How FG drains NNPC accounts - Audit report •Presidency disowns fake Petroleum Industry Bill in circulation

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How FG drains NNPC accounts - Audit report •Presidency disowns fake Petroleum Industry Bill in circulation

Written by David Olagunju Tuesday, 17 July 2012

AN independent audit report has discovered how the Federal Government has continuously drained the accounts of the Nigerian National Petroleum Corporation (NNPC).
According to an audit report published by Reuters on Monday, the Federal Government was owing the NNPC some improper and informal loans, which were used to cover a range of expenses, from a presidential helicopter to maritime security.

The audit was prepared by an independent firm, which was given access to accounts of the NNPC as part of a government’s transformation agenda aimed at improving transparency at the NNPC.

The Petroleum Minister, Mrs Diezani Alison-Madueke, had promised that the transformation of the debt-ridden NNPC would lead to an independent profitable company emulating Brazil's Petrobras or Malaysia's Petronas.

NNPC has an annual budget approved by the National Assembly. Other revenues it collects from its Joint Venture (JV) contracts are meant to be passed to the government accounts, but industry experts said powerful interests tapped the money before it could be sent through official channels.

According to sources involved in the external audit, who preferred anonymity, it would show outstanding debts owed to the NNPC by a number of ministries and state agencies. The company paid for a $14 million presidential helicopter, and is owed $106 million by the Power Holding Company of Nigeria (PHCN) and $124 million by a maritime security agency.

State governors had been threatening to take the Federal Government to court over illegal tapping of oil revenues that should be shared with local government.

The finance ministry and NNPC declined to comment on the debts and the presidency and oil ministry did not respond to requests for reaction.

"We are aware of many of these debts. Obviously it isn't an ideal situation," an NNPC source told Reuters on condition of anonymity.

“State agencies in debt to NNPC should be funded through the budget, so such loans add to transparency concerns.

“The NNPC needs its own funds to pay for joint ventures with foreign oil companies, some of which have made dormant due to a non-passage of the Petroleum Industry Bill (PIB).

"It does highlight the extent to which NNPC has been drawn into the more opaque areas of government and will give ammunition to those critics who say it has operated at least partly as a slush fund for government.

"It points to the huge difficulties in making independent a corporation with such a complex web of assets and liabilities, at least some of which appear not to have been contracted solely on a commercial basis.” Antony Goldman, Nigeria oil expert at PM Consulting, said.

Numerous earlier reports and audits had concluded that corruption had been rife within NNPC. Last year, Transparency International and Revenue Watch ranked NNPC as one of the least transparent oil companies in the world.

Besides, the House of Representative report in May had uncovered a $6.8 billion fraud involving petroleum subsidy regime, which is partly run by the NNPC and Petroleum Products Pricing Regulatory Agency (PPPRA).

That report said NNPC was accountable to no one. It said the company owed oil traders, including privately-held Trafigura , $3.5 billion in unpaid bills.

A long-awaited Petroleum Industry Bill (PIB), due to go to parliament for debate within days, is supposed to spin off some assets and replace the NNPC with a new, independent and partially listed National Oil Company (NOC).

The draft PIB also states that the oil minister will oversee all institutions within the industry, raising question marks over how independent the NOC would be.