OBSERVATIONS
The Committee observes as follows:
1. There is lack of proper and adequate co-ordination between key agencies of Government such as MOF,MPR, CBN, NNPC, DPR, FIRS etc. Ordinarily, reconciliations on regular basis between sensitive institutions controlling our economy should be an on-going and common practice;
2. The problem of non-remittance of revenues by NNPC was not new and it was not the Central Bank of Nigeria (CBN) Governor that first disclosed it. It has been a recurring issue at monthly Federation Account Allocation Committee (FAAC) meetings sometimes leading to States Commissioners
Finance walking out of meetings;
3. The Committee could not see how the figure of US$49.8billion was arrived at by the CBN Governor in the first instance.
4. That the CBN Governor at the first hearing had put forward the figure of US$12 billion as monies to be reconciled and changed his position to US$20 billion at subsequent hearing. At the conclusion of his written submission he posited that it could be US$20 billion, US$12 billion, $10.8 billion or anything in between;
5. That the CBN Governor orally or in writing never outrightly submitted that monies were missing but that monies were not remitted to Federation Account by the NNPC;
6. That the CBN Governor only posited that part of US$6 billion representing value of liftings by NNPC on behalf of NPDC should belong to the Federation Account and that he was not in a position to say how much was the amount. Therefore, the assumption that the entire sum of US$6 billion was to be accounted for is incorrect and misleading. The actual value of the liftings was however found to be US$6,815,188,626.25
7. That CBN Governor only sought for evidence relating to US$2 billion representing value of liftings under Third Party Financing. The actual value of the liftings was however found to be US$2,430,750,973.
8. That there was poor record keeping and non-challant work attitude by the NNPC by not rendering returns on subsidy claims on monthly basis from January 2012 to-date which contributed largely to creation of the problem in hand.
9. That there was no evidence to suggest that the submission of claims by NNPC to PPPRA were done prior to payments being made.
10. That the Ministry of Finance and Ministry of Petroleum Resources differ on position of subsidy on kerosene.
11. That the Coordinating/Minister for the Economy/Minister of Finance testified that she had not authorised any payment/expenditure of subsidy on kerosene and that there was no budgetary provision, while the Minister of Petroleum Resources agreed that there was no budgetary provision for
subsidy on DPK but noted that the Ministry continues to make payment for kerosene subsidy in the overall interest of the masses.
12. That NNPC still controls the revenue account of NPDC which undermines its status as a separate legal entity and makes proper accountability difficult.
13. At the second public hearing of the Committee on 4th February, 2014, the FIRS admitted receiving total sum US$16,001,887,639.67 against the sum of US$15 billion indicated in the CBN Governor’s submission. CBN Governor accepted the submission of the FIRS when asked for comment.
14. That the sums of N888.101 billion and N971.138 billion were appropriated to meet requirements for fuel subsidy in the years 2012 and 2013 respectively contrary to the CBN Governor’s claims that such was not the case purely based on the non-filing of subsidy claims by NNPC on monthly basis. This can be seen in the submission of the Ministry of Finance confirming same and revenue profiles for 2012 and 2013 respectively approved by National Assembly.
15. That the Petroleum Products Pricing Regulatory Agency (PPPRA) has certified subsidy claims by NNPC as follows:
(a) For PMS, Jan 2012-Dec 2012= US$3,343,141,081.56 equivalent to N517,752,259,303.78
(b) For DPK, Jan 2012-July 2013= US$2,281,721,090.24
(c) For PMS, Jan 2013 – July 2013 =US$1,911,605,951.56 equivalent to N296,p,413,718.09
(d) For DPK, Jan 2013 – July 2013= US$1,230,194,700.59 equivalent to M90,520,253,280.69
(e) For PMS, Aug 2013- Dec 2013= US$636,914,882.88 equivalent to N593.635.120.87 (Interim)
(f) For DPK, Aug 2013 – Dec 2013= US$917,443,479.99 equivalent to N142,019,114,550.26 (Interim).
