Audit-Report-on-NNPC

Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013)
II.
with information which indicated that the various NNPC (55%) portion of Oil leases
(OMLs) involved in the Shell Divestments related to the eight (8) OML’s aforestated,
were transferred to NPDC for an aggregate Sum of US$1.85billion. So far, only the
amount of US$100m had been remitted in relation to these assets. This means that
the amount of US$1.75billion is yet to be remitted in relation to this transfer. In
addition, by a comparison of the aggregate amount of US$1.85billion determined by
DPR as the transfer value , and the (arm’s length) commercial value paid for by 3rd
parties for between 30% to 45% divested by Shell, we arrive at an estimated
Alternative Commercial Valuation of US$3.4billion for the NNPC 55%. The point here
is that while we appreciate that this is a government entity to government entity
transaction, we had expected a transfer basis higher than the US$1.85billion
commercial value determined by DPR. We have not performed a professional
valuation and therefore recommend that the valuation done by DPR be re- assessed.
NNPC explained that these OML transfers were in the bid to encourage local
participation in the Nigerian upstream Oil and Gas Industry
We also expect that NPDC should remit dividends to NNPC and ultimately the
Federation accounts, based on NPDC’s dividend policy and declaration of dividend
for the review period. We did not have access to NPDC's full accounts and records and
we have not ascertained the amount of costs and expenses which should be applied to
the US$5.11billion Crude Oil revenue (net of royalties and PPT paid) per the NPDC
submission to the Senate Committee hearing in order to arrive at the Net Revenue (in
line with the AG's Opinion), which should be subjected to dividend remittance. We
are also not aware that NPDC declared dividend for the review period.
These matters need to be followed up for final resolution in terms of the NPDC Net
Revenue (dividend) for Crude Oil relating to the transfers, PPT and royalty
unremitted, and the transfer price valuation and remittance.
We determined from information obtained from PPPRA that $3.38 billion relating to
DPK subsidy cost was incurred by the NNPC for the review period. We obtained a
letter, dated 19 October 2009 written by the Principal Secretary to the President, to
the National Security Adviser (The following were in copy: Honourable Minister for
Petroleum Resources, Honourable Minister of State for Petroleum Resources, Group
Managing Director NNPC, and the Executive Secretary PPPRA), confirming a
Presidential directive of 15 June 2009 instructing that subsidy on DPK be stopped
(Exhibit D7). We also obtained a letter dated 16 December 2010 from the Executive
Secretary PPPRA to the CBN Governor clarifying that PPPRA had ceased granting
subsidy on Kerosene since the Presidential directive of 15 June 2009 (Exhibit D8).
Furthermore, Kerosene subsidy was not appropriated for in the 2012 and 2013 FGN
budget.
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However, the Presidential Directive was not gazetted and there has been no other
legal instrument cancelling the subsidy on DPK.
In a Presidential media chat on 24 February 2014, The President and Commander in
Chief of the Armed Forces of the Federal Republic of Nigeria, President Goodluck
Ebele Jonathan, asserted that kerosene subsidies have not been disallowed.
We therefore recommend that an official directive be written to support the legality of
the kerosene subsidy costs. This should also be followed by adequate budgeting and
appropriation for the costs.
Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation.
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