Stakeholders express worry over non-implementation of fiscal allocation audit report

By Bertram Nwannekanma   |   30 April 2015   |   11:31 pm  

Mrs. Obiageli OnuorahNON- IMPLEMENTATION of the 2007-2011 Fiscal Allocation and Statutory Disbursement (FASD) Audit Report recently released by Nigeria Extractive Industries Transparency Initiative (NEITI) has become a source of worries to stakeholders in the extractive Industries.

The stakeholders, who participated at a dissemination workshop organized in Lagos by the Centre for Public Private Cooperation (CCPC) to sensitize Civil Societies in the South-West held in Lagos last week, said the implementation of the report released last year would have aided the incoming administration of General Mohammmadu Buhari to sanitise the oil and gas sector.

Team Leader Outreach for NEITI, Mrs. Obiageli Onuorah, who spoke at the workshop, said the report revealed that there were non-cash call payments made from the joint venture cash call accounts.

According to her, the report revealed for instance that Nigeria National Petroleum Corporation (NNPC) withdrew $1.8 billion from its cash call accounts to finance a range of emergency activities.

Some of the withdrawals did not follow due process and normal budgetary procedures. Onuorah said there are several recommendations and findings in the reports that if implemented will reform the oil and gas sectors.

According to her, it is critical in getting the Petroleum Industry Bill (PIB) passed that will unbundle the NNPC, which will really put in place fiscal policy that could grow the sector.

For renowned economist and director of CCPC, Prof Ademola Ariyo, it is worrisome that nothing has been done since the report was released in June 2014; this is not a new phenomenon as there was also a report from 1999- 2004.

“Nothing tangible has been done even from the accounting with this, it has come ass a ritual, the solution is not just to switch off, the right man may come on board, he or she must have right information that is while the new orientation of the incoming government, NEITI has document its findings and recommendation for corruption, I still believe that the incoming government will listen and so something about it.

“ In the reports, there is the whole gamut of all we need to do to capture total production in oil sales and the gap in the prices, if you are able to capture the total production and also able to know the price but there is no way to capture that now.

“ There is no functioning metre from the gas station to the loading bay and they are talking about linkages before any they get to the pipelines, you should know how much they are getting even if there are pipeline bursting, you have to quantify them, that one is the real leakage, we must capture what is actually transferred before you now talk of resolution that is thee main challenges.

“As you are aware, oil is the golden egg of the economy but has become a black box. That has led to widespread corruption in the oil sector. Regarding to the issue of oil bunkering, theft of oil and subsidy that will in nutshell that all are demystified, that people can now know about it and hold some people accountable”.

He said. According to him, we have had to know what is happening there being technologically in nature like any other sector. “You have to bring in experts like in Mexico, Brazil, where they did some thing like that to have an inroad in the oil and gas sector. We must turn it from black box to white box”, he added.

According to him, the 2007-2011 Fiscal Allocation and Statutory Disbursement (FASD) audit report recently released by Nigeria Extractive Industries Transparency Initiative (NEITI) offered an opportunity for the incoming government to turn the black box into a white box.

The former budget advisor to the National Assembly also called on General Buhari to appoint of ministers based on their leadership traits and not areas of specialties except in law, where specialist is needed According to him, a good leader will definitely know how to get resources to manage his ministry efficiently.

In the report, Federal Government lost no fewer than 136 million barrel of crude oil estimated at $10.9 billion to crude oil theft and sabotage within 2009 and 2011.

Apart from oil theft, a total of N1.40 trillion was also claimed by Nigeria National Petroleum Company (NNPC), which was deducted directly from domestic crude oil proceeds before remitting the balance to the federation account, with a total of N1.60 Trillion paid to other marketers during the same period, thereby bringing the total subsidy paid to importers of refined products to N3 trillion.

From the report, the difference between subsidy claims paid from the Federation Account and subsidy claims paid by the Petroleum products Pricing Regulatory Agency (PPPRA) stood at N175.9 billion.

The report also gave an example that the office of Accountant General of the Federation disclosed a total of subsidy payment of N2.825 trillion while the PPPRA disbursed N3 trillion to marketers. The report disclosed that some marketers disagreed with the amount ascribed to them by PPPRA.

In the period covered by the report, Government paid a total of $8.8 million and N1.2 trillion into the dollar and naira cash call accounts respectively. The report, which was based on loss by Shell, Chevron and Agip, the three oil companies used as example, also revealed another loss of about 10 million barrels valued to $894 million as a result of pipeline vandalism in downstream operators. NNPC’s crude oil pipeline network was especially hard hit, the estimated annual value of losses from it rose nearly 800% between 2009 and 2011.

This figure was against the 2.5 billion barrel of total amount of crude produced in the same period. The report went further to identify causes of revenue lose to the country to include, the payment of cash call to fund upstream production costs, the fuel subsidy (also deducted at source from crude sale revenues, discretionary deductions by NNPC to finance a range of emergency measures, complex contractual arrangements such as oil –for- product swaps which can be less transparent or efficient, debts owed by NNPC to the Federation and manipulation of exchange rate, improper tax deductions, oil theft and infrastructure sabotage/ pipeline vandalism and poor measurement and record keeping,.

The report therefore called for urgent need for Federal Government ‘s intervention to review existing agreements in the industry with the companies, which includes the Modified Carry Arrangement (MCA), The audit recommends that government should make adequate and timely allocation of money for cash call to fund the joint venture operations.

It also called for a review or stoppage of the allocation of 445,00 barrel per day to NNPC to be refined locally for domestic consumption, since the local refineries are operation at a very low capacity utilization.

Deliberate policy to encourage construction and growth of new refineries in Nigeria through privatization and private sector participation. It further called for transparency, accountability and efficiency in the management of subsidy on fuel importations to meet local needs on short term as well as urgent installation of meters to measure accurately the quantity of crude produced.

According to the report, NNPC should speed up on all pending court cases on controversies over calculations of taxes due to government from companies since the delay are causing government huge revenue losses especially in foreign exchange, while government should set up of a committee to review and agree on a new fiscal regime and governance framework for the oil and gas industry, this in the opinion of the Audit Report is important for managing the industry before the passage of the Petroleum Industry Bill (PIB) into law.



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