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The Nigerian National Petroleum Company Limited (NNPCL) has been accused of financial irregularities, including unauthorised deductions and revenue diversion, in the 2021 annual report by the Auditor-General of the Federation.
The 558-page report, submitted to the National Assembly in November 2024, raises serious concerns about the management of funds by the state-owned oil firm.
One of the major allegations in the report is the unauthorised deduction of ₦82.9 billion from federation revenue, purportedly for refinery rehabilitation.
According to the Auditor-General, these transactions lacked proper authorisation or supporting documentation, breaching the Nigerian Constitution and Financial Regulations of 2009.
The report also criticised the NNPCL for irregular deductions from domestic crude oil sales, describing this as a violation of statutory guidelines on the economy of expenditure.
The Auditor-General recommended that the Group Chief Executive Officer of NNPCL provide explanations to the Public Accounts Committees of the National Assembly regarding the unauthorised deductions.
The report further advised that the lost funds be recovered and remitted to the government’s treasury to prevent further revenue leakage.
The report attributed these anomalies to weaknesses in the NNPCL’s internal control systems. It warned that such practices could lead to misappropriation of funds, diversion of public revenue, and significant financial losses for the federation.
Details Of The Allegations
From a review of NNPCL payment records for 2020 and 2021, the audit observed that the ₦82.9 billion deduction from crude oil and gas sales was made without documented evidence of approval.
“The anomalies discovered in the accounts of the NNPCL could amount to misappropriation of funds and a 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 ₦343 Billion
The report stated that from the review of the NNPC SAP Payment record for March and May 2021, ₦484.7 billion was the gross amount generated for the sale of Domestic Crude for March and May 2021.
However, auditors said ₦343.6 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 ₦127 billion but only ₦77 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 ₦343.6 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 ₦343 billion recovered “and remitted to the treasury.”
The auditor general also expressed shock at the warehousing of ₦83.6 billion from the federation’s miscellaneous income.
Auditors observed from the review of the financial records of the NNPCL that ₦83.6 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 ₦83.6 miscellaneous income from the NNPC joint venture operations from 2016 to 2020 was sunk into the CBN/NNPC sinking fund account.
According to Premium Times, the audit report reveals that ₦3.7 billion was controversially paid to a company as a shortfall in sales of MT cargo of PMS.
In 2021, an internal memo advised marketers to pay naira sales proceeds in advance into the company’s designated accounts, from which the company utilised ₦3.7 billion to purchase forex through NNPC Group treasury to pay the suppliers.
The auditor general said details of the transaction between the NNPC, PPMC and the company that gave rise to the ₦3.7 billion which was paid to the company as a shortfall on sales of MT cargo of petrol were not provided for audit.
The above transaction violated Paragraph 603 (i) of the Financial Regulations (FR) which states that: “All vouchers shall contain full particulars of each service, such as dates, numbers, quantities, distances and rates, so as to enable them to be checked without reference to any other documents and will invariably be supported by relevant documents such as local purchase orders, invoices, special letters of authority, time sheets, etc.”
Furthermore, paragraph 415 of the Financial Regulations (FR) states “The federal government requires all officers responsible for expenditure to exercise due economy. Money must not be spent merely because it has been voted.”
Similarly, paragraph 3106 of FR states “A public officer who makes an irregular payment from public funds, shall be given 21 days notice to offer an explanation. Where no satisfactory explanation is given, the amount involved shall be recovered from the officer and such officer shall be removed from the schedule.”
The auditor general fears that the NNPCL’s actions may have resulted in a loss of public funds. He wants the money recovered and remitted to the treasury.
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