Naija News

The KPMG, in a forensic
analysis of the operations of
the Nigeria National Petroleum
Corporation in 2010, unveiled
startling revelations about the
company. The report showed
that the NNPC is a rotten egg,
from which a miasma of
stench oozes, to the detriment
of the Nigerian government
and the Nigerian people.
In one of the findings, KPMG
found that the NNPC does not
even have the data of crude
oil production in a centralised
manner as it is stored in the
computer of staff. NNPC
approves oil lifting to
companies not on the
government approved list;
there are delays in billing the
oil lifters and variants between
the invoice value and the LC
value. In one such instance,
invoice number COS/02?
PPMC/026/08 has a cargo
valuation of $95.4 million, but
LC value of $85million. The
four refineries in 2008 and
2009 recorded capacity
utilization of 18 per cent; the
process of importing fuel is
murky, sometimes companies
not approved in a quarter,
suddenly re-appeared on the
list. Others are that the NNPC
incurs average demurrage of
31 days for oil cargoes,
subsidy claims based on
volume of products imported,
not on what was actually lifted
out of the depots for sale to
Nigerians.
Some of the findings that will
shock Nigerians and labour
unions:
1. “No centralized location for
storing electronic copies of
historical production and
allocation data. These
information are stored on
personnel (individual)
workstations.
Implication: Potential loss of
historical production
information in event of staff
turnover or system failure.
Difficulty in retrieving prior
documents/ reports.
2.NNPC is invoiced in US$ for
domestic crude allocations but
is expected to remit the
equivalent Naira value to the
Federation Account. However
we observed that exchange
rates used by NNPC were
lower than the average
exchange rates published by
the CBN during the review
period.
Exchange rate variances for
2007, 2008 and 2009 were
estimated at N25.7 bn, N33.8
bn and N26.7 bn respectively.
(using CBN rates for the
month of transaction)
NNPC claimed they obtained
the exchange rates from CBN
via phone but there was no
document to substantiate the
claim.
Implication: Significant
underpayment of domestic
crude cost to the Federation
Account.
3.We observed that NNPC‟s
subsidy claims and PPPRA‟s
verification are based on
volume of petroleum products
available for sale (volume of
products imported and actual
production from the refineries)
as against duly verified
volume of products lifted out
of the depots (volume of
petroleum products sold) as
stipulated in the subsidy
guidelines.
Implications:Potential risk of
subsidy payment on products
not consumed by end users
due to losses from pipeline
vandalism, theft e.t.c. A rough
estimation of subsidy payment
on product losses for the
period under review (2007 –
2009) is estimated at N 11.8
billion.
Risk of payment of subsidy on
locally refined products which
is not the intent of subsidy
may encourage inefficiencies
in the refinery process.