That the PPPRA has certified subsidy claims Marketers as follows:
(a) For PMS, Jan 2012 – Dec 2012= N461,040,708,363.46
equivalent to US$2,978,322,976.02
(b) For PMS, Jan 2013 – Dec 2013= N467.620.656.674.24 equivalent to US$3,020,829,442.11
17. That PPPRA certification of subsidy payment for NNPC/other marketers is subject to the Forensic Audit conducted by PWC and Office of the AGF.
18. That the PPPRA certified the subsidy payments/deductions in respect of DPK in spite of the fact no appropriation were made for such
in 2012 and 2013 Appropriation Acts.
19. That Mr. President, Dr. Goodluck Ebele Jonathan (GCFR) in his media chart on 24th February, 2013 aired on NTA and television stations defended the deductions for other kerosene (DPK) subsidy.
That Section 80(2), (3) and (4) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) stipulates as follows:
(a) 80(2) “No money shall be withdrawn from the Consolidated Revenue Fund of the Federation except to meet expenditure that is charged upon the Fund by this Constitution or where the issue of those money has been authorised by an Appropriation Act or an Act passed in pursuant of Section 81 of this Constitution.
(b) 80(3) “No money shall be withdrawn from any Public Fund of the Federation other than the Consolidated Revenue Fund of the Federation unless the issue of those moneys has been authorised by an Act of the National Assembly”.
(c) 80(4) No money shall be withdrawn from the Consolidated Revenue Fund or any other Public Fund of the Federation, except in the manner prescribed by the National Assembly”.
21. That in 2007, the late President, Umaru Musa Yar’adua (GCFR) having exceeded amount appropriated for petroleum support fund (subsidy) sought for and got approval of the for additional sum of N25,000,000,000 National Assembly.
22. Further observes that President Dr. Goodluck Ebele Jonathan (GCFR) in 2012 having exceeded the amount appropriated for fuel subsidy sought for approval of additional sum of N161.617 billion which was not considered by the Senate thus not approved.
23. That NNPC submitted other details and expenses as follows:
(a) Expenses in respect of holding strategic stock US$0.46 billion;
(b) Crude oil losses US$0.76 billion; and
(c) Expenses in respect of maintenance of installations and pipelines US$6.91 billion.
All supporting documents in relations to NNPC other expenses presented to the Committee were handed over to Consultants appointed by it with approval of the Senate President for verification, auditing and certification.
24. It was observed that demurrage charges were not paid in cash but through crude exchange for products (product swap). Balance due to/from the Companies are carried forward and offset against crude loadings.
25. Average number of (days taken to discharge a vessel load of 33.5 days as against expected 1.5 days resulting into US$207.8 million demurrage.
26. It was also observed that some documents represented by NNPC/PPMC to the Consultant for authentication were overstated, understated or duplicated.
FINDINGS
After all careful submissions, the Committee’s findings are as follows:
1. That all parties, i.e. CBN, NNPC, Ministry of Finance and Ministry of Petroleum Resources had resolved through reconciliation undertaken them that US$47 billion had been received into the Federation Account out of the total oil
lifting valued at billion between January 2012 and July 2013;
2. That on the remaining US$20 billion Committee’s findings are as follows:
(a) The amount deducted/withheld/expended by NNPC on fuel subsidy between January 2012 to July, 2013 was US$5,254 billion (N813.302 billion). This was certified by PPPRA and the National Assembly has appropriated funds in 2012 and 2013 for fuel subsidy in the sums of N888.101 billion (US$5.737billion) and N971.138 billion (US$6.274billion) respectively See Annexure SEN 5A and 17);
(b) The amount expended on subsidy on kerosene (DPK) between January to July, 2013 was US$3,512 billion (N543.890 billion). This was certified by PPPRA. This was not appropriated for by the National Assembly in both 2012 and 2013 Appropriation Acts;
(c) The subsidy deduction in the sum of N180 billion (US$1.2billion) by NNPC in 2012 but relating to fourth quarter 2011 was certified by PPPRA. The CBN position was that this deduction PPPRA certification.
(d) There was also appropriation for fuel subsidy in 2011 in the sum of N245.96 billion.
(e) PPPRA verification alluded to on the NNPC subsidy claims are in practice book keeping verification rather than physical verification of products and claims.
