The Office of the Auditor-General for the Federation has uncovered financial irregularities totalling ₦514 billion in the 2021 operations of the Nigerian National Petroleum Company Limited (NNPCL).
The findings were detailed in an audit report highlighting non-compliance and internal control weaknesses within Ministries, Departments, and Agencies (MDAs) for the 2021 financial year.
Breakdown of Infractions
The audit revealed four major financial discrepancies:
1. Irregular Deductions: ₦343.64 billion was deducted from domestic crude oil sales at source without proper documentation.
2. Sinking Fund Deposits: ₦83.66 billion, classified as miscellaneous income, was retained in a sinking fund account.
3. Unauthorised Refinery Deductions: ₦82.95 billion was deducted from federation revenue purportedly for refinery rehabilitation.
4. Unsubstantiated Payments: ₦3.75 billion was flagged for unverified transactions relating to petrol sales.
Constitutional Violations
The Auditor-General’s report stated that these transactions breached the 1999 Constitution and the Financial Regulations Act of 2009.
Details of Irregularities
The report noted that ₦484.73 billion was generated from domestic crude oil sales in March and May 2021.
However, ₦343.64 billion was deducted for various expenses, including “Value Shortfall,” “Strategic Stock Holding Cost,” and “Pipeline Maintenance.”
These deductions were unilaterally made by NNPCL without sufficient documentation to justify the expenses.
Additionally, ₦50 billion of the net payable amount for May 2021 was unaccounted for, leaving a significant gap in federation revenue.
Audit Concerns
The Auditor-General attributed these issues to weak internal controls within NNPC, now operating as NNPCL.
The report warned that such practices pose risks of public fund diversion, misappropriation, and significant revenue losses for the federation.
The report read, “Audit observed from the review of NNPC SAP payment record for March and May 2021 payments that the sum of ₦484.73bn was the gross amount generated for the sale of domestic crude for the months of March and May 2021.
“The sum of ₦343.64bn from the gross amount was unilaterally deducted from the gross domestic crude sales as NNPC Value shortfall, Strategic Stock Holding Cost, Crude Oil and Products Pipeline Losses, as well as the pipelines maintenance and management costs.
“The details of each of the cost components deducted were not provided for audit review. Hence, the reasons for the deductions could not be justified by the management.
“In the month of May, the net payable that could have been remitted ought to have been ₦127.075bn, but only the sum of ₦77.075bn was remitted, leaving an unremitted balance of N50bn to the Federation Account, which has remained unaccounted for.
“The above anomalies could be attributed to weaknesses in the internal control system at NNPC, now NNPC Ltd. This is a potential loss of Federation revenue, diversion of public funds, or misapplication or misappropriation of funds.”