Two regulatory bodies overseeing Nigeria’s petroleum sector are yet to account for over N313 billion, leading to significant revenue losses for the government. This is according to the latest audit report released by the Auditor General of the Federation.
The report highlights the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, and the Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, as the agencies implicated in the findings.
The 2021 audit report, which contains preliminary observations, requires the agencies to clarify the issues raised. However, in several instances, their responses were deemed insufficient by the auditor general.
The document outlines lapses in regulation, non-compliance with due process, and a failure to uphold accountability standards.
Auditors reported that N309 billion and $2.28 billion could not be properly accounted for under the supervision of the NUPRC and NMDPRA during 2021.
The two agencies were created in August 2021 following the enactment of the Petroleum Industry Act by then-President Muhammadu Buhari. Gbenga Komolafe has served as the Chief Executive Officer, CEO, of NUPRC since September 2021, while Farouk Ahmed assumed the role of CEO of NMDPRA in the same month. The infractions took place under their leadership.
Unaccounted funds include unpaid royalties, bridging allowance arrears, and discrepancies in marketers’ debt records.
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Outstanding Royalties
Auditors discovered that $1.65 billion in royalties owed by the Nigerian National Petroleum Corporation Limited, NNPCL, to the Department of Petroleum Resources, DPR, remained uncollected as of December 31, 2021. Only $1.4 billion of the amount was remitted, leaving $254 million outstanding.
No justification was provided for the uncollected revenue, which violates Paragraph 227, i and, ii, of the Financial Regulations. This non-compliance has contributed to revenue shortfalls affecting the government’s ability to fund the 2021 budget.
In response, NUPRC stated that $224 million had been paid, leaving an unpaid balance of $29.6 million. The agency assured auditors that efforts were underway to recover the remaining amount.
However, auditors dismissed this explanation, stating that $29.6 million remains uncollected. The auditor general has recommended that the NUPRC CEO recover the outstanding royalties and remit them to the Federation Account.
Unjustified Deductions by NNPCL
Auditors found that NNPCL deducted N204 billion in oil royalties assessed by the DPR in 2021 without providing valid reasons. These deductions included expenses for priority projects and crude oil losses, breaching Section 162, 1, of Nigeria’s Constitution.
NUPRC stated it had no control over these deductions, which were made at the source by NNPCL. However, the auditor general rejected this explanation, directing NUPRC to recover the funds and ensure such deductions do not occur in the future.
Billions of Dollars in Missing Revenue
Auditors identified $1.74 billion in unpaid oil royalties and $13.8 million in outstanding gas royalty revenue as of December 31, 2021. Additionally, 23 operators owed $496 million in gas flare penalties, while 17 companies owed $7.68 million in concession rentals.
NUPRC attributed delays to operational lags but stated that recovery efforts were ongoing. Despite this, auditors maintained that the issues were unresolved and called for the recovery and remittance of all outstanding amounts.
Indictment of NMDPRA
Auditors revealed that N28.6 billion in bridging allowances from NNPCL Retail to the defunct Petroleum Equalization Fund Board remained unpaid as of December 31, 2021. These funds are intended to reimburse marketers for transportation costs.
While NMDPRA claimed ongoing reconciliations, the auditor general found its response unsatisfactory and instructed the agency to recover the outstanding funds.
Outstanding Claims from Marketers
Auditors observed that N13.5 billion in bridging claims from three marketers and N14.1 billion from 20 marketers were unpaid in 2021. Reconciliation efforts were documented but lacked adequate supporting records, such as agreements or meeting minutes.
The auditor general has directed NMDPRA to recover these funds and remit them to the Federation Account, ensuring compliance with financial regulations moving forward.
Crediblenewsng.com
