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2019 Audit Query: NMDPRA Distances Self from $1.2bn Oil Royalty Deduction
Udora Orizu in Abuja
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has asked the House of Representatives to demand explanation from the Nigerian National Petroleum Company (NNPC) Limited why it deducted about $1.2 billion from the federation account in 2019.
The NDMPRA’s (formerly known as Department of Petroleum Resources) position was contained in its response to the query from the office of the Auditor General of the Federation which asked the agency to recover the said money from the NNPC or face sanction.
In its annual report on the federal government’s consolidated financial statements for the year ended December 31, 2019, submitted to the National Assembly on August 18, 2019, the Auditor General, Adolphus Aghughu reported the deduction of $1,278,364,595.49 by the NNPC from oil and gas royalty assessed by the DPR.
The report stated: “Audit observed from the review of 2019 Joint Venture Ledger and other related records that the sum of $1,278,364,595.49 was deducted by the NNPC from the Oil and Gas Royalty assessed by the Department of Petroleum Resources (DPR) for 2019.”
Giving a breakdown of the deductions, the OAuGF stated: “Distribution of Mid/Downstream Cost $992,693,875.57; Repayment Agreement (RA) – Oil Royalty $215,664,380.91; Modified Carry Agreement (MCA) –Oil Royalty $59,075,576.79 and Modified Carry Agreement (MCA) – Gas Royalty – $10,930,762.22.”
It stated further that, “the deductions emanated from the assessments based on the Joint Venture arrangement that NNPC has with other Operators in 2019, and No justifiable reasons were provided for the deductions of the above amount from proceeds of assessments before remittance into the Federation Account.”
The auditor general also said that in their response, the management of the DPR as it was then said the Department may have little or nothing to do in this regard because the deductions of the amount in question were made in accordance with the directive from the Federation Accounts and Allocation Committee (FAAC), adding that it is difficult to recover the amount from NNPC.
He also the then Director/CEO of DPR should be directed to provide reasons why the amount was deducted by the NNPC from the federation account revenue proceeds, recover the said amount from the NNPC, deduct the four per cent cost of collection due on the amount and forward evidence of remittance into the Federation Account to the Public Account Committees of the National Assembly.
Failure to do this, he said the agency should be sanctioned in line with paragraphs 3112 (i) of the Financial Regulations.
However, when the management appeared before the Public Accounts Committee of the House of Representatives, it said the money deducted by the NNPC were for priority projects of the federal government, saying that only the NNPC would be in a position to explain the deduction.
The NMDPRA claimed that the money which was supposed to enter into an account belonged to the DPR and controlled by the Accountant General of the Federation never entered into the account.
