Office of Auditor General for the Federation (oAuGF) has requested the intervention of the National Assembly for the recovery of N151.122 billion in revenue unjustifiably deducted by Nigerian National Petroleum Corporation Limited (NNPCL) from source before remittance to the Department of Petroleum Resources (DPR) during the 2020 financial year.
The oAuGF request was contained in the 2020 audit report being investigated by the House Committee on Public Accounts, chaired by Hon. Bamidele Salam.
The oAuGF averred that the deduction was in breach of Section 162 (1) of the 1999 Constitution (as amended) which states that: “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’.
“Also, Section 11(1) (Payment of Royalty) of the Deep Offshore and Inland Basin Production Sharing Contract Act,1999 states ‘The Corporation or the Holder, as the case may be, shall pay all royalty, concession rentals and Petroleum Profit Tax on behalf of itself and the Contractor out of the allocated royalty oil and tax oil.’
The audit observed from the review of NNPC Joint Venture (JV) schedules and other documents that: i. The sum of N151,121,999,966.34 was deducted by the Nigerian National Petroleum Corporation (NNPC) from the Oil Royalty assessed by the Department of Petroleum Resources (DPR) now Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for 2020.
Breakdown of the deductions shows as follows: January – N35,538,521,083.26; February – N17,296,910,344.71; March – N23,856,985,843.06; April – N15,122,641,329.85; May – N12,232,178,074.07; June – N9,701,831,750.39; July – N3,543,937,903.00; August – N985,117,483.00; September – N4,954,555,060.00; October – N8,662,342,342.00; November – N11,252,047,143.00 and December – N7,974,931,610.00, respectively.
According to the report sighted by our Nigerian Tribune, oAuGF disclosed that the deductions by NNPC were purportedly for handling government priority projects, strategic holding costs, crude oil and product losses among others.
It however observed that: “No evidence was produced to show details of the priority projects and approval by Federation Account Allocation Committee (FAAC).
“The deductions by NNPC were made prior to remittance to DPR (now NUPRC), and no justifiable reasons were provided for the deductions of the royalties by the NNPC before remittance.
“The above anomalies could be attributed to weaknesses in the internal control system at the DPR (now NUPRC).”
In its recommendations based on the risk analysis, oAuGF argued that the unjustifiable deductions pose loss of government revenue and diversion of public funds.
As stipulated in the audit report on the Management’s Response, it stated that: “The NNPC makes deductions for Government priority projects at source before remittance of royalty to NUPRC with the latter having no control over this. Thus, NNPC is in better position to provide necessary approvals to justify these deductions.”
It further noted that: “The office of the Accountant General of the Federation has been duly written on the payment of 4% Cost of Revenue Collection to NUPRC for money deducted at source by NNPC for Government priority projects.”
Unsatisfied with the NNPCL’s response, oAuGF in its recommendations as encapsulated in the 2020 audit report, stated that: “The Director/CEO (now Commission Chief Executive – CCE) should be requested to: Account for the sum of 4151,121,999,966.00 that was deducted by NNPC from Federation Account revenue proceeds.
“Recover the sum of N151,121,999,966 being unjustified deductions due to DPR (now NUPRC) and remit the same into the Federation Account.
“Deduct 4% cost of collection due on the amount in (1i) above.
“Forward evidence of recovery and remittance into the Federation Account to the Public Accounts Committees of the National Assembly.
“Otherwise, sanctions relating to failure to collect and account for Government Revenue in paragraph 3112 (ii) of the Financial Regulations (FR) should apply.”
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