In the face of dwindling revenue occasioned by the low price of crude in the international market, the Nigeria Extractive Industries Transparency Initiative (NEITI), has urged the Federal Government to recover about $21.77 billion (N7.2 trillion) unremitted funds from the Nigerian National Petroleum Corporation (NNPC).
The amount which includes unremitted N316 billion are aggregation of unremitted dividends from NLNG between 2000 and 2014, and unpaid value of OMLs transferred to the National Petroleum Development Company (NPDC), a subsidiary of NNPC.
The proposed 2017 budget by Federal Government is N7.29 trillion with a deficit of N2.32 trillion. The government hopes to cover the deficit through internal and external borrowing and has in the past months issued bonds to raise the money.
But NEITI Executive Secretary, Mr. Waziri Adio told journalists yesterday in Abuja that recovering just 20 percent of the unrecovered funds will significantly eliminate the need for the government to borrow.
Speaking on the latest NEITI’s Policy Brief, Adio noted that findings from its previous audits of the petroleum sector show that these monies recovered can help the nation go through its difficult economic challenges.
A breakdown of the amount showed that there is outstanding $1.7 billion from the transfer of eight OMLs from SPDC JV to NPDC; outstanding $2.22 billion from the transfer of four OMLs from NOAC JV to NPDC; outstanding $148.2 million and N2.42 billion cash call paid for transferred OMLs (not refunded); and legacy liabilities $1.45 billion and N70.01 billion. Totaling $5.53 billion and N72.43 billion
On the unremitted NLNG dividends, NEITI said the $15.82 billion (2000 to 2014) was still outstanding; $424.18 million cash calls paid to NAPIMS but not remitted, and N243.63 billion unpaid earnings from domestic crude sale. Totaling $16.26 billion and N243.63 billion.
Adio who explained that NNPC has never disputed the amounts especially at it relates to NNLG dividends, said NEITI believes the money is sitting somewhere and should be recovered.
“I want to start from that prism that there is money sitting there. And that is why we have asked government, go and recover this money. So, you say you have the money, where is the money? If they say we don’t have it, the question will then be why don’t you have it? Or we don’t have everything, then it will be why don’t you have everything?
“Let us look at this way by disaggregating the funds we are talking about. Eight OMLs under the Shell JV were divested to NPDC and they were valued at $1.8 billion but they paid $100 million and so there is $1.7 billion lying there. Forget whether there were properly valued or not. This figure is undisputed.
“What we are saying that if these assets were worth $3.4 billion as PWC said, you have two options. One is to say pay us the balance or to say take your $100 million and we auction them”.
He pointed at the several anomalies in the divestment of the four OMLs under NOAC (Agip) JV which include the fact that they were not valued at the time of divestments.
“Four OMLs under the NOAC JV (OML 60, 61, 62 & 63), $2.2 billion which was divested to them in 2012. Was not valued until 2016 and when they the valuation in 2016, they said you need to advise us on you arrived at the valuation.
“They are still contesting how the valuation was arrived at meanwhile they were enjoying all the benefits. They also say the gas proceeds from those assets were remitted to the Federation Account to offset the payment for the assets.
“Look at this way, you bought assets and you have not paid for it, the assets were not valued and when it was valued four years after, you are now saying we are not clear about this your valuation but we have don part payment from some of the proceeds”.
He therefore called for the restructuring of the NPDC status in relation to the Federal Account.
“Status and operations of NPDC should be reviewed in line with global best practices to ensure greater efficiency and optimal value to the country.
“The Federal Government should investigate the status of and use of NLNG dividends from 2000 t0 2014 and undertake criminal proceedings against anyone found wanting”.
NEITI also urged the government to retrieve and auction all OMLs divested to NPDC but not fully paid for.
The NEITI boss noted that $21 billion was a huge amount of money which could go a long way to raising the revenue profile of all tiers of government if it could be recovered.
“If there is any time that these monies are needed, it is now”, he added.
Adio concluded that “the failure of government agencies to remit revenue to the treasury has significant implications for Nigeria’s economy in two ways. The questionable practice of withholding revenues due to the treasury is partly implicated in government’s current fiscal struggles. Yet, the withheld funds offer huge and interest free opportunity to stimulate the economy, much easier and much better to access than internal and external borrowings, depending on government’s capacity and willingness to use its machinery to recover unremitted funds.
“From the computation above, total unremitted revenues to government’s treasury amount to $21.778 billion and N316.074 billion. At current exchange rate, this comes to about N7.2 trillion. Achieving a recovery rate of just 20% would significantly offset the projected deficit for the 2017 budget. A third of the computed unremitted revenues would completely eliminate the need to borrow to finance the budget.
“This has both short and long-term positive implications for the economy. Short-term macroeconomic benefit has been discussed in relation to the implementation of the 2017 budget. In the long-run it would improve Nigeria’s stock of productive infrastructure as envisaged by the current administration, with attendant multiplier effects on the economy.
“NEITI believes that at an institutional level, enforcing collection of arrears of revenues accruing to the Federation but withheld by NNPC and NPDC would significantly advance the accountability objective of government, which is the main pillar of President Buhari’s administration.
“However, recovering the outstanding revenues without reforming the system that allowed the anomalies in the first place will be a missed opportunity. The country has thus been presented with a loud and compelling case for a root-and-branch reform to deepen efficiency, transparency and accountability in Nigeria’s improving but not yet squeaky-clean petroleum sector”, he added.
When contacted, the Group General Manager, Group Public Affairs of the NNPC, Mr. Ndu Ughamadu said the corporation was still studying the comments by NEITI.