NNPC balks on resolution of N5.3trn subsidy dispute

Commissioners for Finance from the 36 states have jointly asked Minister of Finance, Mrs. Kemi Adeosun to prevail on forensic auditors looking into the books of Nigerian National Petroleum Corporation (NNPC) over the N5.3 trillion subsidy claims between January 2010 and December 2015 to conclude their work on schedule.

Nigerian National Petroleum Corporation (NNPC) has failed to submit relevant documents to support claims that it was withholding the money to offset crude and product loses, pipeline repairs and other management costs.

Meanwhile, there are expectations that subsidy claims may escalate in 2018 as crude oil price continues to rise in the international market.

The Federation Account Allocation Committee (FAAC) Post Mortem Sub-Committee (PMSC) had set up sub-committee on Subsidy claims of NNPC certified by Petroleum Pricing Regulatory Agency (PPPRA) for the period.

At the FAAC meeting held December 16, Kaduna State Commissioner for Finance, Alhaji Suleiman Kwari who is chairman of the sub-committee reported NNPC realised N14.256 trillion from domestic crude oil sales during the period under review.

Of this amount, N8.904 trillion was paid into the Federation Account thus leaving the sum of N5.351 trillion.

The committee also established “that certified subsidy claims by NNPC from January 2010 to December 2015 was N4.026 trillion.”

For instance, in 2010, the corporation purchased N1,815,637,337 worth of domestic crude oil out of which N1,413,756,989.92 was paid into Federation Account.

Out of this, PPPRA certified subsidy liability of N389,027,885,443.79 against the Federation thus leaving an outstanding of N402,423,580,712.08 and a net outstanding arears of N13,395,695,268.29 to be remitted to federation account.

However, in 2011, NNPC sold domestic crude worth N13,395,695,268.29 but paid N1,855,505,601,451.88 into Federation Account, withholding N402,423,580,712.08.

PPPRA verified that a total of N981,734,423,646.57 was due for subsidy payment leaving N136,789,975,174.55, which NNPC would collect from federation account.

For 2012, a total of N2,769,259,266,345.09 worth of domestic crude was sold by NNPC but the corporation remitted N1,659,231,631,865.35 and withheld N1,110,027,634,479.74.

Subsidy claims verification by PPPRA revealed that marketers were due to be paid N893,746,516,631.73 thus leaving NNPC with a liability of N216,281,117,848.01 meant for federation account.

Similarly, in 2013, domestic crude worth N2,557,209,731,508.19 was sold while N1,551,935,625,000.00 was remitted leaving N1,105,274,106,508.19 as outstanding payment.

Subsidy reimbursement of N792,961,142,799.52 was verified by PPPRA and FAAC is demanding that the balance of N312,312,963,708.67 by refunded.

For 2014, total domestic crude sales amounted to N2,636,930,514,777.19 according to federation account documents out of which NNPC withheld N1,199,245,925,803.36 after paying N1,437,144,588,973.83.

Total subsidy on premium motor spirit and kerosene for the year stood at N652,178,892,312.22 thus remaining N547,067,033,491.14 to be refunded to national coffers.

In 2015 when prices of crude oil began to nosedive, the corporation sold N1,676,739,619,423.71 on behalf of the federation but remitted only N987,540,806,965.31 of the amount thus withholding N689,198,812,458.40.

After thorough verification, PPPRA reported that N316,720,837,527.84 was due for subsidy payments leaving a balance of N372,477,974,930.56 expected to be refunded by NNPC.

To be sure, NNPC has an allocation of 445,000 barrels of crude oil per day to be processed by its four refineries but since the refineries have not functioned effectively for decades, the balance that could not be refined locally are sold.

From the accruals, NNPC settles subsidy claims and refunds the balance to federation account.

To resolve the outstanding issue, Kwari and his committee members resolved to net-off subsidy claims on petroleum products certified by PPPRA amounting to N4.026 trillion for the period January 2010 to December 2015 in favour of NNPC from the outstanding domestic crude oil sales of N5.351 for the same period against the corporation.

“He concluded that the outstanding domestic crude sales against NNPC stood at N1.325 trillion pending the verification of the Crude and Petroleum Loses, Pipeline Repairs and Management Cost claimed by the Corporation”, the document revealed.

FAAC at its last meeting on December 16 then requested NNPC to hasten the submission of documents required for the verification of crude and product loses, pipeline repairs and management cost.

It “also called on the honourable minister of Finance to prevail on the Forensic Auditors, KPMG and S.S. Afemikhe & Co to conclude the Forensic Audit of NNPC up to 2015 within the given time line.

And with Vice President Yemi Osinbajo insists that fuel prices will not be increased, there are possibilities that subsidy claims by NNPC will escalate.

According to Osinbajo, “We are certainly not expecting to increase oil prices at all; the government has absolutely no intention of increasing fuel prices and that’s it.

“The Federal Government, at the moment, isn’t paying any subsidy, but NNPC is trading; if NNPC buys fuel at certain cost.

“And don’t forget that the way that the NNPC trades is that, in many cases, NNPC is actually giving fuel; there is 445, 000 barrels of fuel.

“So really what you are seeing, in many cases, is more or less an exchange for PMS. So at the moment NNPC is paying the cost.”