Missing $49.8bn: Reconciliation that ‘ll strengthen accountability in public finance

Posted by admin Latest Politics Thursday, January 2nd, 2014

FROM ISAAC ANUMIHE, ABUJA

A mere letter by the Governor of Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi to President Goodluck Jonathan, on September 25, 2013, alleging non-remittance of over $49.8 billion by Nigerian National Petroleum Corporation (NNPC) has generated a lot of controversy in the nation’s already fragile economy.
For one, many believe that its timing coincided with the ‘letter bomb’ by former president, Olusegun Obasanjo’s to Jonathan which has already triggered some panic in Aso Rock.
Again, the amount involved was considered too startlingly and capable of disorganising even a bigger economy.
On the other hand, some are still worried that it came when investors were evaluating the 2014 budgets to know where to invest in the new year.
Sanusi had, in the letter complained to President Goodluck Jonathan about the continuing refusal of NNPC to honour its legal obligations, including failure to remit the said amount, which he said represented 76 per cent of the value of crude oil lifted during the period.
“Our analysis of the value of crude oil export proceeds based on the documentation received from pre-shipment inspectors shows that between January 2012 and July 2013, NNPC lifted 594,024,107 barrels of crude valued at $65,332,350,514.57.
“Out of this amount, NNPC repatriated only $15,528,410,098.77, representing 24 per cent of the value. This means the NNPC is yet to account for, and repatriate to the Federation Account, an amount in excess of $49.804bn of the value of oil lifted in the same period,” he argued
Drawing attention to an attached table of analysis of the crude oil lifting and repatriations as prepared by the CBN, the governor noted that the failure of the NNPC to repatriate the amounts constituted not only a violation of constitutional provisions but also the country’s foreign exchange and pre-shipment inspection of export laws.
He recalled the previous occasion in which he had expressed concern about what appeared to be shortfalls in remittances to the Federation Account in spite of the strong recovery in the price of oil.
He insisted that the NNPC ought to have accounted fully for all proceeds that were diverted from its accounts with the CBN and the Federation Account.
Although, the whistle-blowing effort of the CBN was hailed by analysts, what most Nigerians want to know is final outcome of reconcilations.
The letter prompted the Federal Government to swing into action with a view to unravelling the mystery behind the missing fund.
Led by the Co-ordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, the relevant agencies in the matter were called to iron out the issue.
After several hours of reconciliation, certain discoveries were made which suggested a breakdown in communication between the two agencies of government which called for a deeper enquiry.
In an effort to clarify this issue, Sanusi has been to the Presidency where he made some clarification. And later went to the National Assembly and finally, spoke to financial journalists in the Ministry of Finance.
The CBN boss however noted that he never intended to make the letter a public show and that out of $49.8 billion, it was only $12 billion that was now missing.
After intense reconciliations involving the CME, the Petroleum Minister, CBN, and the NNPC    the outstanding unaccounted balance now stood the $28 billion domestic crude.
“From our records, we have received $16 billion for the shortfall, and we are told that shortfall has always been part of the discussion between the Ministry of Finance, the Petroleum Ministries and the NNPC. This is where we are” he said.
According to the CBN boss, the letter to the president was not meant for public consumption, but to alert the president of an anomaly in the system. Unfortunately, the letter found its way to the press.
Sanusi also explained that, CBN in its record, shows that   $65 billion   had been paid by NNPC and about $15 billion retained to the Federation Account.
So, after the letter, it was discovered that out of the $65 billion that NNPC shared, $24 billion did not belong to the NNPC. It was the crude that was paid by other companies as tax and royalties and shipment to NPDC, which explains half of the $15 billion.
“This is the first time that I am speaking on the matter. I will like to give a little context to this discussion. First of all, it is important to remember that the CBN never issued a public statement, or made a press statement on this matter. The CBN wrote a letter to Mr. President, which unfortunately found its way to the press. And that letter was addressed and for an invitation to begin investigation, and not the end of an audit or investigation. Now, what was the context. We have been concerned along with our Finance Minister, the decline in excess crude despite the fact that oil prices were high. We are concerned at what we saw as a gap between what we have in our records as the value of crude shipped by the NNPC and the amount it has remitted as equity to the Federation Account.
And what we had in our records was $65 billion paid by the NNPC and about $15 billion retained to federation account. Now after the letter, the president sent for this to know what happened and we have the following; that out of the $65 billion that NNPC shared, $24 billion did not belong the NNPC. It was crude that was paid by other companies as tax and royalties and shipment to NPDC and so, that explains half of the $15 billion.” he said.
