Audit-Report-on-NNPC

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Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) 4.2. Revenue Remitted 4.2.1. Introduction 4.2.1.1 Overview It was established from NNPC’s submission to the Senate that a total of $67 billion revenue had been generated for the Federation during the period January 2012 to July 2013, out of which only $47 billion had been remitted, consisting; 1. $14 billion from equity crude sales 2. $15 billion PPT from FIRS 3. $2 billion Royalty from DPR 4. $16 billion from domestic crude sales This review verified the remittances listed above and identified any other remittances that might have been made to the Federation Account during the period under review. Proceeds from crude oil sales are received in various forms depending on the source of the revenue and the type of arrangement that created the revenue. The various revenue sources and how proceeds are received by the Federal Government have been summarized below: 4.2.1.2 Equity Crude Oil The purchaser of the crude oil cargo opens a 30-day Letter of Credit (LC) in favor of the NNPC. Payments for the crude oil are credited to the NNPC/CBN JP Morgan Chase Crude Oil and Gas US Dollar (USD) account on expiry of the 30 day period. The CBN maintains the NNPC/CBN Oil and Gas US dollar accounts with JP Morgan Chase on behalf of the NNPC and both parties monitor the accounts for payments as a LIBOR based interest penalty applies to late payments. 4.2.1.3 Domestic Crude Oil Product exchange (swap) transactions SWAP transactions involve sale of crude oil, by NNPC, in exchange for refined petroleum products on a value-for-value basis. The proceeds from the sale of refined products are paid by buyers into NNPC local Deposit Money Bank (DMB) accounts as designated by PPMC. The DMBs periodically remit these funds into the CBN/NNPC crude oil revenue (Naira) account based on NNPC’s instruction. NNPC subsequently issues a remittance advice to CBN informing them of the transfer from the DMBs to CBN’s remittance pool account and then another remittance advice to move the funds to the Federation Account. The inflows through sale of products from the SWAP transactions are in Naira. Offshore Processing Arrangements (OPA) OPAs involve the use of a refinery outside Nigeria to process crude oil into refined products. The refinery is paid refining fees. Proceeds of subsequent sale by NNPC of the refined products are deposited in the NNPC local Deposit Money Bank accounts. NNPC issues an instruction to the Deposit Money Bank to move the funds into the CBN remittance account. The CBN remittance account is further debited by the CBN through a remittance advice from NNPC into the Federation Account. Vanguardngr Allocation to Local refineries The proceeds from sale of the refined products are likewise deposited in the CBN remittance accounts by the Deposit Money Banks through a remittance advice from the NNPC. The CBN also through a remittance advice from the NNPC credits the inflow back to the Federation Account. Unutilised Domestic Crude Oil Sales Proceeds from sale of unutilized crude sales are paid into designated USD accounts with DMBs. Note – All the proceeds from domestic crude liftings are subject to a 90 day credit period which means that revenue from liftings in a particular period are remitted three (3) months after the lifting. Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 52
Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) 4.2.1.4 FIRS This goes through the same process as equity crude oil. However remittance is made directly to the FIRS JP Morgan account. FIRS then issues remittance advice to CBN, instructing the Bank to remit the proceeds in the JP Morgan account into the Federation Account. 4.2.1.5 DPR This goes through the same process as equity crude oil. However, remittance is made directly to the DPR JP Morgan account. DPR then issues remittance advice to CBN, instructing the Bank to remit the proceeds in the JP Morgan account into the Federation Account. 4.2.1.6 Senate submissions The Senate Committee set up to investigate the alleged unremitted crude oil revenue for the Federation requested for submissions from relevant parties including CBN and NNPC. In addition, the Ministry of Finance set up a Reconciliation Committee (consisting of CBN, NNPC, DPR, FIRS, OAGF, the Budget Office of the Federation, Federal Ministry of Finance and Federal Ministry of Petroleum Resources) to align the differing figures that were being reported and a final reconciled remittance figure of $47 billion was agreed. S/N Total Revenue NATURE ($bn) 1 Equity 14 2 Domestic Crude 16 3 FIRS 15 4 DPR 2 TOTAL 47 Table B1 – Summary of crude oil revenue remitted for the period of January 2012 to July 2013 as reported by NNPC 4.2.2. Procedures Performed 1. Conducted interviews with relevant process owners to validate understanding of each agency’s remittance procedures. 2. Traced equity remittances to CBN/NNPC JP Morgan account to confirm the total amount received from equity crude sales. 3. Traced domestic remittances to various DMB accounts to confirm the total amount received from domestic crude sales. Vanguardngr 4. Traced FIRS remittances to CBN/FIRS JP Morgan accounts to confirm total amount received in respect of PPT 5. Traced DPR remittances to CBN/DPR JP Morgan accounts to confirm total amount received in respect of Royalties 6. Compared amounts in procedures ‘2’, ‘3’, ‘4’ and ‘5’above to FAAC reports to establish completeness of remittances to the Federation. 7. Examined remittance advice issued by NNPC to CBN to transfer payments to the Federation Account to enable comparison with FAAC reports. 8. Documented findings and conclusions Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 53
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