By Ayomide Otitoju
The Office of the Auditor-General for the Federation has identified financial irregularities amounting to ₦514 billion in the operations of the Nigerian National Petroleum Company Limited (NNPCL) for the fiscal year ending December 31, 2021.
The findings, outlined in the 2021 audit report on non-compliance and internal control weaknesses within Ministries, Departments, and Agencies (MDAs), highlight breaches of the Nigerian Constitution and the 2009 Financial Regulations Act. The infractions include:
Irregular deductions of ₦343.64 billion from domestic crude sales at the source.
Warehousing ₦83.66 billion in a sinking fund account instead of the Federation Account.
Unauthorized deductions of ₦82.95 billion for refinery rehabilitation.
Unsubstantiated payments of ₦3.75 billion as shortfalls from petrol sales.
Key Audit Findings
A review of NNPCL’s SAP payment records from March to May 2021 revealed gross revenue of ₦484.73 billion from the sale of 18.97 million barrels of crude oil. However, ₦343.64 billion was unilaterally deducted for operational costs, including value shortfall, stock holding, and pipeline maintenance. The audit noted that the company failed to provide a breakdown of these deductions, violating Section 162(1) of the Constitution, which mandates remittance of all revenues to the Federation Account.
Further, only ₦77.075 billion was remitted to the Federation Account in May 2021, leaving ₦50 billion unaccounted for.
On refinery rehabilitation, the audit highlighted the deduction of ₦82.95 billion from crude oil and gas sales in 2020 and 2021 without documented authorization or approvals.
Similarly, a payment of ₦3.75 billion was flagged as unaccounted shortfalls from the sale of petroleum products. The report revealed discrepancies in how NNPC’s subsidiary, PPMC, managed forex transactions and funds allocation for this purpose.
Sinking Fund Account Controversy
The report also exposed the diversion of ₦83.66 billion, labeled as miscellaneous income from joint venture operations between 2016 and 2020, into a sinking fund account at the Central Bank of Nigeria (CBN). This contravened regulations requiring such revenues to be deposited into the Federation Account.
The diversion reportedly forced the Federation to resort to borrowing to cover shortfalls.
Auditor-General’s Recommendations
The Auditor-General recommended that the NNPCL Group Chief Executive Officer provide detailed justifications for the infractions to the Public Accounts Committees of the National Assembly. Failure to do so could result in sanctions for irregular payments and gross misconduct as specified in the 2009 Financial Regulations.
The report underscores systemic weaknesses in NNPCL’s internal controls, which it identified as enabling potential revenue loss, fund diversion, and financial mismanagement.
This revelation comes as the Federal Government grapples with a ₦2 trillion revenue shortfall in 2021, with actual revenue of ₦4.64 trillion falling significantly below the projected ₦6.64 trillion.
