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NNPC Explains Missing $10.8bn, Faults Sanusi

Source: thewillnigeria.com
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As CBN Governor accuses NNPC of hoarding documents SAN FRANCISCO, February 13, (THEWILL) - The Nigerian National Petroleum Corporation (NNPC) mounted a vigorous effort on Thursday to clear the air on the alleged $10.

8bn missing money just as the Senate has ordered an independent forensic investigation into the missing funds Central Bank of Nigeria(CBN) governor Lamido Sanusi who neither backed down on the $20b missing crude oil money allegation nor emphasised it however, expressed disappointment over the failure of the NNPC and other related agencies to provide him with documents needed to verify NNPC's position on the alleged missing fund.

He also insisted that the claims by the NNPC that it is still paying subsidy on kerosene is illegal, adding that it showed proof of a directive by late President Umaru Yar'Adua who ordered a halt to the payment of subsidies on kerosene The CBN Governor had accused the NNPC of unremitted  $49.

8 billion in oil proceeds to the Federation Account over a 19-month period, but  the Coordinating Minister for the Economy and Minister of Finance, Dr.

Ngozi Okonjo-Iweala, and Minister of Petroleum Resouces, Mrs.

Diezani Alison-Madueke, pegged the unremitted funds   at $10.

8 billion .
The Minister of Finance,  Okonjo-Iweala,  said the shortfall they are reconciling with the NNPC is $10.

8bn and not $12bn, as claimed by Sanusi.
The CBN governor had last week dropped another bombshell when he  told the senate panel that instead of the initial $10.

8 billion that was yet to be reconciled out of $49.

8 billion proceeds from the oil sales, the amount was $20 billion.

He insisted that the total proceeds   supposed to be remitted to the federation account was $67 billion, while record of remittance showed only $47 billion.

However, the Group Managing Director of  NNPC, Engr Andrew Yakubu who took the stand, told the Senate Committee on Finance investigating the allegations that in the $10.

8billion dollars are unpaid petroleum products subsidy totaling   $10.

8billion dollars, crude oil and products loses amounting to $0.

76billion dollars.
Also, National Strategic Reserve holding cost amounting to 0.

46 billion dollars and pipeline maintenance and management cost amounting to 0.

91 billion dollars.
He said the items have been fully reconciled with all relevant stakeholders and supporting documents.

'Today, the Corporation is pleased to present further clarification on all outstanding issues relating to non-remittance of 10.

8 billion.
"For the benefit of this committee and all Nigerians, let me quickly state here that long before the allegation of 49.

8billion, NNPC, FAAC, CBN and federal Ministry of Finance are clearly aware of the outstanding US10.

8 billion and the issues relating to its non-realisation .

" This distinguished Committee is invited to note that since January 2012 NNPC has not received any subsidy payments for petroleum products supplied to the domestic market.

You may also recall that N888.
101 billion and N 971.
138 billion appropriated for subsidy for years 2012 and 2013 were grossly inadequate to meet the required subsidy payments to both the NNPC and other marketers.

'In spite of the non-payment of subsidy, NNPC continued to sustain petroleum products supply, even when other marketers refused to participate.

This development led to the accumulation of $8.
76bn as unpaid subsidy due to NNPC for petroleum products supplied during the period under review.

'This amount is comprised of US5.
25B for PMS and US3.
52B for DPK and has been reconciled and signed off by statutory agencies ( PPPRA, DPR and NNPC) ," Yakubu said.

He appealed to the Senate committee for government agencies to imbibe the spirit of team work and collaboration in order to avoid misinterpretation of facts to the public .

In her presentation, the Minister of Petroleum, Madueke, said,"This shortfall had been acknowledged by NNPC and is largely due to petroleum subsidy claims, unrecovered crude/ product losses, pipeline maintenance and repairs and cost of maintaining strategic petroleum storage, all of which , except subsidy , are currently not captured in the PPRA template for refunds.

"This figure is also well known to all stakeholders at the Federation Account Allocation Committee(FAAC) and is reported and updated on a monthly basis.