In a statement issued by the Director, Corporate Communications, Mr Ugochukwu Okoroafor, the apex bank neither confirmed nor denied the existence of the said letter but advised against politicizing the issue.
“The Central Bank of Nigeria will neither confirm nor deny the existence of such a letter and considers any discussion by it on the allegation to be inappropriate.
“However, to the extent that the matter is gathering momentum in the public space, and seems to be assuming a highly politicised dimension, the bank wishes to issue the following clarifications:
The bank however issued some clarifications including that the CBN is statutorily mandated to establish price stability, protect the external value of our national currency, manage the external reserve of the Federation and ensure the smooth functioning of our financial system as well as adviser to the President on economic matters.
It said the capacity of the bank to perform its role effectively is strengthened or undermined by the extent to which the nation is able to increase foreign exchange earnings and savings from these earnings, thus boosting the Excess Crude Savings Account, raising reserve levels, providing currency stability and moderating interest rates with limited risks to inflation and financial stability.
Okoroafor said that in the performance of this role it is natural for the CBN to be concerned at the low level of accretion to reserves and the Excess Crude Account, in spite of strong international oil prices, especially as Nigeria’s performance is compared with other oil producing economies.
But in response to CBN’s letter, Group Managing Director of NNPC, Andrew Yakubu, stated that he was forced to believe that the CBN may have decided to add to Nigeria’s already heated political atmosphere with the letter.
“I want to say that the allegation is unfounded, baseless and has become a political instrument in the current politically- charged environment.” Yakubu, said.
Yakubu said the NNPC was taking aback by the CBN’s letter because the issue came up about four months ago.
“In fact, we made our clarification through the   Minister of Petroleum Resources, four months ago and for it to surface at this time that the political atmosphere is charged, makes it difficult to believe pointing out that the issue was better left for the media to investigate and unravel the reasons behind it.
“As you are well aware, it is not in our character to join issues or trade blames with other agencies of government. But considering the high level of publicity that the recent letter from the CBN to the President has generated, and the erroneous impression it has created among Nigerians, it became necessary to set the records straight.
But in the words of the NNPC helmsman “The statement credited to the CBN governor that NNPC failed to remit the sum of $49.8 billion representing 76 per cent of total national oil receipts is borne out of lack of understanding of how revenues from crude oil sales are remitted into the Federation Account.”
He explained that NNPC crude oil lifting are made up of Equity Crude, Royalty Oil, Tax Oil, Volume for Third Party Financing and NPDC equity volume, noting that it was important to stress that remittances of proceeds from the above lifting are made according to statutory and production arrangements.
Accordingly, proceeds from Equity Crude are paid by NNPC into the Federation Account which is held by the Central Bank of Nigeria. Proceeds from Royalty Oil are paid to Department of Petroleum Resources (DPR) whose designated account is managed by the same CBN.
“Similarly, the proceeds from Tax Oil or Petroleum Profit Tax lifted by NNPC are paid directly into the Federal Inland Revenue Service account also managed by the CBN.
“In the same vein, Third Party Finance and Trial Marketing volume are paid into designated Escrow accounts, while NPDC equity proceeds are remitted to NPDC account. It should now be clear to all that NNPC by statutory requirement is responsible for direct remittances of only one stream of lifting, namely Equity Crude.” he said.
Yakubu said that proceeds from the total NNPC lifting comprising Federation Equity, Royalty Oil, Tax Oil, Volume for Third Party Finance, NPDC equity and volume for Trial Marketing period amounted to US$67.12 billion as against the $65.33 billion that the CBN stated.
“At this point, we wish to categorically state that all the proceeds amounting to $67.12 billion have been remitted as statutorily required. NNPC remitted its portion which is $18.48 billion into the Federation Account being the total proceeds from Equity Crude and gas sales. This represents 27.5 per cent of total proceeds of $67.12 billion as against the 24 per cent declared by CBN.
“On the issue of US$49.8 billion or 76 per cent of total national lifting and the alleged unremitted funds, we would like to clarify that this represents the proceeds from Royalty and Petroleum Profit Tax lifting. These, as I stated earlier, are remitted to the Department of Petroleum Resources (DPR) and the Federal Inland Revenue Service (FIRS) which are statutorily empowered to collect and remit same into the Federation Account.”, the MD, further, explained.
In view of this, he said, it is incomprehensible for him, to think that CBN could come again after four months to allege that money was missing.
“We are taken aback because in my presentation, you saw clearly that there was hardly any operation that the NNPC does alone.
“It is a multi-agency transaction and right from our production containment and entitlements meetings, all the various agencies that are involved in crude oil production are involved and reconciliation is done with lifting numbers agreeing and signing off before the lifting of our crude oil.

