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2<br />
NEWS<br />
•Managing Director, Grand Oak Ltd, Akshay Kumar, receiving the Best Performance Trophy of Lexcel Group of Companies<br />
in Q1 from Commercial Director Aare Fatai Odesile at the the Group's Q1 Performance & Assessment Review in Lagos.<br />
With them is General Manager, Marketing, Brajesh Kumar (right) and Sales Operations Manager, Elder Dele Akinloye.<br />
THE NATION TUESDAY, APRIL 28, 2015<br />
How NPDC<br />
The Presidency yesterday released the report of the forensic<br />
audit carried out by Pricewaterhouse Coopers (PwC)<br />
on the alleged missing $20 billion oil cash. From the report,<br />
it is clear that the Nigerian Petroleum Development<br />
Company (NPDC) did not aid the diligent implementation<br />
of the audit firm’s mandate. PwC ran into some<br />
brickwalls in the course of its work. The key limitations<br />
were: inavailability of relevant NPDC personnel to give<br />
information on the company’s operations and NPDC’s<br />
failure to provide it with detailed breakdown of the crude<br />
oil assets, volume of allocations to Strategic Alliance Partners<br />
and list of receiving banks, account numbers and bank<br />
statements for crude proceeds. Excerpts of the report:<br />
•Former Vice President Alhaji Atiku Abubakar (right) and President, Kaduna Chamber of Commerce, Industry, Mines<br />
and Agriculture (KADCCIMA), Dr Abdul-alimi Bello at the seminar on: “Promoting domestic trade for national sustainable<br />
economic development” at the ongoing thirty-sixth Kaduna International Trade Fair in Kaduna...yesterday.<br />
• From left: Chief Executive Officer (CEO), Fairtrade, Germany, Martin Maerz (left); Chief Operating Officer (COO)<br />
Nigerian-German Business Association, Jennifer Anoyika; Delegate of German Industry & Commerce in Nigeria, André<br />
Roenne and Fairtrade Manager, Dominik Rzepka at a news conference for the upcoming trade show tagged: “Agrofood<br />
and Plastprintpack” in Lagos.<br />
•Marketing Manager, Vlisco, Adaeze Alilonu (left); winner, 2015 Vlisco Women's Month Award, Mrs. Dotun Akande<br />
and Vlisco Ambassador, Mrs. Adesuwa Onyenokwe at the yearly Vlisco Women's Month Award in Lagos…at the weekend.<br />
BASED on the work conducted<br />
by our team from the commencement<br />
of this mandate up<br />
until 29 January 2015, our conclusions<br />
are as follows;<br />
•Total gross revenues generated<br />
from FGN crude oil liftings was<br />
$69.34bn and NOT $67 billion as earlier<br />
stated by the Reconciliation Committee<br />
for the period from January<br />
2012 to July 2013.<br />
• Total cash remitted into the Federation<br />
accounts in relation to crude oil<br />
liftings was $50.81bn and NOT $47bn<br />
as earlier stated by the Reconciliation<br />
Committee for the period from January<br />
2012 to July 2013.<br />
• NNPC has provided information<br />
on the difference leading to a potential<br />
excess remittance of $0.74 billion (without<br />
considering expected remittances<br />
from NPDC). Other indirect costs of<br />
$2.81 billion which were not part of the<br />
submission to the Senate Committee<br />
hearing have been defrayed to arrive<br />
at this position.<br />
• The resulting potential excess remittance<br />
indicates that the Corporation<br />
operates an unsustainable model. Forty<br />
six percent (46%) of proceeds of domestic<br />
crude oil revenues for the review<br />
period was spent on operations and<br />
subsidies. The Corporation is unable to<br />
sustain monthly remittances to the Federation<br />
Account Allocation Committee<br />
(FAAC), and also meet its operational<br />
costs entirely from the proceeds of domestic<br />
crude oil revenues, and have had<br />
to incur third party liabilities to bridge<br />
the funding gap. Furthermore, the review<br />
period recorded international<br />
crude oil prices averaging $122.5 per<br />
barrel (Average Platts prices for 2012).<br />
As at the time of concluding this report,<br />
international crude oil prices average<br />
about $46.07 per barrel2, which is about<br />
sixty two percent (62%) reduction when<br />
compared to the crude oil prices for the<br />
review period. If the NNPC overhead<br />
costs and subsidies are maintained (assuming<br />
crude oil production volumes<br />
are maintained), the corporation may<br />
have to exhaust all the proceeds of domestic<br />
crude oil sales, and may still require<br />
third party liabilities to meet costs<br />
