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NNPC Under the Spotlight as FAAC Tackles Revenue Underpayment
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NNPC Under the Spotlight as FAAC Tackles Revenue Underpayment

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  • NNPC Under the Spotlight as FAAC Tackles Revenue Underpayment

Based on official statistics from government, the bulk of the nation’s revenue is generated by the Nigerian National Petroleum Corporation from crude oil sales. This is because despite the Federal Government’s effort at diversifying the economy, oil still accounts for a huge chunk of financial allocation to the three tiers of government.

In the 2017 fiscal year, for instance, oil revenue accounted for N4.1tn out of the gross federation account revenue of N7.35tn.

However, while oil revenue is supposed to be a source of blessing to Nigeria, the manner in which the revenue is currently being managed and remitted to the federation account has been a major cause for concern.

In 2014, there was outrage in the country over allegations by the then Governor of the Central Bank of Nigeria, Lamido Sanusi, about the non-remittance of the sum of $48.9bn into the federation account by the NNPC.

The revelation by Sanusi, now the Emir of Kano, generated a lot of controversy, following which an investigative committee was constituted by the Senate to probe the revenue underpayment.

The committee , which was chaired then by Senator Ahmed Makarfi, found that there was indeed revenue underpayment and that about $5bn should be remitted to the treasury by the NNPC.

It also recommended that the National Assembly should speedily pass the Petroleum Industry Bill in order to check the level of abuse in the industry.

The non-remittance of all revenues by the NNPC has become a recurring issue at monthly Federation Account Allocation Committee meetings.

This disagreement (had, in so many cases) led to states’ commissioners of finance walking out of the monthly FAAC meetings when revenues were about to be distributed to the three tiers of government.

Just a few days ago, similar scenario also played out as the FAAC meeting ended in a deadlock following the under-remittance of about N100bn by the NNPC.

Commenting on the revenue underpayment by the NNPC, Makarfi, who was the chairman of the senate investigative panel that probed the alleged missing $48.9bn revenue, told our correspondent in an interview in Abuja that there was a need to further strengthen the governance framework of the NNPC.

He said the report of his committee covered the alleged unremitted $49.8bn, representing 76 per cent of the value of crude oil lifting.

Makarfi said, “We were given investigations which was very specific that $48.9bn was not remitted into the federation account and in the course of doing our job, we were given additional task to find out how averagely N700m daily was being spent on kerosene.

“So, these were two specific assignments given to us. For the first one, we were to determine the amount that entered the federation account within a specified period of time and it didn’t have to do with so many aspects of NNPC operations such as strategic alliances, contracts and allocation of blocks.

“At the end of the day, we came out with findings that there was no certainty as to the amount not being remitted.”

He added, “As to the issue of indicting anybody, we didn’t indict anybody because forensic audit was yet to be conducted then.

“We had understanding with the Auditor-General for the Federation that he would conduct a forensic audit, which would be forwarded to our committee and we indicated this in our report to the Senate that when we receive the forensic audit report, we will make specific recommendations on matters that have to do with individuals.

“Maybe because we were leaving government, all our communications to the auditor-general were ignored and we communicated to the senate that we were unable to get the audit report from the auditor general, that our hands were tied.”

He said those accusing the committee of cover-up were being economical with the truth, adding that in some of its recommendations, the NNPC was required to make refunds of over $5bn to the coffers of government.

Makarfi said, “When the National Economic Council appointed PricewaterhouseCoopers to do the same audit but with a wider scope, their report and our own were not far apart. They had longer terms of reference and longer period to cover.

“On the issue of payment of subsidy for kerosene, because of the sensitivity of the matter, I sought the permission of the senate president that I wanted to find out the truth even from the then President (Goodluck Jonathan) if he approved it. He arranged it and I asked specific questions whether he was aware that subsidy on kerosene was being paid and he confirmed in the affirmative.

“So look at the level at which the President made himself available to the chairman of a committee to clarify matters; is this happening now?”

On how to make NNPC effective, Makarfi said, “Our recommendations are there in the report. We recommended a speedy passage of the PIB. If the executive is serious about it; is it not lobbying? The executive and the legislature can sit down, iron it out and you will see how fast things would go.”

Also commenting on revenue underpayment by the NNPC, the Chairman, FAAC Commissioners of Finance Forum, Mahmoud Yunusa, said the corporation was deliberately side-lining other stakeholders in its revenue remittances into the federation account.

He said, “The account as submitted by the NNPC is not acceptable to us. We will sit down with the NNPC to ensure that all the grey areas are trashed out.

“What we expected from the NNPC is less than what was submitted. We the commissioners of states are not happy with the way the NNPC is running this business.

“We are major shareholders in this business but we are not happy with the way the NNPC is handling it.

“We won’t take this anymore. The NNPC will have to sit up and do its job. We are not taking this anymore. We will not come here, spend days without holding the meeting.

The Minister of Finance, Mrs Kemi Adeosun, while speaking on the revenue underpayment at the end of March FAAC meeting, explained that all the members of the committee agreed to collect the current allocation, pending when a reconciliatory meeting would be held to resolve the unremitted revenue.

She said, “There are issues that we will take up with the NNPC. We will sit down with the Group Managing Director (Dr. Maikanti Baru) or his representatives to thrash out subsisting issues.

“The NNPC is a major chain of our revenue and by that fact, there would be from time to time issues.

“We are going to sit with the NNPC. Accounting is a process; there has to be dialogue. Some of the issues that were raised have actually been cleared but of course, there were new issues that arose.

“I think that is part of reconciliation, accountability and transparency. We did that overnight, speaking to the governors and we took a decision to go ahead. I am still of the view that there are issues and I will meet with the NNPC GMD or his representatives.”

She described the revenue disagreement as a health development as it would make the agency more accountable in delivering its mandate to generate revenue to run the affairs of government.

The minister added, “I think this is a healthy process. Questions must be asked; that is what accountability is all about. We will get to the bottom of the issue so that we can move forward.

“I think it’s a healthy development. I am confident that we will resolve all the outstanding issues.”

A finance expert and former Managing Director, Unity Bank Plc, Mr. Rislanudeen Mohammed, said there was a need for the Federal Government to come up with initiatives that would make all the states compete in economic development.

He said, “Nigeria has huge economic potential outside oil sector, which is largely untapped due to the so-called Dutch disease that has for years made us lazy and always relying on mono product commodity called oil as source of income, notwithstanding the fact that oil constitutes only 10 per cent of our Gross Domestic Product.

“Economic restructuring will make all the states compete in development and uplifting the lives of their people. There is potential for growth in non-oil export in most states and virtually all the states have one form of economic competitive advantage or the other.

“The states do not have to grow at same pace but hard work will make all the difference. For example, virtually the whole of Zamfara State is sitting on gold and diamond, largely untapped with little going to illegal miners.”

According to Mohammed, the current economic reality is a good opportunity for all the states to wake up and diversify their incomes.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya