NEITI: N7.2tn NNPC, NPDC Unpaid Oil Proceeds Can Fund Economic Recovery

Says 20% of funds can offset 2017 budget deficit
Chineme Okafor in Abuja
The Nigeria Extractive Industries Transparency Initiative (NEITI) has asked the federal government to finance Nigeria’s recovery from its present economic recession with about N7.2 trillion reportedly owed the federation as unpaid oil and gas incomes by the Nigerian National Petroleum Corporation (NNPC) and its subsidiary, the Nigerian Petroleum Development Company (NPDC).

NEITI said in its latest policy brief: ‘Unremitted Funds, Economic Recovery, and Oil Sector Reform,’ released yesterday in Abuja, that the NNPC and NPDC still owed the country $21.778 billion and N316.074 billion from oil assets’ sales and divestments, taxes, and dividends on oil and gas operations.

It noted that when added up, these unpaid oil revenues amounted to N7.2 trillion, which can be used by the 36 states in the country and federal government to fund recoveries from economic recession.

From its computation of the unpaid revenue and what it could do for Nigeria’s economic recovery plan, NEITI explained that if 20 per cent of it were recovered, it could fund significant parts of the deficit in the federal budget for 2017, while one-third of it could completely eliminate any need to borrow to fund the budget.

According to it, the funds withheld by NNPC and NPDC offered the government huge and interest-free opportunity to stimulate the country’s recessed economy, adding that they were much easier and much better to access than internal and external borrowings with interests.

The transparency agency thus asked the government to set up the right machineries to recover the funds, stating that it was a better option in the mix of options available to reflate the economy.
Giving details of the unpaid revenues which it added were not entirely new, NEITI said its previous audit reports on the operations of the country’s oil industry showed the NNPC and NPDC have yet to pay $21.778 billion and N316.074 billion to the Federation Account.

It said these were amounts due from three main sources – federation assets divested to NPDC and NPDC’s legacy liabilities, payments for domestic crude oil allocation to NNPC, as well as dividends from the country’s investment in Nigerian Liquefied Natural Gas (NLNG) paid to it but withheld by NNPC.

According to the NEITI, while the NPDC owed the Federation $5.531 billion and N72.435 billion as considerations for divested oil assets and revenues accruing from them, the NLNG paid a total of $15.8 billion dividend to NNPC which NNPC acknowledged receiving but failed to remit to the Federation Account.

Additionally, NEITI said the NNPC still owed N243.639 billion to the Federation Account as unpaid balance from its management of the 445,000 barrels per day (bpd) domestic crude allocation to its refineries in Kaduna, Warri and Port Harcourt the refineries, as well as $424.185 cash call refund from another of its subsidiary – the Nigerian Petroleum Investment Management Services (NAPIMS).

“NNPC and NPDC owe the Federation Account more than $20 billion, which could help jumpstart the economy. Beyond the golden opportunity for economic recovery, there is also a compelling case for deepening transparency and accountability in the improving oil sector,” said NEITI in the policy brief.

According to it: “Recovery of these funds will significantly enhance government’s fiscal position in the short term. Addressing the underlying causes of withheld revenues will boost government’s collection in the medium to long term, thereby enhancing government’s capacity to implement its infrastructure development programme, to successfully carry out its social intervention policies, and to put the economy on a sound and sustainable footing.”

“It will also expand revenue options for the country at this critical period. In addition, the system and structure that allow funds to be withheld at discretion and with impunity point to an important area of reform in the oil and gas sector,” it added.

Indicating the action plans it would expect the government to adopt on this, NEITI said: “The federal government should recover the over $20 billion withheld or owed by NNPC and NPDC and use it to fund economic recovery, OMLs (oil mining licenses) divested to NPDC but not fully paid for should be revalued, retrieved and auctioned for higher value to the country.”

It further said on this: “Status and operations of NPDC should be reviewed in line with global best practices to ensure greater efficiency and optimal value to the country, federal government should investigate the status and use of NLNG dividends from 2000 to 2014 and undertake criminal proceedings against anyone found wanting and FG should fast-track comprehensive reforms of the improving petroleum sector.”

Speaking on the import of the policy brief, the Executive Secretary of NEITI, Mr. Waziri Adio, told reporters that such huge revenue could not be withheld by the NNPC and NPDC while the government searches for funds to get the country out of recession.

Adio also noted that the agency had briefed the Economic Management Team (EMT) headed by Vice President, Prof. Yemi Osinbajo, and would expect it to act on this.
He said: “We want to go beyond yearly reports to now play in the policy space and engage policy makers who have not used our reports. We need the money now and the country should go out to get them. This is nothing new, we are just deepening the issues in terms of where we are now as a country.”