NEITI: FG’s share of NLNG dividend should be paid directly into federation account

Nigeria Extractive Industries Transparency Initiative (NEITI) has queried why the federal government’s share of dividends from the Nigerian Liquefied Natural Gas (NLNG) is not paid directly into the federation account.

In its latest 2020 oil and gas report, NEITI said the NLNG payments need to be transparently accounted for as funds were kept in accounts belonging to Nigerian National Petroleum Company (NNPC) limited.

In its recommendations, the report noted that while the fund should be paid into the joint account, it should be fully reported in the national oil company’s financial statements.

“NLNG dividend and other related payments remain an issue in 2020 as payments are being warehoused in NNPC designated bank accounts and not federation accounts,” NEITI said. 

“NNPC Ltd. should transparently disclose and account for NLNG payments in the corporation’s financial statements while future dividends should be paid to the federal government as the investor.”

On under-recoveries and value loss, NEITI noted that the total amount of subsidy claim by NNPC in 2020 was N133.74 billion ($375.22 million), out of which N106.99 billion ($300.19 million) was recovered from the federation in 2020, leaving an outstanding balance of N26.74 billion.

“The federal government should fully deregulate the downstream sector and savings made from the stoppage of the subsidy regime should be used to improve the life of citizens. The PIA is expected to address this issue,” it said. 

The report further noted that the total number of crude losses reported by 22 companies in the year under review was 53,056,772 bbls, valued at about $2.21 billion, at the annual average selling price of federation equity crude oil reported in the audit.

“The NNPC should ensure proper pipeline security surveillance using satellite imagery and other sophisticated Information and Communication Technology (ICT) tools to ensure real-time monitoring and decisive actions on pipeline vandalism,”’ NEITI said.

“The companies should also work with the federal government to ensure the implementation of fiscal provisions in the PIA for the welfare of host communities and thus strengthening responsibility for communal ownership of crude oil pipelines.”

On the operatorship of oil mining lease (OML) 116, NEITI added that although the operatorship was transferred to the Nigerian Petroleum Development Company (NPDC), the proceeds from production was treated as if the ownership of the licence was reassigned to NPDC.

It added that there was no consideration paid to show that it was reassigned.

“Transfer of operatorship does not mean the transfer of assets or ownership rights. NPDC should pay considerations if the OML has been reassigned,” the organisation said.