How NEITI, NNPC Resolved Most Audit Issues In Past Reports

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Most of the issues listed against the Nigerian National Petroleum Corporation (NNPC) in past reports of the Nigeria Extractive Industries Transparency Initiative (NEITI) have been fully resolved or are being addressed, a joint committee of the two organisations has submitted.

The NEITI-NNPC Joint Committee on Remediation and Mainstreaming was inaugurated on 21 November 2019 by the heads of the two institutions and was charged with reconciling 20 legacy issues, producing a status update, and making recommendations for deepening transparency within the NNPC.

After reviewing documents and deliberating for about a year, the committee recently presented its report to the senior management teams of the two organisations, which reviewed the report and approved as follows: 11 issues (or 55%) are deemed fully resolved; eight issues (or 40%) are deemed partially resolved or ongoing; and one issue (5%) is yet to be resolved.

The unresolved issue is the status of NLNG’s payments, and it was recommended that NNPC should publish a statement on the status of the NLNG account. NNPC pledged to look into the recommendation and to consult with the account owners. It will be recalled that NNPC holds 49% stake in NLNG on behalf of the country for which it receives dividends and other payments put at $16.8bn over a 15-year period by NEITI.

The eleven issues deemed fully resolved are: the outstanding liabilities by the Nigerian Agip Exploration (NAE) and the under-reporting of revenues receivable by NNPC as disclosed in the 2014 NEITI report. Others are: non-compliance with the 30-day remittance rule by some crude oil and gas traders; payments of cash-call to the Nigerian Petroleum Development Company (NPDC), a subsidiary of the NNPC, after the company had acquired Federation Joint Venture assets in the NAOC JV; and payment of cash-calls to NPDC after it had acquired Federation Joint Venture assets in the Shell JV; inconsistencies in records of cash-call payments; expending cash-call on non-cash-call items; issuance of revenue receipts as at when due; payment of consideration on NAOC Joint Venture assets divested to NPDC; outstanding PAYE liabilities; and outstanding payment from domestic crude allocations.

The eight issues deemed partially resolved are: over-recovery by NNPC under the Petroleum Support Fund Scheme (PSF); NPDC’s unremitted NDDC levy; accumulated unremitted gas flare penalties; unremitted balance for crude oil lifting from NPDC, Shoreline and Seplat JVs; Outstanding NPDC’s Petroleum Profit Tax Liability; unremitted crude oil royalties for 2014, 2015 and 2016; balance of the value of the eight OMLs assigned by NNPC to NPDC from Shell JV between 2010 and 2011; and upfront deductions from domestic crude allocations.

Payment plans had been developed between NNPC and the beneficiaries and payments are being made according to the plans. NNPC, which committed to a transparent and accountable framework for deductions from domestic crude allocations, is expected to provide regular updates on progress on the eight issues until they are fully resolved.

Furthermore, NEITI and NNPC resolved to continue to work together on NNPC’s 13-point action plan on mainstreaming as the framework for deepening openness within the national oil company, building on NNPC’s monthly reports, the historic publication of its audited financial statements for 2018 and 2019, and the decision by NNPC to join the global EITI as a supporting company.

“We acknowledge the significant strides towards openness by the current management of NNPC,” said Waziri Adio, the Executive Secretary of NEITI. “While remediation is about looking back, mainstreaming is about looking forward. Both are about being transparent and being accountable. And what we have seen on both fronts is concrete commitment. We urge you to keep this up and we want you to know we are always here to partner with you.”

On his part, the GMD of NNPC, Mr. Mele Kyari, said: “NNPC is committed to expanding the frontiers of transparency and accountability. We believe there should be full disclosure of our transactions, not just in alignment with the EITI, but also because Nigerians need to have full visibility of our operations. We are always eager to work with NEITI on this.”

Bilateral engagement with affected covered entities is one of NEITI’s new approaches to resolving issues highlighted in its industry audits. Given the quantum of issues associated with NNPC in past audit reports, NEITI chose to pilot this new approach with the corporation.

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