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2005 Audit: NEITI indicts DPR, NNPC on transparency

By Yemie Adeoye
THE recently released 2005 oil and gas audit report has indicted Department of Petroleum Resources (DPR) and the Niger Delta Development Commission (NDDC) over lack of transparency in their activities in 2005, even as it also recommends the NDDC for proper investigation.

The Nigeria Extractive Industries Transparency Initiative (NEITI)held a town hall meeting  for the people of South Eastern Zone to rub minds on the way forward at the Concorde Hotel, Owerri. Photo shows L-R, Prof Assisi Asobie, Chairman, NEITI discussing with Mazi Sam Ohuabunwa, board Member NEITI at the meeting. Photo by Sylva Eleanya.
The Nigeria Extractive Industries Transparency Initiative (NEITI)held a town hall meeting for the people of South Eastern Zone to rub minds on the way forward at the Concorde Hotel, Owerri. Photo shows L-R, Prof Assisi Asobie, Chairman, NEITI discussing with Mazi Sam Ohuabunwa, board Member NEITI at the meeting. Photo by Sylva Eleanya.

Specifically the DPR was alleged not to have conducted the bidding process in 2005 transparently, while the NDDC on  its  part was alleged to have confirmed the receipt of $134 million   and N8.3 billion to the auditors, while the companies reported paying the commission $119.9 million  and N8.1 billion respectively.

This was disclosed by the Executive Secretary of the Nigeria Extractive Industry Transparency Initiative (NEITI) Mallam Haruna Sa’eed while speaking on the highlights and major recommendations of the audit report at the one day road-show and town-hall meeting organised by NEITI in Owerri, the Imo state capital during the week.

According to him, although the NDDC has just sent another confirmation to the secretariat that it received  $202.6 million  and N10.8 billion, the Commission should still be investigated or its account audited as some payments made by the companies and supported by transaction documents were not included in the NDDC report provided to  auditors.

Speaking further Sa’eed stated that the DPR does not have reliable system of measuring production for royalty purpose other than terminal receipts as the law is not clear.

“There is no strong communication between DPR and the Nigerian National Petroleum Corporation (NNPC), which could enable DPR to know the milestones that have been reached by the companies which will determine when signature bonuses fall due.

DPR was not duly verifying the royalty computations made by the companies; including key variables therein that is API and volume which were subjectively interpreted and applied by the companies which imply a self assessment by the companies.”

The NITI boss also said that the DPR did not collect royalty from companies despite their high production, “e.g Cavendish, AENR and Express Oil among others.  They are also not involved in the measurement/ assessment of ‘in-kind’ payments for royalty to ensure its accuracy.

Several notable speakers who delivered papers on Transparency and the 2005 audit report hammered on the need for proper accountability on the part of the leaders.

Speaking at the event An Energy Consultant Dr. Arinze Agbim charged the audience when he disclosed that about $600 million  was unaccounted for , while huge losses in product distribution system also accounted for unexplained losses up to the tune of $239 million  during the year under review.

This was however challenged by the Chairman of the session and country Chair, Shell companies in Nigeria Mr Basil Omiyi, who said that the issue of losses is being blown out of proportion, and that the figures may not be factual.

However, Dr. Agbim who apparently does not agree with this notion lamented the situation of Nigeria as the only OPEC country that is dependent on importation of refined products for domestic consumption, even as he challenged the government on the reason behind the selection of Vitol and Trafigura  the two companies responsible for 43 per cent of imported petroleum products into the country.

He stated that the Nigerian National Petroleum Corporation (NNPC) has not confirmed what happened to the dividend payment of N207 million  which it received from the Nigerian Liquefied Natural Gas (NLNG).

“NNPC received the total sum of N4,065 million for its Joint Venture (JV) cash calls but paid out only N3,469 million to its JV partners  and failed to return the balance to the federation account.

The NNPC also owes the federation N654.8 billion for domestic crude it lifted for the refineries under a 90 days credit arrangement, N331.8 billion of this amount was overdue by year end 2005.The Niger Delta Development Commission (NDDC) also declared that they received from companies 135 million dollars and N8.4 billion during the years under review while the companies submitted that they paid amounts slightly lower than these”

He however advocated for the need to strengthen technical capacity in government Agencies like the Federal Inland Revenue Service (FIRS), Office of the Accountant General of the Federation (OAGF), Department of Petroleum Resources (DPR) etc.

“We have a situation where some indigenous and small companies exporting without paying tax, like the Executive Secretary has said, the law does not feel that once you export you must pay tax, once you produce you pay royalty, if you make profits you pay tax on your profits, but if you can prove that you have not made any profits then you have no tax liability, what has now happened with so many of the small companies is that somehow they have managed to write up to tax returns to say even if they have been exporting for so many years they have overhead costs and all other costs and as such they have not made profits.

If someone claims not to have made profit in a business for so long, then why couldn’t he leave the business? So we need to look at these issues more critically if we are to consider transparency in this all_important sector.” He enthused.

Also speaking on the gains and lesson of transparency in the sector and reasons for town hall meetings, The Chairman of the NEITI Professor Asisi Asobie stated that it opens widely, hitherto opaque industry to public scrutiny, places in public domain immense and rich array of facts and figures, information and data about oil and gas industry thus empowering the civil society more deeply. “The NEITI model would also redirect the debate on corruption, and places it on a right keel, away from personalities to structures and systems.

It would reveal the centrality of institutional quality, technical capacity, bureaucratic efficiency and good governance in development.  It also importantly provides a basis for comprehensive institutional remediation, bureaucratic repair, and technical capacity building” he said.


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