(f) On the Third Party Financing liftings by NNPC which CBN put at US$2 billion and called for more explanations, the Committee’s findings are as follows:
(i) That the actual; value of Third Party Financing lifting was
US$2,430,750,973 (See Annexure SEN 3D);
(ii) That the amount confirmed by the Accountant-General the Federation as having being remitted into the Federation Account between January, 2012 and July, 2013 was U3$1,370,172,650.36;
(iii) That the share belonging to Mobil Producing Nigeria Limited in Third Party Financing arrangement with NNPC confirmed by them orally and in writing was US$848,687,58; and
(iv) That the amount confirmed by the Accountant-General
the Federation as having being remitted into the Federation Account in December, 2013 which is outside the period January, 2012 July, 2013 was US$300,000,000. Therefore, the sum of $218,069,354 remains outstanding or unremitted by NNPC which it explained was in escrow account and will be remitted when it matures.
(g) On the US$6 billion liftings by NNPC on behalf of NPDC which CBN observed that part of the Revenue belongs to the Federation Account) the Committee’s findings are as follows:
(i) NPDC strategic alliances are within the laws Federation as submitted by the Attorney-General for the Federation and Minister of Justice;
(ii) Total liftings during the period in question was US$6,815,188,626;
(iii) Share of revenue to go to the Federation Account was US$2,175,635,436;
(iv) Amount of Petroleum Profit Tax (PPT) confirmed received by Federal Inland Revenue Service (FIRS) from the NPDC and remitted to the Federation Account was US$863,000,000 (See Annexure SEN 6B);
(v) Amount of Royalty confirmed received by Department Petroleum Resources (DPR) from NPDC and remitted the Federation Account was US$864,817,552; and
(vi) Royalties and Taxes not remitted to the Federation Account by NPDC within the period under consideration was US$447,817,884.
(h) On other expenses and crude losses which the Committee appointed Independent Professional Accountants the Committee findings are as follows:
(i) Crude and refined oil losses were certified Committee C6nsultants as US$0,809 billion against the US$0,760 billion reported by NNPC (Annexure SEN20);
(ii) Pipeline surveillance cost increased from US$2.23 million m 2012 to US$11.15 million in 2013 without corresponding decrease in pipeline oil losses.
(iii) Actual PPMC’s Staff Salaries and upfront benefit claimed in NNPC submission were overstated US$7.58 million and US$29.35 million for the year 2012 and 2013 respectively.
3. Amount expended above budgeted or not budgeted for at all in respect of PMS and DPK in 2012 and 2013 are as shown below:
(a) PMS 2012: Budgeted: N888.101 billion (US$5737 billion); Expenditure:
N978.795 billion (US$6.323billion); Over Expenditure: N90.693 billion (US$585million) Supplementary budget for PMS in the sum of N161.617 billion was presented to National Assembly by the President Dr. Goodluck Ebele Jonathan (GCFR), in the month of December, 2012 but was not even considered by the National Assembly, thus not approved.
(b) PMS 2013: Budgeted: N971billion (US$6billion); Expenditure: N862.264billion (US$5billion); (Over expenditure expected since certification subsidy for the period August December 2013 was only an interim one).
Certification of subsidy for the period August to December 2013 by PPPRA was only an interim one. It therefore means that the amount spent without appropriation may well exceed the above figures.
(d) KEROSENE (DPK)
2012 Budgeted: Nil
2012 Expenditure N353,370,145,245.07 US$2,282 billion
2013 Budgeted: Nil
2013 Expenditure: N332,539,367,830.95 (US$ 2.148 billion)
The total kerosene (DPK) subsidy paid but not appropriated for by National Assembly in 2012 and 2013 was the sum N685,909,513,076.02 (US$4,430 billion). The amount may exceed this because certification by PPPRA for the period August- December 2013 was an interim one.
4. Mr. President having publicly defended payment (DPK) subsidy clearly shows that the said Presidential directive by late President Umaru Musa Yar’adua (GCFR) had been set aside by the current President. Therefore it is not a unilateral action of any individual. However, it remains unconstitutional since it was riot appropriated for by the National Assembly.
