Audit-Report-on-NNPC

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Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) These costs relate to amounts incurred by NNPC (and its subsidiaries) in executing its mandate. We observed that there were documents supporting these expenses. E This represents the revenues due to NPDC from crude oil sale for the period from January 2012 to July 2013. The balances used in this analysis were obtained from the submissions made by the former MD of NPDC Mr Victor Briggs, during the Senate Committee hearings. We could not find proof or evidence that these revenues were remitted by NPDC/NNPC into the Federation Accounts For the purpose of this report, PwC has included these expenses as verified, and treated them as legitimately incurred in the process of the Corporation executing its mandate. Verified costs (NPDC yet to complete payment for assigned assets). It is important to note that the relationship between NNPC and NPDC as it relates to OMLs 30, 34, 40, 26, 4, 38, 41, 42 controlled by NPDC, is a key limitation to our scope. We had no access to NPDC management; our work relied on discussions with NNPC management (Section 6.3.2) and review of submissions to the senate (Exhibit A1). From our reviews of the NNPC Act (section 6(1 c & d)), we noted that the Corporation is empowered: (c) to enter into contracts or partnerships with any company, firm or person which in the opinion of the Corporation will facilitate the discharge of the said duties under this Act; (d) to establish and maintain subsidiaries for the discharge of such functions as the Corporation may determine; Sections 6(1c & d) are critical to establishing the nature of sale of these OMLs. We have analysed these as follows: (Factors supporting a sale) 1. NPDC paid taxes and royalties with a total of $1.7 billion. We have not been able to establish the assets on which these taxes and royalties were paid. However, the practice of payment of these statutory deductions suggests that the revenues from the related assets belong to the Company. According to NPDC’s submission at the senate hearing, NPDC has not been assessed for royalty and PPT for the review period by DPR and FIRS respectively. The Company made part payments based on estimates. Vanguardngr 2. Existence of a Deed of Assignment: As part of our work, we were informed of a document (Deed of Assignment) that transferred the assets from NNPC to NPDC. We were availed with copies of Deeds of Assignment for OML’s 26,30,40,42. We were not provided with copies of Deeds of Assignment for OML’s 4,38,41,34. 3. An outright sale to NPDC means that NPDC would be expected to make a payment to the Federation accounts for procuring the asset. DPR assigned a total value of $1.85 billion dollars as reasonable amounts to be paid for the eight OML’s in consideration, out of which the Corporation had paid $100 million. An outright sale will also require dividend remittance by NPDC to NNPC (and Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 22
Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) thus the FGN), depending on the dividend policy of NPDC (NNPC is the sole owner of NPDC). See analysis of NPDC’s submission at the senate hearing below: Analysis of NPDC submissions F This reflects amounts deducted by NNPC as subsidy claims on PMS - $5.32billion & DPK - $3.38billion (Total $8.70billion) These costs were verified based on documents received from PPPRA. We have however deducted the errors noted in these documents, before arriving at the verified amounts. Description Amount ($) Total revenues from NPDC assets 6,815,188,626 Total PPT paid (863,000,000) Total Royalties paid (838,991,619) Total revenues less payment already made Senate hearing submissions, PwC analysis 5,113,197,007 Total amounts estimated to have been withheld by NPDC on assumption of a sale of the divested assets is $5.11 billion. Verified costs requiring legal opinion The FGN should seek legal opinion on: 1. Legitimacy of DPK subsidy We were not provided with any document evidencing the Federal Government’s approval for the continuation of DPK subsidy. However, 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, confirmed the Federal Government’s position, that the kerosene subsidies have not been disallowed. Vanguardngr 2. NNPC’s right to deduct subsidy from amounts due to the FGN for the sale of domestic crude, instead of retrospective claim as done by other marketers The role of NNPC in the downstream sector is to refine petroleum products and subsequently sell to bulk traders and retailers. Due to the decline in local refining capacity and increased domestic consumption, NNPC has resorted to importing products to compensate for the shortfall. The FGN subsidises the cost of petroleum products imported or refined locally. Typical process preceding subsidy claims includes verification and certification by PPPRA of the product type, volume and specification of the imported or refined petroleum product before the subsidy is claimed and paid. Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 23
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