Audit-Report-on-NNPC

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Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) 4.4. PMS & DPK Subsidy 4.4.1. Introduction Petroleum products subsidies in Nigeria are a form of government intervention designed to alleviate the effect of possible high retail prices of finished petroleum products (PMS & DPK) produced in Nigerian refineries or imported from other countries. Unlike Other marketers that use cash or source for funds from financial institutions to import finished petroleum products (PMS & DPK) into Nigeria, NNPC uses crude oil as its main medium of exchange for the finished petroleum products from other countries. The various activities involved in the movement of the crude oil and the ultimate importation of finished petroleum products into Nigeria is undertaken by PPMC, a subsidiary of NNPC. The exchange of the crude oil for the finished petroleum products is done under any of the following arrangements: 1. Off-shore Processing Arrangements (OPAs) with foreign refineries and 2. Swaps of crude oil for finished petroleum products (PMS & DPK). At the time of the arrival of the finished petroleum products (PMS & DPK), the sum of the international market price of the finished petroleum products (Platt Prices) and the additional costs involved in moving the products into the shore tanks of NNPC or the dealers, is referred to as the Landing Cost. The Landing Cost is usually higher than the price that the Federal Government of Nigeria has required that the finished petroleum products be sold to the retailers/dealers at the Depot (Ex-Depot Price). The difference between the Landing Cost and the Ex-Depot Price is the subsidy due. Apparently, for NNPC, subsidies are therefore inherent in the process of converting domestic crude to PMS and DPK which must be sold at the prices regulated by the Federal Government of Nigeria. At the time of importation of the finished petroleum products into Nigeria, PPPRA is required to verify the quantity delivered in the Shore Tanks, examine the import documents required for petroleum products importation per the Petroleum Support Fund (PSF) Guidelines 41 , and thereafter issue a Payment Advice to NNPC on the amount deductible as subsidy. Unlike PMS that is received and stored in the storage tanks owned or leased by NNPC/PPMC, DPK is usually sold on arrival to interested marketers at prices determined and managed by the Inland Sales Department of PPMC. After the sales of DPK to interested marketers, the marketers usually engage the services of different vessels (i.e. Shuttle Vessels) other than the Mother Vessel to move the DPK purchased from PPMC to their own storage locations or jetties. Vanguardngr PPPRA’s Import Verification process for NNPC’s Imports The diagram below illustrates the processes/activities involved in the verification of petroleum products importation into Nigeria. 41 PSF Guidelines – Framework and procedures for the administration of the petroleum products subsidy scheme in Nigeria Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 64
Investigative Forensic audit of crude oil revenues and remittances by NNPC (January 2012 – July 2013) NNPC forwards Notice of Arrival (NOA) to PPPRA PPPRA notifies its auditors and cargo inspectors Imported volumes witnessed by the relevant stakeholders (DPR, PPPRA, NNPC, inspectors) Submission of Import and Discharge documents independently by NNPC and Cargo Inspectors to PPPRA Source: PSF Guidelines 4.4.2. Procedures Performed Import documents are checked/ verified by PSF unit of PPPRA Were the requirements met? YES Subsidy is calculated and processed by the PSF unit of PPPRA NO PPPRA issues Payment Advice to NNPC, notifies FMF and MPR NNPC deducts subsidy before remittance of revenue to the FG NNPC would be required to submit all necessary documents PPPRA verifies all outstanding import documents Held discussions with the principal officers of PPPRA to understand PPPRA’s role in the Petroleum Products Subsidy Scheme in Nigeria. Vanguardngr Reviewed the PPPRA Act to understand PPPRA’s roles and responsibilities in the Petroleum Products Subsidy Scheme in Nigeria. Reviewed the PSF Guidelines (as amended in 2010) to understand the role and responsibilities of the other stakeholders in the Petroleum Products Subsidy Scheme in Nigeria. Obtained from PPPRA and reviewed all Payment Advice issued to NNPC by PPPRA for all PMS and DPK discharges between January 2012 and July 2013. Confidential information for the sole benefit and use of the <strong>Audit</strong>or-General for the Federation. PwC 65
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