifting and swap contracts, as well as the fi nancial transactions of counter-parties for equity, fairness and transparency among others.

Expectedly, however, as an organization which has not enjoyed much of public sympathy with regards to issues of transparency and accountability in the management of the country’s oil revenue, the NNPC descended heavily on the CBN governor, alleging that his allegations were based on lack of knowledge on the workings of the oil and gas industry and the modality for remitting crude oil sales revenue into the Federation Account. Besides, the corporation said the letter was leaked to embarrass it and the government as part of the campaign for the 2015 general elections.

The Group Managing Director of NNPC, Engr. Andrew Yakubu insisted that the NNPC is not in the business of withholding proceeds of crude oil sales due to the federation account or any other statutory remittances

Yakubu said that it is not in the corporation’s character to join issues or trade blames with other agencies of government but said that considering the high level of publicity that the recent letter from the Governor of the Central Bank of Nigeria (CBN) to the President has generated, and the erroneous impression it has created among Nigerians, it has become necessary to set the records straight.

The NNPC GMD said that all NNPC crude oil lifting is made up of equity rude, royalty oil, tax oil, volume for third party fi nancing, and NPDC equity volume, stressing that remittances of proceeds from the above lifting are made according to statutory and production arrangements.

Accordingly, he said that proceeds from equity crude is paid by NNPC into the Federation Account which is held by the Central Bank of Nigeria, while the proceeds from Royalty oil is paid to Department of Petroleum Resources, DPR, whose designated account is managed by the same CBN.

Similarly, Yakubu said that the proceeds from Tax Oil or Petroleum Profi t Tax lifted by NNPC is paid directly into the Federal Inland Revenue Service, (FIRS) account also managed by the CBN, while the Third Party Finance and Trial Marketing volume are paid into designated Escrow accounts, while NPDC equity proceeds are remitted to NPDC account.

The NNPC boss said that contrary to the CBN letter which claims that for the period 1st Jan 2012 to 31st July 2013, total National crude oil liftings was 1.287 billion barrels, the corporation’s records show that the total national crude lifting for the same period was actually higher at 1.330 billion barrels.

NNPC said that of all the proceeds amounting to $67.12bn have been remitted as statutorily required, stressing that it remitted its portion which is $18.48bn into the Federation Account being the total proceeds from Equity Crude and gas sales. “This represents 27.5 per cent of total proceeds of $67.12bn as against the 24 per cent declared by CBN,” Yakubu said.

The NNPC boss said that for the benefi ts of those who may not be aware of the workings of the industry, it is imperative to state that the CBN, NNPC, FIRS and DPR meet regularly to reconcile lifting, sales and remittance of proceeds. Therefore, the data presented are jointly reconciled by CBN, NNPC, FIRS, and DPR.

On the alleged N22bn unpaid levies to the National Export Supervisory Scheme, the corporation said that the levies are paid to third party inspectors based on services rendered to the Federal Government. “Payment to the NESS is update as per value of work done,” it said.

The current position, according to Yakubu is that, NNPC has paid a total of $114.78 million from inception of NESS in 2009 up to October 2013 as against the total budget of $117.08 million for the same period. “These payments have been reconciled with the CBN, who are again the custodians of the NESS account that is operated on a draw-down basis by the CBN.”

The NNPC boss said that the allegation is “unfounded. It is baseless and it has become a political instrument in the current politically charged environment. It is a political instrument for the 2015 general elections and we consider this as an attempt to ridicule the corporation and its management,” he said.

Yakubu said that he was taken aback that the issue is coming up again four months after the corporation made its clarifi cation to the Hon. Minister of Petroleum Resources, arguing that for it to surface at this time that the “political atmosphere is charged, then we fi nd it diffi cult but it is left for you journalists to do your investigative journalism to unravel the reason behind this attack.”

However, the CBN has said that it considers any discussion by it on the letter purportedly written by Sanusi Lamido Sanusi, CBN governor, alleging non-remittance of $49.8 billion by the Nigerian National Petroleum Corporation (NNPC) as inappropriate. It therefore, urged the general public to avoid unnecessary politicisation of a technical matter while awaiting the broad outcome of ongoing consultation and reviews.

In a statement by Ugochukwu Okoroafor, director, corporate communications, CBN, the apex bank said it would neither confi rm nor deny the existence of such a letter but said the bank was aware of a proposal to set up a technical team made up of representatives from the Federal Ministry of Finance, the NNPC and the CBN to examine the sources of any revenue leakages and propose appropriate fi scal controls.

“The CBN welcomes these initiatives and believes that they represent a positive contribution to the process of improving the management of the economy, especially if they lead to greater oversight of the fi nance ministry over oil revenue and improvements on disclosure and transparency in the oil industry,” the statement said.

It noted that the capacity of the CBN to perform its role effectively is strengthened or undermined by the extent to which the nation is able to increase foreign exchange earnings and savings from these earnings, thus boosting the Excess Crude Savings Account, raising revenue levels, providing currency stability and moderating interest rates with limited risks to infl ation and fi nancial stability.

“In the performance of this role, it is natural for the CBN to be concerned at the low level of accretion to reserves of the Excess Crude Account, in spite of strong international oil prices, especially, as Nigeria’s performance is compared with other oil producing economies.”

According to the statement, the CBN is aware that this concern is shared by the president, the Federal Ministry of Finance, minister, state governors, legislators, economist, analysts and all stakeholders involved in managing the economy, and discussion on how to address the matter are being held at highest levels of government.

However, some operators in the sector, who spoke with Business Courage on the issue at the weekend, called for an in-depth probe into the scandal, stressing that the CBN may have been pushed to come up with the ‘facts’ because of the frustrations it was encountering in dealing with the corporation.

An industry player who spoke on the condition of anonymity said that some of the illegal activities being perpetuated by the NNPC would not have been possible if the corporation was not tactfully being supported by some senior government offi cials.

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