“Operations at the terminals are also done by all the various agencies and particularly championed by the regulatory agencies that are the arbiters of numbers and superintend over the process. NNPC is not a sole player in the entire business of the oil and gas value chain; so, our functions are purely professional and we also have avenues to reconcile from time to time and we have no option whatsoever to determine the reconciliation of the numbers and our operations with all other agencies.
I will not say that the CBN is not aware of all these because they are always at the documentation and reconciliation meetings; they also signed off on the documents. That is why I will continue to say that we are all dumb-founded because we are always available for any form of clarification by any agency of government and particularly that the minister ordered this audit months ago before we even got the letter from the CBN.
“You can imagine that the letter came four months ago and it took a snapshot of 18 months. So, why would we wait for 18 months before we write a letter of a very serious issue like this? Forty-nine billion dollars is not a small money; it is an amount that can even shake the US economy and not one that you can just stock under your shelves. That is why we always make sure that our records are always intact.
“The CBN’s letter claims that for the period 1st January 2012 to 31st July 2013, total national crude oil lifting was 1.287 billion barrels. Our records show that the total national crude lifting for the same period was actually higher at 1.330 billion barrels. Furthermore, the total NNPC lifting during the same period was again higher at 618.552 million barrels as against the 594.024 million barrels stated by CBN.” he calculated.
Concerning the audit of NNPC’ s operations, which the PricewatershouseCoopers (PwC) is auditing, Yakubu said: “It was ordered by the Minister of Petroleum Resources some months ago and they are about rounding off the audit exercise; it is normal. Last year, we had a similar one and we are supposed to go through an audit on regular basis. That is ongoing and will soon be concluded and handed over to the Minister.
The CBN letter claims that for the period 1st January 2012 to 31st July 2013, total national crude oil lifting was 1.287 billion barrels. Our records show that the total national crude lifting for the same period was actually higher at 1.330 billion barrels. Furthermore, total NNPC lifting during the same period was again higher at 618.552 million barrels as against the 594.024 million barrels stated by CBN” the GMD, said.
On the issue of US$49.8 billion or 76 per cent of total national lifting and the alleged unremited funds, he clarified that this represents the proceeds from Royalty and Petroleum Profit Tax lifting, noting that they are remitted to the Department of Petroleum Resources (DPR) and the Federal Inland Revenue Service (FIRS) which are statutorily empowered to collect and remit same into the Federation Account.
Referring to the allegation that NNPC owes the Federal Government another N22 billion in unpaid levies to the National Export Supervisory Scheme (NESS), the GMD noted that the levies under the NESS are paid to third party inspectors based on services rendered to the Federal Government and payment to NESS is update as per value of work done.
So far, NNPC has paid a total of $114.78 million from inception of NESS in 2009 up to October 2013 as against the total budget of $117.08 million for the same period and the payments have been reconciled with the CBN, who are again the custodians of the NESS account that is operated on a draw-down basis by the CBN.
“It is NNPC’s position always that in carrying out our statutory duties we will continue to maintain the highest level of transparency and accountability. Please be assured that NNPC remains available at all times to provide clarifications on these issues or any other matter relating to our responsibility to the Federation and the Nigerian people” he submitted.
Meanwhile, the Co-ordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala has promised that the Federal Government would get to the bottom of the matter. She admitted that there are some misconceptions and misunderstanding about the $49.8 billion.
“This misunderstanding prompted an emergency meeting of the concerned agencies, including her ministry. While reconciliation is still ongoing it is important to make some clarifications on the issue.
“We are here to talk to you (newsmen) about the issue of $49.8 billion that has been in the press as an amount missing from the federation account. We said we should come together and talk to you because we have received many enquiries. But what we have done prior to talking to you, is spend two days with our staff from the Ministry of Petroleum Resources and the NNPC. The Ministry of Finance and the Central Bank and their technical teams have been working, reconciling figures so that we can get to the bottom of these questions that have arising from this amount. We decided we should talk to you but I just want to say that this reconciliation is an on-going matter.
But we thought that at this point in time, after working last night, that we could share with you some of our thoughts and clarifications on this issue. That is why the three of us are here.
Now, what we have done so far shows that for the $49.8 billion, there are some misconceptions or misunderstanding that led to this number. We have been able to come to the conclusion that we account for this amount. And the second point is that, within this, yes there are some shortcomings, both NNPC and the Ministry of Finance have been working on for quite some time and even the CBN” she said.
In view of the foregoing, it has been established that there is a missing fund but not to the magnitude of %49.8 billion as was alleged in the letter.
And this has cast a doubt on the credibility of the CBN governor, who as a custodian of the fund, should have taken his time to know the accurate amount of the missing money before making a public show of it. The CBN Governor occupies an exalted office such that his comments are capable of impacting heavily on the economy.
Sanusi really needs to strengthen his research and accounts departments because they have serially caused him national and international embarrassment.
His research department made him to pay a US-based Nigerian professor some millions of dollars for plagiarising his work.
Again, his accounts department has caused him to be dragged about (to the State House, Ministry of Finance) like a common criminal to eat his vomit.
ENDS

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Posted by admin on Jan 2 2014. Filed under Latest Politics. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry