Prior to the Monday presidential directive authorizing the immediate release of the PricewaterhouseCoopers (PwC) forensic audit of Nigerian National Petroleum Corporation (NNPC) to the public, many commentators were cynical about what the exercise could achieve. Such analysts believed the allegation of unremitted $49.8bn (later reviewed to $10.8bn, $12bn and $20bn by the accuser and former governor of Central Bank of Nigeria, Sanusi Lamido Sanusi).
Their suspicions were further reinforced when the office of the auditor-general of the federation published a terse summary of the report on its website which suggested that PwC did not find NNPC culpable of the Sanusi allegation. It, however, recommended that the corporation should pay the sum of $1.48bn representing the balance of the signature bonus for the oil assets divested by Shell and which were assigned to the Nigerian Petroleum Development Company, the upstream subsidiary of NNPC.
A careful study of the full PwC audit report confirms that it contains some details that could make the government look bad. First is the statement by PwC qualifying the audit report. PwC said in its introductory letter to the auditor-general that the findings in its report were limited to available information and did not constitute a review in accordance with generally accepted standards.
“The procedures we performed did not constitute an examination or a review in accordance with generally accepted auditing standards or attestation standards,” the firm said. “Accordingly, we provide no opinion, attestation or other forms of assurance with respect to our work or the information upon which our work was based.”
Despite its telling decision not to give an opinion on the integrity of its findings, the PwC report on NNPC, like the earlier investigative report by the Senator Makarfi-led senate committee on the same subject, is useful for many reasons.
Firstly, the report confirms that the NNPC Act empowers NNPC to defray its operation costs and expenditures from proceeds of crude oil sales. What is unacceptable is the apparent lack of prudence in the way NNPC spends money.
Secondly, the audit firm said it had no access to the full account of some relevant agencies like NPDC, the upstream petroleum industry subsidiary of the NNPC. This is a common feature noted in nearly every probe report on NNPC in the last two decades.
Thirdly, the auditors found that NNPC “operates an unsustainable model”. It noted that 46 percent of proceeds of domestic crude oil revenues for the review period was spent on operations and subsidies. The corporation is unable to sustain monthly remittances to the Federation Account Allocation Committee (FAAC) and also meet its operational costs entirely from the proceeds of domestic crude oil revenues, and has had to incur third-party liabilities to bridge the funding gap.
“Furthermore, the review period recorded international crude oil prices averaging $122.5 per barrel (Average Platts prices for 2012). As at the time of concluding this report, international crude oil prices average about $46.07 per barrel, which is about 62 percent reduction when compared to the crude oil prices for the review period.
“If the NNPC overhead costs and subsidies are maintained (assuming crude oil production volumes are maintained), the corporation may have to exhaust all the proceeds of domestic crude oil sales, and may still require third-party liabilities to meet costs of operations and subsidies, and may not be able to make any remittances to FAAC.
“We, therefore, recommend that the NNPC model of operation must be urgently reviewed and restructured, as the current model which has been in operation since the creation of the corporation cannot be sustained,” the firm said.
Also, PwC recommended that a determination is required as to whether all or a portion of “other costs not directly attributable to crude oil operations” can be defrayed by NNPC. These are weighty issues that bear testimony to chaotic record-keeping and operational procedures that must change during the Buhari presidency.
Weneso Orogun