' Minister of Finance , Okonjo - Iweala,  stated that the only way to put the controversies to bed is for an independent audit to be carried out on  the accounts According to her , "When CBN spoke about $49.

8bn,  we were the first to say its not correct.
After that, it was proven that $49.
8bn was not the right amount,  the CBN had the courage to admit that it was actually $10.

8bn  .
It  was the process employed by the Ministry of Finance that brought that about.

Without the steady work we have done to perfect the finances of this country,  we won't be talking about $10.

8bn.
' She also added   :"The issue is that where is that money,  how is it being accounted for and we have led the process.

We asked both the NNPC and the PPRA to produce their documents and they have produced certified copies for the $10.

8bn and we have asked for an independent audit.
'A lot of accusations are being made in this country and the only way to be satisfied is to have an independent audit.

" But the CBN Governor, Sanusi, expressed disappointment over the failure of the NNPC and other related agencies to provide him with documents needed to verify NNPC's position on the alleged missing fund.

He however informed the committee that since the Petroleum Products Pricing Regulatory Agency (PPPRA) had the authority to procure all relevant information on the subject matter, he would have no choice than to believe in its verification and submission to the committee.

Sanusi's declaration resulted from an interrogation by Makarfi regarding the submissions made by the management of PPPRA.

He said: " I do not know how much oil has been produced from these wells, I do not know much crude has been taken.

It is not a kind of central market.
What is important is, if we agree with the Finance Minister, if we do establish that legally, a part of this should come to the federation account, then, it is a question now of some oil industry experts coming to  audit properly, how much crude has been taken, how much has been sold, how much money has come in and how much ought to have come into the federation account.

"That is really beyond the responsibilities of CBN but in general, once it is accepted that this $20bn has not been repatriated, for us, we have actually finished our own bit.

"PPRA says it is okay with the claims on kerosine.
It is the agency that is legitimately authorised to certify claims on kerosine subsidy and it is saying that kerosine subsidy is okay; it  is legal and it is allowed.

"That is the agency that has the responsibility but I do have a letter from PPRA in 2010 telling me that they do not pay kerosine subsidy based on Presidential directives.

"It is up to the committee to now decide whether that letter has been superseded by other directives and in fact, whether there has been appropriation for kerosine in the first place because the issue is, with or without directives, can NNPC pay subsidy on kerosine without appropriation? These are questions that are not very difficult to answer," he said.

The Chairman of Senate Committee On Finance, Senator Ahmed Mohammed Makarfi said a  forensic examination of the document will enable the Senate get to the root of the matter.

"These bunch of documents and submissions by the NNPC,  which the committee members will study, and we are going to the ministry of finance, the CBN and others,  relate to the crude oil product losses amounting to  $.

76bn, cost of maintaining the national strategic reserve amounting to $.

46bn and pipeline maintenance and management cost amounting to $.

91bn.
" Our own forensic examination of the document will make us take a decision as to whether the document support the expenses incurred.

The expenses are part of the accounting for the money.

" He also added that :'The major issue laid to rest substantially, is the issue on the subsidy on petrol which is $5.

254bn, because the PPRA has satisfied it even though to further  reassure Nigerians, Ministry of Finance had suggested that and undertaken to independently have it forensically examined to further reassure Nigerians that the certification is indeed in order.

"We have also received certification for kerosene subsidy but the key issue is the appropriation to it and we have all agreed here that no appropriation has been made to it.

"The implications of spending money that is not appropriated, is well known to everybody and the whole world is hearing this.

I don't want us to joke or play with this.
It is the most central issue.
All agencies that have spoken have confirmed to the whole world that this money was not appropriated and I want people to absorb the import of this confirmation.

"We also heard from the CBN that  what they are questioning is part of the $10.

8bn.
They believe that part of it should belong to the federation account but that they are not technically competent at this stage to state how much it is.

"We have agreed to see how we will engage technical expert to determine which position  of the amount, if any, belongs to the federation account.

The question which is certain is that it is not all of it but part of it but at this stage, we don't know exactly.

