Sanusi’s dangerous gaffe

Barely a week after a letter sent to the President by the governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi over an alleged non-remittance of huge oil funds caused tremendous stirs; the CBN governor beats a retreat, bites the humble pie and admitted his allegation was wrong

Sanusi Lamido Sanusi, the governor of the Central Bank of Nigeria, CBN ate the humble pie last week when he retracted his earlier allegations that the Nigerian National Petroleum Corporation, NNPC failed to remit $49.8bn (about N8tn) oil proceeds to the Federation Account between January 2012 and July this year.

The CBN governor, who appeared before the Senate Committee on Finance, alongside Minister of Finance, Dr. Ngozi Okonjo-Iweala, Minister of Petroleum Resources, Diezani Alison-Madueke, Director-General, Budget Offi ce of the Federation, Dr. Bright Okogu; and the Group Managing Director, NNPC, Andrew Yakubu, denied saying that $49.8 billon was missing from the Federation Account, stating that he only said that there may be unremitted amount of monies into the federation account.

Though the CBN governor admitted that he indeed, wrote the letter to the president, he said that “in truth, there is no missing money. Chairman, we did not see the letter as a conclusion of our investigation, but an invitation to investigate. “So, the conclusion that $49.8 billion was missing was wrong, even though, we had the allegation that it was un-remitted,’’ Sanusi said.

He expressed regrets that the letter found its way into the press, adding that it was born out of concern over low rate of accruals. “I found it very unfortunate, it was leaked to the press and the answer is ‘Yes’, the CBN governor did send that letter with those contents. By way of those contents, the Central Bank and Finance Ministry and the government were very much concerned over the years at the very low rate of accretion to the reserves.”

The CBN governor, however, said that a lot had happened since the letter became public and that all stakeholders involved were working together to rectify the situation. “We (the Minister of Finance, Minister of Petroleum Resources, Central Bank, FIRS, and DPR) have set up technical team which has started a process of reconciliation and there has been a lot of progress made.”

He said the committee had made a lot of progress, especially with the NNPC explanation that $24bn of the amount in question, which was put at $67bn, was actually not its crude but that which was shipped on behalf of third parties.

He said the third parties included oil companies that paid taxes in crude and the Nigerian Petroleum Development Company for third party financing, adding that “that already addresses half of the fi gure ($49.8bn).

Sanusi added that the second part of the alleged missing funds was about domestic crude lifting, which was put at $28bn, and “from which we feel there is a shortfall and we had a press conference and talked about that shortfall.”

“Now, we are still in the process of reconciling that fi gure and we have not yet started talking about the export sales tax, which is $20bn, which we will reconcile.

“The finance ministry has told us that even before this letter, there had been ongoing negotiations and discussions with the NNPC and the FAAC, and these numbers have always been discussed at the level of convenience of the fi nance (ministry).

“So, since the objective of this committee and for all of us on this side is actually to get to the bottom of it and fi nd out exactly the amounts that need to be remitted and what needs to be done and recommend action, what I will like to do is that given the progress, we have made a request to be given more time to continue with this process and come back with a fi nal position among us.”

However, Sanusi’s effort to rationalise his position fueled further controversy when Okonjo-Iweala interjected his comments that there was a general consensus among all the agencies involved during their reconciliation meetings that there was indeed, a $12bn shortfall.

Contrary to the CBN governor’s assertion, Okonjo- Iweala said that what was found out during reconciliation was $10.8bn and not $12bn, adding that although the shortfall had been acknowledged by the NNPC, its magnitude was still being disputed by the corporation.

Okonjo-Iweala said, “We have been able to get to the bottom of the $49.8bn that was indicated in the CBN memo. But also due to the way that the accounting for the crude was read, some of it that was being lifted for other parties to the tune of $24bn was said to be missing, but it has been accounted for.

“So, the bulk of the sum of $49bn has been accounted for and that is what the reconciliation exercise is about. So, it is very clear that this is not missing.

“However, both fi nance (ministry) and NNPC have been in discussion to reconcile. We do so every month after the Federation Accounts Allocation Committee meeting. We reconcile our fi gures. It is not an easy thing.

“In the course of the reconciliation, from January 2012 to July 2013, we have looked at a shortfall of about N1.7tn, the equivalent of $10.8bn. That is the amount that we have been discussing; and of course, the NNPC has been disputing some of it, but it is an ongoing reconciliation. We will still continue; we do it every month.

“We will continue our work after now until we can come to terms with what is actually the shortfall and what is due to come to the Federation Account,” the minister said.

While explaining the reason for the shortfall, the NNPC, in a joint statement with the CBN and the Ministry of Finance, blamed it on subsidy claims, undiscovered crude, product losses and cost of strategic petroleum product storage not currently captured in the Petroleum Products Pricing and Regulatory Agency’s template for refunds.

The corporation said the fi gures were well known to all stakeholders at the Federation Accounts Allocation Committee, adding that the shortfall was always updated on monthly basis.

It, however, said all parties concerned were working through the ongoing reconciliation efforts to resolve the shortfall.

Admitting that there was some level of shortfall in the amount remitted to the Federation Account, Alison-Madueke argued that the defi cit had been known for a long time. ,

“We have come to a very clear understanding that there is a listed amount of which most part has been accounted for. There is a shortfall, which has already been mentioned but that shortfall has been known for quite some time.

“It has been acknowledged by the NNPC, but the extent of the shortfall has also been disputed by the NNPC for quite some time now. The NNPC has always participated in the reconciliation meetings with the CBN, FIRS and DPR, and that will continue,” Alison-Madueke said.

She said that the reconciliation efforts are in order to come to an agreed fi gure. She stressed that crude oil production in Nigeria had been under a lot of scourge due to the high level of theft.

“We have been very aggressive to increase our production and reduce the level of theft. In terms of our efforts, we have over the last two weeks seen an increase from a drop of 2.2 million barrels per day to what it is today, which is 2.38mbpd,” the minister said.

It would be recalled that the CBN governor had caused a stir two weeks ago, when a letter he wrote to President Goodluck Jonathan dated September 25, 2013 in which he leveled several allegations against the management of the NNPC, found its way to the media.

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 also in the controversial letter, advocated that the president should authorise “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 third-parties; an independent review of the terms and condition of oil lifting and swap contracts for fairness and equity and transparency,” Sanusi Lamido had stated.

The CBN governor had also alleged that the 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.

The publication, expectedly, had triggered a rash of counter- accusation, with the NNPC accusing the CBN governor of lacking the requisite knowledge of 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.

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, baseless and a political instrument” for the 2015 general elections and an attempt to ridicule the corporation and its management.

Curiously, however, while the NNPC management took time out to deny the CBN governor’s allegations, the CBN governor merely said that it considers any further discussion on the issue as inappropriate.

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.”

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