Reps probe non-payment of N8.1trn royalties by NNPC, others

•warn oil companies against delay tactics

The House of Representatives on Tuesday flagged off the investigation into the non-payment of N8.1 trillion royalties by the Nigerian National Petroleum Company Limited (NNPCL) and other oil companies into the Federation Accounts.

Speaking during the investigative hearing, Chairman, House Committee on Public Accounts, averred that the inquiry has revealed a massive sum of unpaid debts and royalties, exceeding N8.1 trillion (about $10.5 billion) as at 31st December, 2023.

While emphasizing the critical need for the country to generate revenue, Hon. Salam issued a stern warning to the oil companies, cautioning them against employing delay tactics.

The Office of the Auditor General (oAuGF) raised concerns regarding the NNPCL’s financial obligations, many of which remain unmet.

The report alleged that, as of the end of 2021, NNPCL was indebted to the Federation of o$1.6 billion in royalties owed to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) under the Production Sharing Contract, Repayment Agreement, and Modified Carry Arrangement.

Further findings show that the NNPCL’s claims against the Federation reached N1.9 trillion, while the Federation’s claims against NNPCL were recorded at N10 trillion.

According to oAuGF, this unpaid revenue has left the NNPCL owing the Federation N8.1 trillion, a debt resulting from unpaid taxes, royalties, including a loan of N400 billion from the Central Bank of Nigeria (CBN), and other obligations to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

Additionally, NNPCL was found to have deducted N204.8 billion from oil royalties assessed by NUPRC for the year 2021.

This money was reportedly used for government priority projects, including the management of crude oil losses and strategic holding costs. However, the NNPCL has yet to provide any formal justification for these deductions, which were made before royalties were remitted into the Federation Account.

Between 2020 and 2023, NNPCL also deducted a total of N1.38 trillion from Royalties for similar projects.

Despite this, NNPCL has failed to pay NUPRC’s revenue collection cost of N55.1 billion, a 4% levy on the sum of royalties collected. This amount has remained unpaid, even as the cost of revenue collection has since been reduced to 2.5% starting from May 2023.

Further reports alleged that the situation extends beyond NNPCL, with other oil companies also falling short of their obligations. As of December 2021, a total of $1.7 billion in oil royalties remained unpaid, along with outstanding penalties for gas flaring amounting to $496.6 million.

Oil companies are also behind on payments for concession rentals, which total $7.6 million.

By September 2024, 47 oil companies collectively owed the Federation N1.3 trillion (approximately $929 million), a figure that has yet to significantly change.

To address these discrepancies, the Sub-Committee chaired by Hon. Akinlade Isiaq called on NNPCL Group Managing Director to appear and explain the reason for the delay in the payment of all the outstanding debts.

The Sub-Committee has also requested that NNPCL provide full details of the government projects funded through the N204.8 billion deducted from royalties, including relevant presidential approvals.

In addition, the Sub-Committee invited the Minister of Justice and Attorney General for the Federation to provide insight into whether the Petroleum Industry Act (PIA) grants NNPCL the legal standing to make such deductions before remitting the balance of oil royalties.

Other key stakeholders invited include: the Accountant General of the Federation, CBN, Nigeria Extractive Industries Transparency Initiative (NEITI), Ministry of Finance, Revenue Mobilization Allocation and Fiscal Commission (RMAFC), Bureau of Public Procurement (BPP), and Federal Inland Revenue Service (FIRS) with a view to provide clarification on the financial discrepancies and the legal and procedural aspects of these non-payments.

In response to the queries, NNPCL representatives led by the Chief Financial Officer (CFO), Mr Dapo Segun, said that the funding for this project is derived from deductions from the Federation’s crude oil and gas entitlements, which include royalties for the period as appropriate in the various projects and applications.

“It is important to note that no deductions were made in 2023 and 2024 for GPP, as these deductions are contingent upon the passage of the Petroleum Industry Act (PIA) by the National Assembly.

“Regarding the costs associated with collection, particularly in relation to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and fiscal obligations, we are unable to provide specific details as NNPC Limited does not make payments to NUPRC directly. Payments to NUPRC are handled by the Accountant General of the Federation, and as such, NNPC Limited is not in a position to supply this information.

“Our responsibility is limited to the remittance process, and once remittances are made, we trust that the appropriate government agencies will ensure that payments to NUPRC are executed accordingly.

“To clarify, NNPC Limited does not engage in the direct payment of revenues to NUPRC. The deductions made in 2021 were duly authorized and approved under the 2021 Appropriation Act.

“With regard to the claims between the Federation and NNPC Limited as of December 31, 2024, the reconciliation process is still ongoing under the oversight of the Honourable Minister of Finance and Coordinating Minister of the Economy. Once the reconciliation is concluded, relevant reports will be made available to all appropriate agencies and stakeholders,” he explained.

The Sub-Committee has vowed to continue its investigation, with a clear mandate to determine the current status of these debts as of December 2024 and to ensure that these significant amounts are recovered.

The investigation is set to continue through 2025, with the aim of recovering the funds owed and preventing further financial mismanagement within the industry.

In his earlier remarks, Hon. Akinlade Isiaq reiterated the Sub-Committee’s commitment to professionalism and transparency in handling the investigation.

“This hearing is an essential step toward ensuring that Nigeria’s oil and gas resources are properly accounted for. We are determined to take all necessary actions to recover these debts in the interest of the Federation and its citizens.”

The Committee also invited the alleged oil companies indicted by the NUPRC report that owed the federal government the sum of $929 million as of 30th September 2024.

The agencies that appeared before the committee were the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the Nigerian National Petroleum Corporation Limited (NNPCL), and the Nigeria Extractive Industries Transparency Initiative (NEITI).

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