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Bad book keeping mar oil audit

Sebastine OBASI

Improper record keeping and undue discrepancies in the book keeping of government agencies were made manifest in the latest report of the Nigeria Extractive Industries Transparency Initiative, NEITI.

According to the report which covers financial flows within Nigeria’s oil and gas industry from 2009 to 2011, about $311.85million representing flows to the Federation account were claimed to have been paid by the covered entities to the relevant accounts but such payments were not confirmed to the Central Bank of Nigeria, CBN, bank statements.

In some cases, the covered entities were issued treasury receipts (TR) by the office of the Accountant General of the Federation (OAGF) on such payments, but these could not be traced to CBN records by NEITI.

Also, $3.75 million and N1.20 billion being payments made to the Niger Delta Development Commission, NDDC, by the covered entities, could not be confirmed to the Commission’s records. Similarly, $69.44 million and N2.525 billion reported by the Commission could not be confirmed to covered entities’ records.

As regards domestic crude oil sales, which is in dollars, the Nigerian National Petroleum Corporation, NNPC, remitted in Naira to the Federation account. However, the derived average conversion rate by NNPC differs from the annual average CBN rate and therefore results in apparent loss of N98.3 billion during the period under review. Oil-Report

NEITI therefore recommended that domestic oil sales proceeds should be paid into CBN in the currency of sales, where it should be converted at the appropriate rate by CBN and swept to the Federation account, in order to forestall the exchange rate shortfalls.

According to the NEITI Report, the review of the domestic crude oil utilisation by NNPC, showed that the Corporation utilised below the daily quota for 2009 by 1,000 barrels per day, bpd and above the daily quota in 2010 and 2011 by 11,000bpd and 6,000bpd respectively. This showed that NNPC does not effectively monitor domestic crude lifting in accordance with expected guidelines.

Similarly, $4.84 billion was received by NNPC as dividend and repayment of loans from the Nigeria Liquified Natural Gas, NLNG. This is in addition to the $3.996 billion reported to have been received in the previous audit reports. However, these amounts have not been remitted to the Federation account. Also, the dividends and loan repayment made by NLNG and confirmed to be in receipt by NNPC could not be confirmed to the CBN, JP Morgan/Federation account.

According to NEITI, this practice has been a recurring issue. Consequently, NEITI stated that there is need to confirm the ownership of the 49 percent investments in NLNG – whether it is for the benefit of the Federation, the Federation Government or NNPC itself.

Another aspect of the audit report is the NNPC’s share of the Joint Venture undertakings, which is paid to CBN/NNPC Crude Oil and Gas Dollar Revenue Account and subsequently swept into the Federation account. The transactions were said to be off balance sheet items (undisclosed in NNPC audited financial statements).

The implication is that there may be significant contingent liabilities to the Federation, not being disclosed. NEITI recommended that NNPC should fully disclose all contingent liabilities in its financial statement to promote transparency and accountability especially on alternative financing arrangements.

Also, the sum of $1.73 billion non-cash call items were financed from the CBN/NNPC JP Morgan Chase Cash Call Dollar Account. No explanations were given for making the payments from the cash call account. As a result, the amount available for funding JV operations is reduced with the attendant implication of NNPC seeking alternative funding arrangement to fund cash call shortfalls. One of the payments made in this category is on security.

About $600 million were transferred from NAPIMS Joint Venture Cash Call Account to NNPC corporate headquarters for security operations in the Niger Delta region by the Nigerian military. Similarly, $487 million was paid to NNPC-NAPIMS as management fees. Management fees are to meet NNPC-NAPIMS operational expenses. Also, the sum of $282.95 million and $364 million were paid in 2010 and 2011 respectively out of Cash Call Dollar Account for the “expansion of Escravos


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