5. It was established that Auditor-General for the Federation has commenced the forensic periodic check/audit of NNPC including subsidy claims and other expenses.
6. In respect of the Motion moved by Senator Babajide C. Omoworare (Osun East) that N700 Million was expended illegally on Kerosene Subsidy daily. The Committee’s findings based on PPPRA certification are as follows:
(a) In year 2012 amount expended was N353.370 billion which gives N965.49 million; and
(b) In year 2013 (interim) amount expended was N332.539 billion which gives N908.578 million daily.
SENATE IS HEREBY INVITED TO NOTE THAT:
1. The total crude oil liftings January 2012 to July 2013 was US$67billion and not US$65billion as the CBN Governor had presented;
2. There was never any unremitted US$49.8 billion.
3. All the agencies CBN, NNPC, Ministry of Finance, and Ministry of Petroleum Resources had agreed after reconciliation meeting that US$47billion out of the US$67billion had been credited to the Federation Account, amount to be accounted for, therefore was US$20biliion;
4. The sum of US$5.254billion PMS subsidy certified by PPPRA part of the US$20bilslion to be accounted for was adequately covered by the Appropriation Acts 2012 and 2013;
5. The sum of US$3.512 billion DPK subsidy certified by PPPRA for the period January 2012-July. 2013 being part of the US$20 billion to be accounted for was not appropriated by the National Assembly;
6. The total sum certified by PPPRA for kerosene (DPK) subsidy not appropriated for by National Assembly was N353.370 billion (US$2.282 billion) for the year 2012 and N332.539 billion (US$2.148 billion) for 2013 respectively making total for the two years N685.91 billion (US$4.430 billion);
7. CBN Governor posited that part of the US$6 billion out of the US$20 billion to be accounted for; representing liftings by NNPC on behalf of NPDC should belong to the Federation Account. The amount determined as share of Federation Account was US$2.175,635,436;
8. CBN Governor only demanded for PPPRA certification of N180 billion by NNPC (US$1.2 billion) being fourth quarter 2011 subsidy withheld by NNPC. This was part of the US$20 billion to be accounted for;
9. The National Assembly had appropriated the sums of N888.101 billion and N971.138 billion in 2012 and 2013 for petroleum subsidy;
10. CBN Governor only asked for details and evidences supporting the US$2billion Third Party Financing liftings. This is also part of the US$20biilion to be accounted for;
11. The Honourable minister for Finance and Coordinating Minister for the Economy recommended further forensic audit of the subsidy’ deductions by NNPC and the certification by PPPRA;
12. The Auditor – General for the Federation in conjunction with PWC are currently conducting forensic checks on NNPC accounts in relation to the issues under consideration and their report will be forwarded to the Senate Committee;
13. This Committee report only covers accounting for US$67billion crude oil revenue between January 2012 – July 2013;
14. The Committee together with Appropriations Committee will continue its investigation on causes of shortfall in revenues which covers issues such as SWAP, Strategic Alliance etc as relates to the petroleum industry as par Senate Resolution S/RES/007/03/13.
15. The Committee extended coverage of expenditure in respect of subsidy to December 2013 in order to properly establish if amount spent was above what was appropriated;
16. The sum of US$2118,069,354 remains unremitted been Federation Account share from the Third Party Financing arrangement;
17. Royalties and taxes amounting to US $447,817,884 been outstanding Federation Account share from the US$6.815billion liftings by NNPC on behalf of NPDC remains unremitted;
RECOMMENDATIONS:
1. Inter-agencies reconciliation meetings between sensitive economic institutions such as Ministry of Finance, Nigerian National Petroleum Corporation, Central Bank of Nigeria and Federal Inland Revenue Service should be done on regular basis in order to avoid similar episode but most importantly ensure that all revenues are properly and legally accounted for;
2. That the Senate to accept the subsidy deducted by NNPC from January 2012 – July 2013 of US$5.254 billion PPPRA and (N813,803 billion) since it was certified Appropriated by National Assembly. This is without prejudice to the outcome of the Forensic Audit conducted by Office of the Auditor-General for the Federation and PWC.
