The Office of Auditor-General for the Federation (OAGF) has indicted the Nigerian National Petroleum Company Limited (NNPCL) in at least four financial infractions totalling N514 billion on its operations in the financial year 2021.
The OAGF, in its 2021 audit report of non-compliance/internal control weaknesses in the MDAs for the 2021 financial year, specifically listed the breaches of the state-controlled oil company as including irregular at source deductions worth N343.64 billion from domestic crude sales, warehousing of N83.66 billion from the federation’s miscellaneous income in a sinking fund account, unauthorised deductions of N82.95 billion from the federation revenue for refinery rehabilitation; and the unsubstantiated payment of N3.75 billion shortfalls from the sale of petrol.
Stating that the financial infractions violated the Constitution of the Federal Republic of Nigeria and the 2009 Act of Financial Regulations, the Office further accused the NNPCL’s management of failing to provide any explanation for the infractions raised by the Auditor-General after the audit exercise.
The Auditor-General further disclosed that a review of oil company’s SAP payment records from March to May 2021 indicated that N484.73 billion was generated from the sales of 18,966,095 barrels of crude oil out of which N343.64 billion was deducted as operational costs.
According to the OAGF’s audit report, the NNPCL’s management also failed to provide a breakdown of the costs, thereby violating section 162 (1) of the Constitution, which states that “the federation shall maintain a special account to be called the federation account into which all revenue collected by government.”
The report further clarified: “Audit observed from the review of NNPC SAP payment record for March and May 2021 payments that: The sum of N484.73bn was the gross amount generated for sale of Domestic Crude for the Months of March and May 2021.
“The sum of N343.64bn from the gross amount was unilaterally deducted from the gross domestic crude sales as NNPC Value shortfall, Strategic Stock Holding Cost, Crude Oil and Products Pipeline Losses, as well as the pipelines maintenance and management costs.
“The details of each of the cost components deducted were not provided for audit review. Hence, reasons for the deductions could not be justified by the Management.
“In the month of May, the net payable which could have been remitted ought to have been N127.075bn but only the sum of N77.075bn was remitted, leaving an unremitted balance of N50bn to the Federation Account which has remained unaccounted for.
“The above anomalies could be attributed to weaknesses in the internal control system at NNPC, now NNPC Ltd. This is a potential loss of Federation Revenue, diversion of public funds, or misapplication or misappropriation of funds.
“Audit observed from the review of NNPC Payment records for the period 2020 and 2021 that the sum of N82.95bn was deducted from the sale of Crude Oil and Gas (Federation Revenue) from the 2020 and 2021 records.
“This amount deducted at source for purported Refineries Rehabilitation was not supported with evidence of authorization and approvals before the deductions were made.
“The above anomalies could be attributed to weaknesses in the internal control system at NNPC, now NNPC Ltd,” it noted.
Similarly, the auditor-general reported that the national oil firm didn’t report N3.75bn as a shortfall from the sales of petrol sales.
“Audit observed that the sum of N3.75bn was paid to a Company as a shortfall on sales of MT cargo of PMS
“Paragraphs 2 and 3 of the PPMC internal memo with ref. No. PPMC/ EDSS/BILLING/19.16 dated 9/08/2021 advised Marketers to pay naira sales proceeds in advance into the company’s designated accounts, which the company utilised the sum of N3.75bn to purchase forex through NNPC Group treasury to pay the suppliers, and details of the transaction between the NNPC, PPMC and the company that gave rise to the sum of N3.75bn which was paid to the company as shortfall on sales of MT cargo of PMS were not availed for audit”, it added.
The OAGF attributed the above anomalies primarily to weaknesses in the internal control system at the NNPC.
A further analysis of the audit report reflected that the sum of N83.66 billion, being miscellaneous income from the NNPC joint venture operations from the year 2016 to 2020, was sunk into the CBN/NNPC sinking fund account rather than the Federation Account as required.
The OAGF maintained that warehousing of the miscellaneous income of 2016 to 2020 meant for the Federation Account into the CBN/NNPC Sinking Fund Account led the federation to resort to borrowings.”
The report showed that during the financial year under review, the Federal Government recorded N2 trillion revenue shortfall as it projected a total revenue of N6.64 trillion compared to the actual revenue accruals totalling N4.64 trillion.
Based on the findings, the Auditor-General recommended that the company’s Group Chief Executive Officer should be requested to give reasons for the spending to the Public Accounts Committees of the National Assembly or face sanctions relating to irregular payment and gross misconduct specified in paragraphs 3106, 3112, 3115, and 3129 of the Financial Regulations 2009.
