NNPC audit report exposes double subsidy payments on kerosene, petrol

Some oil marketers were paid more than once for the same fuel imports based on the recommendations of the Petroleum Products Pricing Regulatory Agency (PPPRA), the audit report into the accounts of the Nigerian National Petroleum Corporation (NNPC) has alleged.

Download the full NNPC audit report here

The audit was conducted by PricewaterhouseCoopers (PwC) following allegations that the NNPC did not remit $20 billion into the federation account in a letter written to President Goodluck Jonathan in September 2013 by the former governor of central bank, Sanusi Lamido Sanusi, who is now the emir of Kano.

Sanusi initially put the figure at $49.8 billion, but after a reconciliation committee was set up following a media leak of his letter, he revised the figure to $20 billion.

He was subsequently asked to resign by Jonathan and suspended when he refused to do so, but presidency said his suspension was based on a report by the Financial Reporting Council of Nigeria (FRC) on his misdemeanours at the central bank.

The PwC report, which was ordered released to the public by Jonathan on Monday, did not corroborate Sanusi’s figure but the findings were no less damning.

PwC stated in the report that in the payment of subsidies for petrol (PMS) and kerosene (DPK) between January 2012 and July 2013, that there were gaps between what was paid and what was supposed to be paid.

It put the difference at $980 million (about N195 billion) and alleged “duplicated discharges” in subsidy computation.

“Our review of the subsidy documentation revealed that the subsidy due to NNPC between January 2012 and July 2013 on PMS and DPK import was $8.99billion compared to the $9.97 billion stated by the Reconciliation Committee.

“The difference was due to the following: Exclusion of October 2011-December 2011 subsidy claims of $1.2billion. This does not relate to the review period of January 2012 to July 2013; $0.13billion increase in PMS subsidy claimed for the 19 months period, $0.09billion increase in DPK subsidy claimed for the 19 months period; duplicated discharges noted in subsidy computations

“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,” the report said.

PwC alleged “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).

It said the there was another $36.05 million “over-statement” in PPPRA’s PMS subsidy payment advice to NNPC.

The accounting firm said its review of the payment advice sent by PPPRA to NNPC for discharges between January 2012 and July 2013 revealed that 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 were affected in these PPPRA computations, it said, concluding that the “error” resulted in an over-statement of PMS subsidy by N5.6 billion ($36.05 million).

$205m DPK subsidy over-charge

A review of a sample of the copies of the pro forma invoices (PFIs) issued to the other marketers of DPK across different geopolitical zones of Nigeria, PwC said, revealed that the other marketers bought DPK from NNPC/PPMC prior to arrival at NNPC depot in Nigeria at N40.90.

It noted that the marketers were required to incur the Lightering expenses, NPA charges, Jetty Throughput Charge and Storage Charges before bringing the product into Nigeria. Subsidy is then calculated as Landing Cost minus Ex-Depot Price.

“NNPC claimed that this cost is incurred by both NNPC and the marketers. For the purpose of this report, we have considered this cost as a cost incurred by the marketers. Over-charge of subsidy above depends on PPPRA’s decision to either consider this cost in favour of NNPC or in favour of marketers of kerosene,” it reported.

“Per PPPRA’s template, Landing Cost also includes the extra expenses incurred by the other marketers.

“By selling DPK to marketers at N40.90 and claiming subsidy at an Ex-depot price of N34.51 without adjusting the Landing Costs for the extra costs borne by the marketers, NNPC had over deducted subsidies to an estimated amount of N31,522,234,881.06 ($204 million).”