3. That the Senate do accept the subsidy deducted by NNPC in the sum of US$1.2 billion (N180 billion) for fourth quarter 2011 was certified by PPPRA and Appropriated by National Assembly. This is without prejudice to the outcome
of Forensic audit conducted by Office of the Auditor-General for the Federation arid PWC;
4. The President, Dr. Goodluck Ebele Jonathan, (GCFR) should prepare and present to the National Assembly supplementary budget to cover the over expenditure in the sum of N90.693 billion (US$585 million) for PMS subsidy 2012 and the sum of N685.910 billion (US$4A30 billion) for kerosene (DPK) subsidy expended without appropriation by the National Assembly in 2012 and 2013. The Senate should however note that the proportionate expenditure January 2012 to July 2013 was N813.802 billion (US$5,254 billion) for PMS, while DPK was N486.57 billion (US$3,512 billion). It is for the National Assembly to approve or not approve such request or take any other measures it deems necessary. Also this is without prejudice to the outcome the Forensic Audit conducted by Office of the Auditor General for the Federation and PWC;
5. Gross liftings of NNPC on behalf of NPDC between January, 2012 – July, 2013 was US$6.815 billion. Government share revenue to the Federation Account was
US$2,175,635,436. Accountant-General of the Federation confirmed the payment to the Federation Account by NPDC as the sum of US$1,727,817,552. Therefore, NPDC should remit to the Federation Account the sum of U$$447,817,884 being balance of Royalty and Petroleum Profit Tax (PPT);
6. Whereas it may be & good policy to encourage indigenous players by giving them greater participation, however continuing transfer or Federation OMLs to NPDC who in turn transfer same to Third Parties with lots of tax and other revenue concessions will deprive the Federation income. Therefore all such transactions should be conducted in a transparent and competitive manner and devoid revenue concessions;
7. Gross lifting under the Third Party Financing was US$2,430,750,973 out of which share for Federation Account was as US$1,588,242,004. The AGF confirmed and gave documentary evidence showing the sum US$1,370,172,650.36 was remitted to the Federation Account. Therefore, NMPC should remit the balance of US$218,069,354.32 to the Federation Account;
8. Accept the reported crude and refine product losses certified by our Consultants in the sum US$0,809 billion;
9. Accept expenses to the tune of US$1,059 billion by NNPC because documents to support same have been submitted, checked and authenticated by the Committee’s Forensic Consultants;
10. NNPC to refund and remit to the Federation Account the sum of US$262 million being expenses it could not satisfactorily defend in Holding Strategic Stock Reserve; Pipeline Maintenance and Management Cost; and Capital Expenditure;
11. There is need for the subsidy regime be totally discontinued with. All stakeholders should be consulted and carried along as much as possible before abolishing the subsidy;
12. We have noticed that no proposal is made in 2014 Appropriation Bill for] subsidy on kerosene (DPK) and that for PMS also looks inadequate. Therefore only what is appropriated should be spent by the Executive;
13. Further legislative action by the Senate should be taken after receipt of the forensic check/audit currently being undertaken NNPC the Auditor-General for the Federation and PWC;
14. NNPC should not pay their operational expenditures direct from Federation fund without Appropriation by the National Assembly;
15. NNPC should not pay their operational expenditures direct from Federation fund without Appropriation by the National That NNPC should strictly adhere to international best practices in keeping records;
16. That NNPC should not control the revenue account of NPDC in
order not to undermine its separate legal status and make accountability more difficult;
17. That PPPRA should henceforth not certify subsidy payments/deductions when there is no Appropriation for such;
18. NNPC should always ensure due process and diligence their operations;
19. National Assembly Should expeditiously pass the Petroleum Industry Bill (PIB);
20. National Assembly should always treat requests from the Executive to logical conclusion either to approve or not to approve;
21. The Senate mandates the Committee to follow up to ensure all sums recommended for remittance to the Federation Account are remitted and report back to the Senate; and 22. The Senate also mandates the Committee to follow up and receive the forensic audit/checks reports from the Auditor-General for the Federation and PWC study same and report back to the Senate.
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