Revenue body says corporation owes govt
HOUSE of Representatives' investigation into the N450 billion allegedly owed by the Nigerian National Petroleum Corporation (NNPC) to the Federation Account threw up serious disagreement in the National Assembly yesterday.
The Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) declared that the NNPC's refusal to comply with constitutional provision regarding remittances to the federation account led it into accumulating the N450 billion debt. But the NNPC, which claimed it never owed any debt, admitted that it had been forced to start the payment of the N450 billion to the federation account.
Chairman of the RMAFC, Elias Mbam, who led other officials of the commission to the investigation venue, stated that "the issue of NNPC indebtedness, and in particular, the subject of N450 billion started to accumulate from November 2004. The corporation began the practice by withholding some portions of receipts due to the federation account from the domestic crude oil sales. After much deliberations, accusations and counter accusations, NNPC admitted that it owes the N450 billion to the federation account. Signature bonus, which is a premium from concession granted on oil blocks, are currently not being paid into the federation account. Such fund ought to have been paid into the federation account."
Mbam's submissions which attracted applause from the audience, including some lawmakers, spelt out the details of how the NNPC allegedly disregarded the provisions of section 162(1) of the Constitution by paying some of the revenues it generated into its own account instead of the federation account.
Explaining how NNPC further allegedly mishandled the issues of revenue generation and remittances, the RMAFC stated that:
• The proceeds from the export of crude oil and gas lifted are paid directly into the federation account with JP Morgan while the proceeds from the domestic crude oil and gas lifted by NNPC are paid into NNPC's account;
• At present, the JP. Morgan Account, where the payments for export crude oil and gas are made are not largely being supervised and constitutionally monitored by the major stakeholders of the federation account, particularly RMAFC. This situation makes the operation of the account to be shrouded in secrecy and therefore, subject of several criticisms, suspicion and lack of confidence by stakeholders;
• The operation of NNPC's domestic crude oil and gas account does not promote transparency and accountability. Indeed, NNPC pays revenue from its domestic crude oil and gas into its operational accounts and subsequently directs Central Bank of Nigeria to transfer specific amounts to the federation account. In the circumstance, NNPC should maintain a separate federation account for the domestic crude oil and gas. This would then allow for effective monitoring, transparency, accountability, among others in the operation and remittance into the account. It will then go a long way to check all deductions from the revenue due to the federation;
• The NNPC first line deductions above budgetary provisions for subsidy, among others, are in contradiction of Supreme Court judgment of April 2002 on Resource Control. The Apex Court ruled that "Funding the Joint Venture Contracts and the NNPC priority projects cannot by any stretch of construction, come with section 162(3) of the Constitution which provides for the distribution of the federation account among the three tiers of government: that is, federal, states and local governments. All these charges on the federation account are inconsistent with the constitution and are, therefore, invalid";
• The NNPC often applies Exchange Rate regime that is different from the official rate approved by the Central Bank of Nigeria in crediting the federation account. This has been an issue of concern to the commission. For instance, the commission carried out an analysis on the revenue loss to the federation account due to the exchange rate differential. It was observed that the sum of about N12 billion was the exchange rate differential for the period January to August 2011. The commission is, therefore, of the view that henceforth, the exchange rate applicable to crude oil export should also apply to domestic crude and gas at the time of monetisation.
Asked to confirm or deny the allegations, NNPC Group Managing Director, Austin Oniwon, said that although it was true that NNPC had paid the sum of N15.2 billion out of the N450 billion to the federation account, it never really owed any debt.
He said the corporation was paying the money under duress.
Oniwon's statement was corroborated by a former Group Managing Director of NNPC, Funso Kupolokun, who explained that the circumstances in which NNPC operated was very difficult.
He said that the corporation was operating at a loss having been made to buy petroleum products at the market price and then compelled to sell below the market price.
According to him, the need to bridge the gap contributed to the decision by former President Olusegun Obasanjo, in December, 2005, to instruct the NNPC to begin to deduct money from its earnings to pay for its losses.
The RMAFC informed the committee that between February 2005 and December 2008, the NNPC collected a total revenue of N1.3 trillion and remitted only N868.5 billion, leaving a balance of N450.7 billion unremitted to the federation account.
The commission also told the committee that the NNPC had been taking more money from the federation account to pay for petroleum products subsidy beyond what was budgeted for that purpose.
According to Mbam, the NNPC was given a budget of N81.7 billion for subsidy between January 2011 and September 2011 but the corporation deducted a total of N615.67 billion from the federation account for subsidy within the same period.
On how to stop the development, the RMAFC recommended that:
• The NNPC should henceforth maintain a separate federation account for domestic crude oil and gas revenues;
• The exchange rate applicable to crude oil and gas export should also apply to domestic crude and gas at the time of monetisation;
• The operation of subsidy should be made more transparent and should involve all relevant stakeholders in its determination;
• The laws establishing parastatals under the Ministry of Petroleum Resources as well as other government agencies that are inconsistent with Section 162(1) of the 1999 Constitution should be amended to conform with the provision of the Constitution;
• The Office of the Accountant-General of the Federation should be separated from that of the Office of the Accountant-General of the Federal Government; and
• There should be a comprehensive review of the enabling Act of the Commission (RMAFC) to give it powers of enforcement and bring it in conformity with the 1999 Constitution as amended.
The Guardian