of operations and subsidies, and may<br />
not be able to make any remittances to<br />
FAAC.<br />
• We therefore recommend that the<br />
NNPCmodel of operationmust be urgently<br />
reviewed and restructured, as<br />
the current model which has been in<br />
operation since the creation of the Corporation<br />
cannot be sustained.<br />
• The report reflects the fact that $3.38<br />
billion was spent on DPK subsidy for<br />
the review period.<br />
We also confirmed using third party<br />
vessel tracking platforms that all vessels<br />
carrying NNPC cargoes arrived in<br />
Nigeria within the periods disclosed by<br />
PPPRA.<br />
•A major consideration centers on<br />
the ownership of oil and gas assets controlled<br />
by NPDC.<br />
Subject to additional information being<br />
provided, we estimate that the<br />
NNPC and NPDC should refund to the<br />
Federation Account a minimum of<br />
$1.48 billion as summarised in the next<br />
page.<br />
• A determination is required as to<br />
whether all, or a portion of other costs<br />
not directly attributable to crude oil<br />
operations can be defrayed by NNPC.<br />
We did not have access to NPDC’s<br />
full accounts and records and we have<br />
not ascertained the amount of costs and<br />
expenses which should be applied to<br />
the US$5.11 billion crude oil revenue<br />
(net of royalties and PPT paid) per the<br />
NPDC submission to the Senate Committee<br />
which should be considered as<br />
dividend payment by NPDC to NNPC<br />
for ultimate remittance to the Federation<br />
Account.<br />
• Between 12 January and 29 January<br />
2015, NNPC provided transaction<br />
documents representing additional<br />
costs of $2.81 billion related to the review<br />
period, citing the NNPC Act LFN<br />
No 33 of 1977 that allows such deductions.<br />
Clarity is required on whether<br />
such deductions should be made by<br />
NNPC as a first line charge, before remitting<br />
the net proceeds of domestic<br />
crude to the federation accounts. If these<br />
are deemed not to be valid deductions,<br />
then the amount due from NNPC<br />
would be estimated at $2.07 billion<br />
(without considering expected known<br />
remittances from NPDC) or $4.29 billion<br />
(if expected known remittances<br />
from NPDC are considered).<br />
• The Corporation provided details<br />
of expenses to the tune of $12.97 billion<br />
related to the review period, funded<br />
from the proceeds of domestic crude<br />
oil revenues.<br />
•The Corporation represented that<br />
the potential excess remittance of $0.74<br />
billion was funded from proceeds of<br />
PMS sales for which the suppliers of<br />
the PMS are yet to be paid in cash or<br />
crude oil. As at the time of concluding<br />
this report, details of the affected suppliers<br />
that funded this potential excess<br />
remittance are yet to be provided by<br />
the Corporation.<br />
• The analysis above and resulting<br />
potential excess remittance suggest the<br />
existence of liabilitiesto third parties<br />
incurred by the Corporation.We recommend<br />
the Corporation be required todisclose<br />
details of all existing liabilities<br />
and impact on proceeds of future crude<br />
oil sales.<br />
• The Corporation is expected to<br />
operate in accordance with the NNPC<br />
Act LFN No 33 of 1977 which states in<br />
Chapter 320 Part I subsection 7(4) as<br />
follows:<br />
“The Corporation shall maintain a fund<br />
which shall consist of-<br />
(a) such moneys as may from time to time<br />
be provided by the Federal Government for<br />
the purposes of this Act by way of grants or<br />
loans or otherwise howsoever; and (b) such<br />
moneys as may be received by the Corporation<br />
in the course of its operations or in relation<br />
to the exercise by the Corporation of<br />
any of its functions under this Act, and from<br />
such fund there shall be defrayed all expenses<br />
incurred by the Corporation.”<br />
Accordingly, all the Corporations<br />
costs, and those of its loss making subsidiaries<br />
have been defrayed in the<br />
analysis provided by the Corporation<br />
for the review period. However, the<br />
profit making subsidiaries and dividends<br />
received have been excluded<br />
from the analysis provided. This suggests<br />
that there are other sources of net<br />
revenues available to the Corporation<br />
not currently disclosed. A proper estimate<br />
of the actual potential excess re-