That is what is yet  to be ascertained.
"We have also agreed and the Attorney - General had confirmed to us that he will be available next week Thursday to give the legal opinion which also concerns the NPDC issue to give the ministry of finance, legal advice on the issue.

Those directly involved would be on ground,' he said.

See full text of the NNPC's submission to the Senate below.

NNPC RESPONSE TO THE SENATE COMMITTEE ON FINANCE ON THE ALLEGED US10.

8 BILLION UNREMITTED OIL REVENUE BY ENGR.
ANDREW L.
YAKUBU, GROUP MANAGING DIRECTOR NIGERIAN NATIONAL PETROLEUM CORPORATION The Chairman, Thank you for another opportunity to address this distinguished Committee and to give further clarification on the allegation of non-remittance of the sum of $49.

8billion by the CBN for the period January 2012 to July 2013.

The Committee may recall that following Inter-Agency Reconciliation this figure was reviewed to about $10.

87 billion and presented at this distinguished Committee sitting on December 19, 2013.

Today, the Corporation is pleased to present further clarification on all outstanding issues relating to the non-remittance of US$10.

87billion.
  For the benefit of this Committee and all Nigerians let me quickly state here that long before the allegation of US49.

8 billion, NNPC, FAAC, CBN and the Federal Ministry of Finance are clearly aware of the outstanding US$10.

87 billion and the issues relating to its non-realization.

For the avoidance of doubt let me restate that the items included in the $10.

87 billion are: i.
   Unpaid petroleum products subsidy totaling the sum of US$8.

76 billion ii.
  Crude oil and products losses amounting to US$0.
76 billion iii.
National strategic reserve holding cost amounting to US$0.

46 billion iv.
Pipeline maintenance and management cost amounting to US$0.

91 billion.
Item I have been fully reconciled and signed off The above items have been fully reconciled with all relevant stakeholders and supporting documents submitted to this distinguished Committee.

Mr.
Chairman, distinguished Members, kindly permit me to elaborate on the above issues for the benefit of all who do not understand the current operational challenges of the NNPC as follows: 1.

  PETROLEUM PRODUCTS SUBSIDY This Distinguished Committee is invited to note that since January 2012 NNPC has not received any subsidy payments for petroleum products supplied to the domestic market.

You may also recall that N888.
101 billion and N971.
138 billion appropriated for subsidy for years 2012 and 2013 respectively (See Appendix IIIA & IIIB) were grossly inadequate to meet the required subsidy payments to both NNPC and other Marketers.

In spite of the nonpayment of subsidy, NNPC continued to sustain petroleum products supply, even when other marketers refused to participate.

This development led to the accumulation of $8.
76 billion as unpaid subsidy due to NNPC for petroleum product supplied during the period under review.

  This amount is comprised of US$5.
25 billion for PMS and US$3.
51billion for DPK and has been reconciled and signed-off by statutory agencies (PPPRA, DPR and NNPC) as outlined in Appendix III, Schedule 3.

Even when the marketers resumed supply of petroleum products, they still refused to participate in the importation/supply of Kerosene following the lack of clarity over the removal of subsidy on Kerosene.

2.
CRUDE OIL AND PETROLEUM PRODUCTS LOSSES NNPC is operating in an increasingly hostile business environment both in the Upstream and Downstream sectors of the industry.

As you are aware pipeline vandalism is today of great concern to both the industry and Government.

On the Downstream sector, NNPC is suffering from crude oil losses along Escravos-Warri, Bonny-Port-Harcourt and Warri-Kaduna crude oil pipeline systems in its effort to supply crude oil to its refineries.

In the period under review, the Corporation lost a total of 4,658,096 barrels amounting to US$465,809,647.

05.
Pipeline vandalism along our petroleum products distribution networks is even more extensive, affecting nearly all regions of the country.

  In the period under review, NNPC lost 463,185,000 litres of PMS, 2,392,000 litres of DPK and 47,643,000 litres of AGO amounting to US$296,047,770.

