OIL SCANDAL: How NNPC Robbed Nigeria Of $20 Billion – CBN Governor Sanusi

CBN Governor Lamido Sanusi states that $20 billion received by Nigerian National Petroleum Corporation (NNPC), from sales of crude oil between January 2012 and July 2013, is still missing.photo - How NNPC Robbed Nigeria Of $20 Billion - CBN Governor Sanusi

In this seven-page document submitted to the Senate, Sanusi explains he is determined to present detailed evidence that NNPC has, in violation of the law and constitution, been diverting money from the Federation Account.

He has established the following:

  1. By paying the ‘kerosene subsidy,’ the NNPC has confessed to a number of serious infractions, as kerosene is not a subsidised product; President Yar’Adua had issued a presidential directive eliminating this subsidy payment as from July, 2009; these losses inflicted on the Federation Account have not been appropriated.
  2. Claims by NNPC of spending the money on PMS subsidy are not credible.
  3. As NNPC’s disclosed it shipped $6b worth of crude oil on behalf of NPDC, at least a part of this amount is due to the Federation Account. This part relates to oil produced from blocks operated under ‘Strategic Alliance Agreement,’ and Sanusi says these agreements merely serve to transfer revenue due to the Federation to private hands.
  4. Additionally, Sanusi suggested his analysis of the crude-for-refined-product swap contracts entered into by PPMC and indicated where, according to him, Nigeria is losing money in these transactions.

Sanusi says, NNPC has submitted that it lifted $67b worth of Crude between January 2012 and July 2013. Of this, the following amounts have been remitted to the Federation Account:

  1. $14 billion as equity crude
  2. $15 billion as payment to FIRS by IOCs
  3. $2 billion Royalty payment to DPR by IOCs
  4. $16 billion out of the 428b taken as Domestic Crude Paid in naira, not dollars.

The following items are outstanding and need to be proven by NNPC:

  1. $12 billion out of domestic crude sales yet to be remitted
  2. $6 billion shipped on behalf of NNPC
  3. $2 billion ‘third-party financing’ as there are no documents explaining or proving this along with other claims around pipeline repairs, maintenance, strategic reserves, etc.

In summary, Sanusi says, it is established that of the $67 billion crude shipped by NNPC between January 2012 and July 2013, $47 billion was remitted to the Federation Account. There is no dispute that $20 billion out of $67 billion has not been paid into any account with the CBN.

Sanusi makes the following recommendations:

  • NNPC should reduce the refining capacity of its refineries based on a signed refining contract that clearly states what products are to be delivered for each barrel. Sale proceeds net of recognised processing costs should to go to the Federation Account.
  • All Crude for Product Swaps should be terminated and crude should be exported and sold at market price.
  • Where NNPC needs to generate cash flow to fund PMS imports, it can ‘borrow’ crude, on the approval of the Finance Minister, for 90 – 120 days. This crude is to be valued at the ruling market price. NNPC may sell the crude, import PMS and sell through its outlets. It should claim subsidy from PPPRA like every other marketer and present all required documents. Thereafter, NNPC should pay back the full value of crude lifted to the Federation Account and retain the profit. Where NNPC delays payment, the amount outstanding should attract interest at commercial rates until payment.
  • All the SAAs entered into by NPDC should be investigated for constitutionality. The production numbers, Opex and Capex, and profit shares should be audited. The tax arrangements entered into with these parties should be reviewed and all revenues due to the Federation collected. If possible the SAAs should be terminated. Certainly, NNPC should be prohibited from entering into any SAAs in the future.
  • NNPC to account for subsidies claimed in 2010-13 by producing documentary proof of legitimacy.
  • As for what action needs to be taken on what has happened in the past, we express no opinion. The decision on what to do in this case rests entirely with the Government. My task is limited to raising an alarm over what I think is a development that is harmful to the economy, and establishing that the alarm was neither spurious nor baseless. I still insist that an investigation is needed to establish the extent of the losses and the nature of offence committed.

Governor Sanusi says he believes he has placed enough information to make the point. He says the first priority is to stop such practices, as it will ultimately “bring the entire economy to its knees.”


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