A report by the office of Nigeria’s Auditor-General has indicted the Nigerian National Petroleum Company Limited (NNPCL) for alleged misappropriation of funds and diversion of revenue meant for the Federation in 2021.
The indictments are contained in the 2021 Auditor-General’s annual report published in November 2024. The 558-page report was recently submitted to the National Assembly as Nigeria’s Constitution provides.
The report shows a troubling blend of questions bordering on misappropriation of funds involving the NNPCL. In one case, the auditor general indicted the state-owned oil firm of unauthorised deductions of N82.9 billion from federation revenue for refinery rehabilitation.
The NNPCL also got knocks from the report for its “irregular deductions of funds from domestic crude sales at source,” which the auditor general said was a breach of the Nigerian Constitution and Financial Regulations (3106 and 3129) 2009 in respect of economy of expenditure.
The report recommended that the Group Chief Executive Officer of the NNPCL should “furnish reasons to the Public Accounts Committees of the National Assembly, for the unauthorised deduction of funds and to recover and remit the sum of the lost funds” to the government’s treasury.
Unaccounted N82 billion
From the review of NNPCL payment records for 2020 and 2021, the audit observed that N82.9 billion was “deducted from the sale of Crude Oil and Gas (Federation Revenue) from the 2020 and 2021 records, and a total of N82.9 billion which were deducted at source for purported Refineries Rehabilitation.”
The report said the above transactions were not supported by “evidence of authorisation and approvals before the deductions were made.”
The auditor general said the anomalies discovered in the accounts of the NNPCL could be attributed to weaknesses in its internal control system. It could also amount to misappropriation of funds, diversion of revenue meant for the federation and loss of federation revenue, the report stated.
The deductions of funds violated Section 162 (1) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) which states: “The Federation shall maintain a special account to be called “the Federation Account” into which shall be paid all revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the armed forces of the Federation, the Nigeria Police Force, the Ministry or Department of government charged with responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.”
Similarly, it contravenes paragraph 213(ii) of the Financial Regulations (FR), which states that “On no account shall any withdrawal be made from the revenue account other than for the purpose of transfer to the consolidated account.” In addition, paragraph 223 of the FR 2009 states, “No deductions shall be made from any revenue collections or other receipts to adjust a previous over-credit. The gross amount received must, on all occasions, be accounted for in full. The procedure for refunds of revenue and advance payments above is prescribed in Financial Regulations 3006.”
The NNPCL management did not respond to the queries and concerns raised by the auditor general.
Auditors fear that the NNPCL’s actions may have resulted in the misappropriation of funds and the diversion of revenue meant for the federation.
The report then recommended that henceforth, the Group Chief Executive of NNPCL should ensure that amounts due for the “Federation Account are not subjected to any deductions before remittance of the net.”
Irregular deductions of N343 billion
The report stated that from the review of the NNPC SAP Payment record for March and May 2021, N484.7 billion was the gross amount generated for the sale of Domestic Crude for March and May 2021.
However, auditors said N343.6 billion from the gross amount was “unilaterally deducted” from the gross domestic crude sales to fund “NNPC Value shortfall, Strategic Stock Holding Cost, Crude Oil and Products Pipeline Losses, as well as the pipelines maintenance and management costs.”
Details of each of the cost components deducted above were not provided for audit review, hence reasons for the deductions could not be justified by the management of NNPCL, the report said.
It added that in May 2021, the net payable which could have been remitted ought to have been N127 billion but only N77 billion was remitted by the NNPCL, leaving an unremitted balance of N50 billion to the Federation Account, which has remained largely unaccounted for.
Again, these irregular deductions are in breach of the 1999 Nigerian Constitution and 2009 Financial Regulations.
In this regard, the GCEO of the NNPCL was asked to provide reasons to the Public Accounts Committees of the National Assembly, why N343.6 billion was unilaterally deducted from the Federation Account revenue proceeds at source for the months of March and May 2021, contrary to the provisions of extant financial laws.
The auditor general also wants the N343 billion recovered “and remitted to the treasury.”
Warehousing miscellaneous income
The auditor general also expressed shock at the warehousing of N83.6 billion from the federation’s miscellaneous income. Auditors observed from the review of the financial records of the NNPCL that N83.6 billion being miscellaneous income from the NNPC joint venture operations from the year 2016 to 2020 was sunk into the CBN/NNPC sinking fund account instead of the Federation Account.
The auditor general is concerned that this practice ‘has led the Federation to resort to borrowings.’
Treasury Circular Ref. No. TRY/A12 & B12/2013 dated 19 November 2013, made it compulsory for unspent balances as of 31 December, or as may be extended, to be paid back to the treasury. Also, paragraph 414 of the Financial Regulations (FR) 2009 states
“…the unexpended portion of any sub-head shall not be drawn for the purpose of setting it in reserve to meet impending payments or be carried to a deposit or a suspense account…”
The auditor general suspects “the money may have been diverted.” Hence, he wants the funds recovered and remitted to the treasury.
Auditors also requested the GCEO of NNPCL to explain to the Public Accounts Committees of the National Assembly why the N83.6 miscellaneous income from the NNPC joint venture operations from 2016 to 2020 was sunk into the CBN/NNPC sinking fund account.