15.
The total Crude Oil and Petroleum Products losses during the period under review amounted to US$0.

76billion as outlined in the following appendices: ·    Appendix III Schedule 5A: Summary of Crude Oil Losses by Pipeline Segments ·    Appendix III Schedule 5B: Summary of Petroleum Products Losses by Pipeline Segments 3.

STRATEGIC RESERVES HOLDING COST For National energy security and to guarantee seamless supply of Petroleum Products, NNPC is mandated to maintain strategic petroleum products stocks on behalf of Government and currently maintains a 30 day stock level as against the international practice of 90 days.

The non-availability of inland storage facilities as a result of continuous vandalism of NNPC's supply and distribution assets has led to increased costs as NNPC is compelled to resort to offshore storage to maintain this strategic petroleum product stocks.

For the period under review, the sum of $0.
46billion was incurred in discharging this responsibility (See Appendix III, Schedule 4).

This cost is not covered under the PPPRA pricing template (See Appendix IIIH).

4.
PIPELINE AND DEPOT MAINTENANCE AND MANAGEMENT COST NNPC operates over 5000km of pipeline and 22 Depots across the country.

  In view of the fact that the pipeline network across the country remains critical for the supply and distribution of petroleum products, NNPC in the discharge of its statutory duties as provided for in Section 5 of the Nigerian National Petroleum Corporation Act CAP.

N123 (Appendix IIIH) has to carry out the management of these assets.

  Closely tied to the escalating vandalism of pipelines across the country, is the rising cost of maintenance, management and repairs including the provision of additional security at huge costs.

During the period under review, the sum of $0.
91billion was incurred on pipeline and depot management and repairs (See Appendix IV).

It is important to also note that the cost of Crude oil/Petroleum product losses, pipeline management and repair cost are not covered in the PPPRA pricing template and have not been redeemed by NNPC.

5.
       OTHER SUPPORTING DOCUMENTS Mr.
Chairman, further to the above submissions, we have also presented to this distinguished Committee, all relevant documents regarding petroleum products cargoes deliveries and discharges by NNPC into the Nigerian market covering the following: ·    Bill of Lading ·    Survey Report ·    Cargo manifest ·    Certificate of quality ·    Certificate of quantity ·    Certificate of origin ·    Tanker timesheet ·    Navy clearances ·    Custom clearances ·    Discharge certificate 6.

OBSERVATIONS Mr.
Chairman and distinguished members, while the above submissions and documentations have been presented to effectively address the issue of $10.

8Billion brought before this committee, it is our understanding that at our last sitting before the Committee, the CBN raised fresh issues which require response from NNPC.

Accordingly Mr.
Chairman, even without this Committee requesting for it, NNPC has proceeded to also address the supplementary submission of the CBN in the as in the attached Appendix A.

7.
CONCLUDING REMARKS In conclusion Mr.
Chairman, let me invite this Committee and indeed Nigerians, to note that NNPC has been incurring huge costs in ensuring adequate and steady supply of petroleum products in Nigeria resulting from: ·    The Purchase of crude oil at international prices while selling petroleum products at regulated rates.

·    Crude oil and petroleum products losses due to syndicated theft and vandalism, the cost of which the Corporation is compelled to bear.

·    Cost of providing security to pipelines and oil installations across the nation ·    Holding of strategic stock at huge costs to ensure National energy security.

·    Non-payment of subsidy claims for petroleum products supplied to Nigerian domestic market.

8.
RECOMMENDATIONS/WAY FORWARD ·    Payment of outstanding subsidy due to NNPC.

·    Formal approval for reimbursement of cost of holding Strategic Petroleum Product stock.

·    Re-imbursement of crude oil and petroleum products losses.

·    Sustenance of the recent momentum to end pipeline vandalism, crude oil and products theft.

Mr.
Chairman, we like to appeal through this distinguished Senate Committee for Government Agencies to imbibe the spirit of team work and collaboration in order to avoid misrepresentation of facts to the public.

Please be assured that NNPC remains available at all times to provide clarifications on our submissions or any other matter relating to our responsibility to the Federation and the Nigerian people.

Engr.
Andrew L.
Yakubu Group Managing Director.
EMMA UCHE, ABUJA