NNPC withheld $4.2b proceeds in second half of 2015, says report
A new analysis from the Natural Resource Governance Institute (NRGI) has shown that the Nigerian National Petroleum Corporation (NNPC) remitted only $2.1 billion out of the $6.3 billion it made from the sale of oil and gas during the second half of 2015.
Though, the corporation said that it had commenced meeting with some officials of the NRGI toward reviewing the report, the analysis indicates that NNPC withheld $4.2 billion during the period. The international watchdog said that the NNPC continued to withhold revenues from sale of oil and gas worth billions of dollars from the treasury without effective rules or oversight.
In the report, the NRGI said in the second half of 2015, NNPC’s sales of export crude, domestic crude and oil from its subsidiary Nigerian Petroleum Development Company (NPDC) totalled $6.3 billion. The NRGI noted that of this amount, only $2.1 billion entered the Federation Account. “As the government continues its reform of the oil sector, we recommend that it establish a clear, legally enforceable rule governing which revenues NNPC can keep and how they can be spent. Otherwise, oil sector corruption and waste could return to their prior devastating levels once the president leaves or prices rise.” It stated that NNPC therefore retained 66 per cent of proceeds from these three types of sales, which was 12 per cent higher than the withholdings under Goodluck Jonathan in 2013 and 2014.
“Some of NNPC’s withholdings cover known costs, notably its share of joint venture operating expenses. The corporation has not fully explained others; especially revenues retained from domestic crude and NPDC sales.
“NNPC spending on this scale raises questions about fiscal responsibility–especially at a time when public finances are stretched and the Federal Government is looking to fund more of its budget with debt. Recent announcements on NNPC reforms and the latest drafts of the Petroleum Industry Bill do not adequately address how NNPC and the state will share revenues in future,” the report stated.
The NRGI further said: “While NNPC does not disclose enough information to conclusively say what happens to the remainder, we can offer some tentative explanations for each of the three types. They paint a stark picture of how expensive the Nigerian oil sector has become to the nation. Of the $1.4 billion in regular export crude sales, the full amount went to pay JV cash call liabilities, rather than entering the government budget. This is in addition to the $1.1 billion worth of oil that NNPC routed through alternative finance arrangements during this period to pay JV debts. It makes some sense that operating expenses from the JVs now consume a larger relative share of NNPC’s oil sale proceeds, because operating costs have not dropped as precipitously as oil prices have over the last two years. However, the fact that operating costs consumed all the returns from an entire class of oil sales dramatically illustrates the unaffordability of the JVs”.
The agency added that NNPC sold oil from NPDC-owned fields worth $1.5 billion in the latter half of 2015, saying that some of this oil may have gone to the subsidiary’s strategic alliance partners, two companies that are paid in oil for purportedly shouldering some of NPDC’s financial burdens.
“NPDC may keep the rest, or transfer it to its parent, NNPC. The subsidiary produced a sizeable 110,000 barrels of oil per day in the last six months of 2015. But we have seen no evidence that proceeds from NPDC oil sales enter the treasury. Instead, they are spent in an unknown manner.