NNPC Explains $10.8bn Expenditure

...Says Spending backed by Law  
The Nigeria National Petroleum Corporation (NNPC) on Friday offered further clarifications on the $10.8bn believed to have been missing.

Speaking at a press conference, Group Executive Director, Finance and Accounts of the corporation, Mr. Bernard Otti explained that the sum is not missing, but has rather been expenditures incurred as part of statutory responsibilities executed by NNPC on behalf of the Federal Government.

'Once again, we are compelled by the obvious misconceptions surrounding the allegation of unremitted $49.8bn to invite you to yet another press conference to address this issue', Otti said.

'It is regrettable that despite the clarification made earlier on the subject matter by the NNPC as well as Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala; Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke; and Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, a section of the media and some commentators have continued to distort issues, refusing to apply logic and objectivity in their reportage and analyses.

'Ladies and Gentlemen, NNPC is committed to informing the public to put the records straight and proffer logical explanations to Nigerians on this issue. Even at the risk of sounding repetitive, we like to state once again that contrary to what is being speculated, the $10.8bn, which is currently the subject of ongoing Inter-agency reconciliation exercise, is not missing.

'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. For the purpose of clarity, I would like to spend some time to elucidate on these duties'.

Speaking on the role of NNPC as supplier of last resort, he explained that the corporation as the National Oil Company of the Federal Republic of Nigeria, the NNPC is burdened with some onerous responsibilities that other oil companies are freed from.

'In this regard, the mandate of ensuring that the nation is wet with petroleum products round the clock rests solely on the Corporation', he said. 'The corporation is expected to discharge this duty irrespective of the prevailing international market conditions of crude and products'.

He also noted that it is also on record that for many years now, NNPC has been the main supplier of products to the nation, as most of these products are imported at international prices but sold at regulated prices.

'At some point, NNPC was the sole importer of products into the country. The corporation has successfully kept the nation wet with products, especially PMS, for the past three years as can be verified from the absence of queues at petrol stations during normal and festive seasons. It is significant to note that the government has not made any payments to the Corporation in the name of subsidy during the period under review.

'I should like to use this opportunity to restate our position on subsidy. The subsidy regime is a policy of the Federal Government. We only implement what we are directed to.

'Ladies and gentlemen, the unpaid subsidies from the government to the corporation by NNPC account amounts to $8.49bn, which constitutes a significant portion of the yet-to-be-reconciled $10.8bn. It is important to note that these expenses were incurred by the Corporation while fulfilling its essential statutory responsibilities'.

He maintained that another area of huge expenditure on behalf of the Federal Government is the maintenance of national strategic reserves for petroleum products, adding that at every point in time round the year, NNPC maintains huge petroleum products reserves on land and in the national territorial waters.

'The resort to keeping strategic reserves on the waters, with its attendant costs is the result of pipeline vandalism which has made access to most of the inland storage facilities impossible', he continued.

'For the purpose of strategic reserve, at the rate of 40 million litres of PMS national consumption per day, NNPC maintains about 32 days' sufficiency of petrol. The cost incurred in this mandate during the period under review is $0.37bn. 

'Another component of the $10.8bn billion is the cost of pipeline vandalism and crude oil and product theft. Once again, while we acknowledge that successive governments and their agencies like the Military, Police, NSCDC etc, have been trying hard to create an enabling environment for the protection of our key infrastructure, including pipelines jetties, depots etc, the sheer volume of vandalism and theft is just enormous.

'Our over 5,000 kilometres of pipelines have been prone to incessant attacks. Millions of litres of products and barrels of crude oil are regularly stolen, and in most cases spilled as part of environmental degradation. These associated costs of stolen and spilled products and crude oil, repairs and maintenance, and downtime of the refineries constitute a significant part of the yet-to-be-reconciled balance.

'Our account shows a total expenditure of $0.72bn for products and crude oil losses and $1.22bn for pipeline management and repairs. These figures are being reconciled by an inter-agency team and the outcome will be made public.

'It is pertinent to use this medium to address certain concerns on the legality of  expenses incurred by the Corporation in the course of discharging the above enumerated mandates on behalf of the Federal Government and people of Nigeria'.

Otti assured that as a law-abiding corporate entity, NNPC's processes and procedures are guided by the provisions of the law; and whatever expenditure is incurred in the discharge of the above national responsibilities are backed by the law setting up the Corporation.

He mentioned Section 7 Sub-section A and B of the NNPC Act, which states inter-alia that: The Corporation shall maintain a fund which shall consist of (a) such monies as may, from time to time, be provided by the Federal Government for the purposes of this Act by way of grants or loans or otherwise howsoever; and (b) Such monies as may be received by the Corporation in the course of its operations or in relation to the exercise by the Corporation of any of its functions under this Act, and from such fund there shall be defrayed all expenses incurred by the Corporation.

Finally, he emphasized that the services rendered by the corporation are critical to the development of the national economy, and are services which no corporation will perform without being paid upfront by the government. He reiterated also, that subsidy regime is a policy of the government not the NNPC; and that no money is missing.