PwC’s forensic audit report on NNPC: Matters arising BY BARIDON G. LETON

NNPCThe long-awaited re­port of the forensic audit on the Nigerian National Petroleum Cor­poration (NNPC) which the Federal Government hired PricewaterhouseC­oopers (PwC) to conduct has finally been released. As with almost everything in these political times, the forensic audit was el­evated into a campaign is­sue when some politicians began to raise questions about why it was taking so long for the report to be released, insinuating that it may have been swept under the carpet by an administration they believe has a proclivity for support­ing corruption. The release of the report has defused all such impressions imag­ined or real.

The idea of a forensic au­dit of NNPC was the brain­child of the Coordinating Minister of the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, who suggested during the Senate probe of the allegation of non-remittance of $49.8bn oil revenue into the Federa­tion Account levied by the former Governor of the Cen­tral Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, against NNPC. Dr Okonjo-Iweala had sub­mitted before the Senate Committee on Finance that considering the level of in­terest and controversy that the allegation generated, it was good to have a forensic audit carried out on NNPC’s books to get to the bottom of the issue once and for all.

In order to understand the issues raised and the rec­ommendations made in the PwC forensic audit report, it is pertinent to note that the starting point of the issues that led to the audit was the allegation of un-remitted $49.8bn revenue from crude oil sales between January 2012 and July 31 2013. Though the former CBN Governor (now Emir of Kano) who made the allega­tion had variously changed the figures of alleged un-remitted revenue to $10.8bn and $20bn, it must not be forgotten that he started the allegation with $49.8bn.

The summary of the fo­rensic audit report which the Auditor General of the Federation, Mr. Samuel Ukura, presented to the public recently indicated that the allegation of un-remitted $49.8bn, $10.8bn or $20bn was false. The re­port was emphatic that the total amount that accrued from crude oil lifting was $67bn out of which a total of $50.81bn was remitted into the Federation Account. The balance, the report stated, was used for petrol and kerosene subsidies and NNPC operations expenses. This position as reflected in the forensic audit report is consistent with the position that NNPC had always can­vassed regarding the alleged “missing oil revenue”.

The other issue thrown up in the forensic audit re­port is the $1.48bn which the audit firm recommends that NNPC should pay into the Federation Account. This is where there has been so much misunderstand­ing which led to the various screaming headlines that the report indicted NNPC. The $1.48bn, according to the report, is “un-remitted NPDC signature bonus due for divested assets and taxes/ royalties”.

It needs to be stated that signature bonus, taxes and royalties on the divested assets were not part of the crude oil lifting revenue which the original allegation of “missing $49.8bn oil rev­enue” was about. Signature bonus is the book value of oil assets. It’s usually deter­mined by the Department of Petroleum Resources (DPR) based on certain parameters. What happened in the case of the divested oil blocks by Shell and which were as­signed to the Nigerian Petro­leum Development Compa­ny (NPDC), the Exploration and Production subsidiary of NNPC, was that DPR esti­mated the book value of the oil blocks to be $1.847bn. NNPC raised concerns with the parameters used for computing the book value of the assets. While the is­sues were being reconciled with the DPR, NNPC went ahead to pay over $300m as a token to indicate its inter­est in acquiring the blocks pending when the issues it raised over the parameters used in calculating the sig­nature bonus were resolved. This much was explained by the Group Managing Direc­tor of NNPC, Dr. Joseph Dawha at a press confer­ence recently.

The point in the above ex­planation is that the $1.48bn is distinct from the revenues from oil lifting between January 1st 2012 and July 2013 which the allegation of un-remitted $49.8bn was all about. This distinction helps to highlight the error in the interpretation of the recom­mendation of the forensic audit report with regard to the remittance of the $1.48bn made in some quarters that NNPC was indicted in the report. The recommendation that NNPC/NPDC should remit the outstanding signa­ture bonus to the Federation Account does not amount to indictment in any way as the amount is not part of the original amount alleged to be missing or un-remitted. And the fact that NNPC had already commenced payment of the signature bonus as indicated in the PwC forensic audit report shows that it actually had the intention to pay the money as soon as the concerns it raised over the parameters deployed in calculating the bonus were resolved. In any case, the Minister of Petro­leum Resources, Mrs. Die­zani Alison-Madueke has directed NNPC to pay the outstanding $1.48bn forth­with.

The other issue which the report has thrown up has to do with the extant laws and business model which NNPC is constrained to run. The report recommends that the NNPC Act which “provisions contradict the requirement that NNPC be run as a commercially viable entity” must be reviewed as a matter of urgency. The re­port highlighted the fact that the issue of deduction of its operation costs and expenses from crude oil sales proceeds by NNPC for which the cor­poration is pilloried daily is a legal issue made possible by the provisions of the NNPC Act which established the corporation. The audit firm recognized and recommend­ed that the way to go about correcting the anomaly is to review the legal framework and thereby the business model of the corporation.

This once again under­scores the need to urgently pass the Petroleum Industry Bill (PIB) which has been in the works in the National Assembly for upwards of five years. In fairness to NNPC, it has commenced a Transformation Pro­gramme aimed at retooling its structures and making it more commercially focused ahead of the post-PIB era. The duty of passing the Bill does not lie with the NNPC but with the National As­sembly. It’s in the interest of all Nigerians for the PIB to be passed expeditiously to free NNPC to run as a commercial entity as recom­mended in the PwC report.

Until the PIB is passed to provide a legal founda­tion for the reforms recom­mended in the PwC report, the nation will not be com­pletely rid of allegations of un-remitted revenues, the type that led to the long in­quisition that has been for­tunately laid to rest with the forensic audit report con­ducted by PwC.