How NNPC swindled Nigeria of billions of naira through ‘double claims, repeated subsidy’, by Price Waterhouse Coopers report

A damning report released on Monday has shown how the Nigerian National Petroleum Corporation (NNPC) and its subsidiary, the Nigerian Petroleum Development Company (NPDC), swindled the country of billions of naira.
The Price Waterhouse Coopers report on the oil sector revealed how the oil giant set aside procedure/laid-down rule and engaged in financial and record manipulation.
The report also advised that one of the solutions to the fraud in the sector “is to review the current NNPC Act to make it pay all revenues accruing from crude oil sales into the Federation Account”.
“Our examination of the PMS and DPK import verified by PPPRA revealed that some discharges were apparently verified and subsidy advised to NNPC more than once.
“There is also repeated subsidy for PMS amounting to N3,709,879,190 ($23,954,796) and another repeated subsidy for DPK amounting to N6,169,502,266 ($39,836,652). There is another $36.05m over-statement in PPPRA’s PMS subsidy payment advice to the NNPC.
“The corporation over-claimed $980m (N19.3 billion) as subsidy on Premium Motor Spirit and Dual Purpose Kerosene between January 2012 and July 2013. The NNPC capitalised on lapses in the current law to spend part of the crude oil sales proceeds without limit or control.
“We recommend that the NNPC Act be reviewed as the content contradicts the requirement for the NNPC to be run as a commercially-viable entity. It appears the Act has given the corporation a blank cheque to spend money without limit or control.
“This is untenable and unsustainable, and must be addressed immediately. The corporation should be required to create value and meet its expenses entirely from the value created. Proceeds from the FGN’s crude oil sales should be remitted entirely to the Federation Account. Commissions for the corporation’s services can then be paid based on agreed terms.”
“NNPC’s model of operation must be urgently reviewed and restructured, as the current model, which had been in operation since the creation of the corporation, could not be sustained.
“The accounting and reconciliation system for crude oil revenues used by government agencies appears to be inaccurate and weak. We noted significant discrepancies in data from different sources. The lack of independent audit and reconciliation led to over-reliance on data produced from the NNPC.
“This matter is further compounded by the lack of independence within the NNPC as the business has conflicting interests of being a stand-alone self-funding entity and also the main source of revenue to the Federation Account.
“Our review of the subsidy documentation revealed that the subsidy due to the NNPC between January, 2012 and July, 2013 on PMS and DPK imports was $8.99 billion compared to the $9.97 billion stated by the reconciliation committee.
“The difference was due to the exclusion of October 2011 to December 2011 subsidy claims of $1.2bn, which did not relate to the review period of January 2012 to July 2013; $0.13bn increase in PMS subsidy claimed for the 19-month period; and $0.09bn increase in kerosene subsidy claimed for the period.
“Our review of the subsidy payment advice sent by the PPPRA to the NNPC for discharges between January 2012 and July 2013 revealed that the PPPRA applied the pre-2012 ex-depot price (N49.51) on some discharges in 2012 instead of the approved ex-depot price of N81.51. A total of 174,449,778 litres of PMS was affected in these PPPRA computations.
“An estimated $205 million kerosene subsidy was over-charged by the NNPC. Our review of a sample of the copies of the pro forma invoices issued to the other marketers of DPK across different geopolitical zones of Nigeria revealed that the other marketers bought DPK from the NNPC/PPMC prior to arrival at the NNPC depot in Nigeria at N40.90.
“The marketers are, thereafter, required to incur the lightering expenses, NPA charges, jetty throughput charge and storage charges before bringing the product into Nigeria. Subsidy is calculated as the landing cost minus ex-depot price.”
“$3.38bn was spent on kerosene subsidy for the review period. There is also an unsubstantiated $305.8 million under the cost allocated to pipeline maintenance and management cost. The sum remains unsubstantiated due to lack of or insufficient supporting documents and duplication of entries”.