How 'Missing' $10.8bn Was Expended

The Nigerian National Petroleum Corporation (NNPC) yesterday provided lucid details of how the controversial unremitted $10.8 billion was expended, saying subsidy payments, pipeline

es repairs, associated costs of spilled and stolen crude oil, and cost of maintaining strategic reserve accounted for a chunk of the money.

Central Bank Governor, Sanusi Lamido Sanusi, had in a letter to President Goodluck Jonathan claimed that NNPC could not account for crude oil receipts to the tune of $49.8 billion between January 2012 and July 2013.

A two-day high level reconciliation meeting of the NNPC, CBN, Ministries of Finance and Petroleum Resources, as well as other revenue agencies of the federal government last month however established that it was $10.8 billion from domestic crude oil receipts that had not been remitted.

At a press conference in Abuja addressed by its Group Executive Director, Finance and Accounts, Bernard Otti, the corporation said, "The sum in question has been expenditures incurred as part of statutory responsibilities which the NNPC as the National Oil Company executes on behalf of the Federal Government and by extension the entire people of Nigeria."

While insisting that the actual figure remained $10.8 as earlier discovered by a reconciliatory meeting of key stakeholders in Nigeria’s revenue management framework, the NNPC said out of the total sum, $8.49 billion was spent on subsidy claims within the period under review; $1.22 billion on management and repairs of petroleum pipelines which are constantly damaged by criminals across the country; while $0.72 billion was incurred on products and crude oil losses and another $0.37 billion expended on holding the country’s strategic products reserve.

Otti, flanked by the corporation's GED Commercial Investment, Alhaji Dalhatu Yusuf, and GED Gas and Power, Dr. David Ige, said: "We have called you here to as usual help us inform Nigerian citizens about the state of affairs of our corporation and it is our duty at NNPC at all times to continue to inform and assure the general public that things are the way they are.

"What we are saying in that, $10.8 billion is not missing rather it is undergoing the normal processes and procedures of accounting reconciliation. The $10.8 billion reflects expenditures incurred by the NNPC in the period under review and are really made up of the following: subsidy claim, $8.49 billion; pipeline management and repair costs, $1.22 billion; products/crude oil loses, $0.72 billion; and cost of holding the strategic stock reserve itself, $0.37 billion".

Otti however said: "These (figures) are being subjected to the normal continuing inter-agency reconciliation exercise and as long it is transaction; it is always work in progress."

Shortly before asking the corporation’s GED, Corporate Planning and Strategy, Timothy Okon, to make further clarifications on the expenditures, Otti said, "these expenditures have been incurred by the NNPC as part of our statutory responsibilities as a national oil company which we execute on behalf of the Federal Government for the benefits of the citizens of this country; the truth is as simple as we have said."

Okon in his explanation of the corporation’s expenditures with regards to the $10.8 billion, noted that government did not provide NNPC with funds from the national budget to defray costs such as repair of petroleum pipelines and management of the country’s strategic reserve amongst others.

He said: "Plainly, this issue that was addressed before is a mystery to us, but only in the context that these claims still go on after the ministers of the country had met and addressed it."

But let’s be clear here, there is a process by which revenue is accrued into the federation account and there is also government policy that states that subsidy is still in place.

"NNPC executes those policies and we do not create policies, in particular, the subsidy claim had simply arisen because after the 2011 period where we saw that there was no import of petroleum products when prices had gone up, NNPC was solely importing and the claims as regards the subsidy were from this particular period."

"The subsidy claims normally is known to all the relevant agencies and there was nothing hidden about it. The other part of the expenditure had to do with the pipeline management. The PPPRA template does not have any recovery mechanism for pipelines even though it offers mechanisms for certain claims under the subsidy regime on whether you import or distribute petroleum products but everyone needs to be aware that pipelines are constantly vandalised in Nigeria and there is a cost to it, the cost for repairing these pipeline are reflected here and NNPC has to keep this mandate running as stated in the Act establishing it".

Okon further said: "The products are equally subjected to theft and again this should not be news to anyone because when you look at the Port Harcourt refinery for instance, in many cases, when you send crude through the pipeline and when it arrives at the refinery, about 30 per cent of it is lost, NNPC has to account for the 30 per cent that is lost and that cost is reflected here.

"Anyone who is familiar with strategic storage will know that we have a floating storage which is part of the stock that is required to provide some sufficiency which is usually over 30 days. Again we need to reflect that this Christmas there were no hiccups and you got petrol from the filling station because somebody was maintaining the stock at a cost and all of these costs have to be recovered for the NNPC to continue as a going concern. The resort to keeping strategic reserves on waters with its attendant costs is the result of pipeline vandalism which has made access to most of the inland storage facilities impossible."

Faulting comments about the controversial unremitted oil revenue, Okon said: "Complex matters are being discussed maybe by people who probably do not have the level of understanding of such matters, if I wanted to discuss how the tariff methodology is computed here, I think I will bore everyone but it is an issue that is important from the technical point of view."

He said, "Trying to reduce technical matters to a slogan or something that will suit a political editorial of a paper is really something that we technocrats do not understand and maybe cannot answer to and that’s why when you see numbers that are quoted, you will think there is a breakdown in communication."

Sanusi had, in a letter he wrote to President Jonathan, raised the alarm that NNPC was yet to remit $49.8 billion to the Federation Account between the periods January 2012 and July 2013. Sanusi also recommended that President Jonathan should take measures to compel NNPC to remit the monies and sanction those found to be culpable.

The dust raised by the letter is yet to settle as the President had in a telephone conversation with Sanusi demanded his resignation for allegedly leaking the letter to the media as exclusively reported by THISDAY on Thursday. Sanusi however reminded him that he could only be removed from office by a two-third majority votes of the Senate.