Audit-Report-on-NNPC
Audit-Report-on-NNPC
Audit-Report-on-NNPC
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
Investigative Forensic audit of crude oil revenues and remittances by <strong>NNPC</strong> (January 2012 – July 2013)<br />
II.<br />
with informati<strong>on</strong> which indicated that the various <strong>NNPC</strong> (55%) porti<strong>on</strong> of Oil leases<br />
(OMLs) involved in the Shell Divestments related to the eight (8) OML’s aforestated,<br />
were transferred to NPDC for an aggregate Sum of US$1.85billi<strong>on</strong>. So far, <strong>on</strong>ly the<br />
amount of US$100m had been remitted in relati<strong>on</strong> to these assets. This means that<br />
the amount of US$1.75billi<strong>on</strong> is yet to be remitted in relati<strong>on</strong> to this transfer. In<br />
additi<strong>on</strong>, by a comparis<strong>on</strong> of the aggregate amount of US$1.85billi<strong>on</strong> determined by<br />
DPR as the transfer value , and the (arm’s length) commercial value paid for by 3rd<br />
parties for between 30% to 45% divested by Shell, we arrive at an estimated<br />
Alternative Commercial Valuati<strong>on</strong> of US$3.4billi<strong>on</strong> for the <strong>NNPC</strong> 55%. The point here<br />
is that while we appreciate that this is a government entity to government entity<br />
transacti<strong>on</strong>, we had expected a transfer basis higher than the US$1.85billi<strong>on</strong><br />
commercial value determined by DPR. We have not performed a professi<strong>on</strong>al<br />
valuati<strong>on</strong> and therefore recommend that the valuati<strong>on</strong> d<strong>on</strong>e by DPR be re- assessed.<br />
<strong>NNPC</strong> explained that these OML transfers were in the bid to encourage local<br />
participati<strong>on</strong> in the Nigerian upstream Oil and Gas Industry<br />
We also expect that NPDC should remit dividends to <strong>NNPC</strong> and ultimately the<br />
Federati<strong>on</strong> accounts, based <strong>on</strong> NPDC’s dividend policy and declarati<strong>on</strong> of dividend<br />
for the review period. We did not have access to NPDC's full accounts and records and<br />
we have not ascertained the amount of costs and expenses which should be applied to<br />
the US$5.11billi<strong>on</strong> Crude Oil revenue (net of royalties and PPT paid) per the NPDC<br />
submissi<strong>on</strong> to the Senate Committee hearing in order to arrive at the Net Revenue (in<br />
line with the AG's Opini<strong>on</strong>), which should be subjected to dividend remittance. We<br />
are also not aware that NPDC declared dividend for the review period.<br />
These matters need to be followed up for final resoluti<strong>on</strong> in terms of the NPDC Net<br />
Revenue (dividend) for Crude Oil relating to the transfers, PPT and royalty<br />
unremitted, and the transfer price valuati<strong>on</strong> and remittance.<br />
We determined from informati<strong>on</strong> obtained from PPPRA that $3.38 billi<strong>on</strong> relating to<br />
DPK subsidy cost was incurred by the <strong>NNPC</strong> for the review period. We obtained a<br />
letter, dated 19 October 2009 written by the Principal Secretary to the President, to<br />
the Nati<strong>on</strong>al Security Adviser (The following were in copy: H<strong>on</strong>ourable Minister for<br />
Petroleum Resources, H<strong>on</strong>ourable Minister of State for Petroleum Resources, Group<br />
Managing Director <strong>NNPC</strong>, and the Executive Secretary PPPRA), c<strong>on</strong>firming a<br />
Presidential directive of 15 June 2009 instructing that subsidy <strong>on</strong> DPK be stopped<br />
(Exhibit D7). We also obtained a letter dated 16 December 2010 from the Executive<br />
Secretary PPPRA to the CBN Governor clarifying that PPPRA had ceased granting<br />
subsidy <strong>on</strong> Kerosene since the Presidential directive of 15 June 2009 (Exhibit D8).<br />
Furthermore, Kerosene subsidy was not appropriated for in the 2012 and 2013 FGN<br />
budget.<br />
Vanguardngr<br />
However, the Presidential Directive was not gazetted and there has been no other<br />
legal instrument cancelling the subsidy <strong>on</strong> DPK.<br />
In a Presidential media chat <strong>on</strong> 24 February 2014, The President and Commander in<br />
Chief of the Armed Forces of the Federal Republic of Nigeria, President Goodluck<br />
Ebele J<strong>on</strong>athan, asserted that kerosene subsidies have not been disallowed.<br />
We therefore recommend that an official directive be written to support the legality of<br />
the kerosene subsidy costs. This should also be followed by adequate budgeting and<br />
appropriati<strong>on</strong> for the costs.<br />
C<strong>on</strong>fidential informati<strong>on</strong> for the sole benefit and use of the <str<strong>on</strong>g>Audit</str<strong>on</strong>g>or-General for the Federati<strong>on</strong>.<br />
PwC 17