The Nigerian National Petroleum Company (NNPC) Limited failed to account for $1.95 billion ( ₦779.38bn) and spent $6.93 billion ( ₦2,77trillion) without appropriation out of $23,046,088,000 ( ₦9.2trn) in revenue that Nigeria earned from sales, taxes, and payment for 566,129.94 million barrels (mbbls) crude oil and 2,743,700.32 million metric standard cubic feet (mmscf) of natural gas produced in 2021, based on ₦399.68 Central Bank of Nigeria’s official average exchange rate in that period.
Nigeria Extractive Industries Transparency Initiative made this known in its 2021 oil and gas industry report, released on Monday.
According to the report, several government agencies and companies in Nigeria’s oil and gas sector failed to remit a total of over $9.85 billion in revenues to the Federation in 2021, as over 80% of these outstanding financial liabilities are owed by NNPCL.
Out of 566,129.94mbbls total fiscalised crude oil production, the report showed that the companies under the Joint Ventures (Jvs)- including MCA & RA produced 225,230.00mbbls (39.78%), while Production Sharing Contracts (PSCs) produced 242,956.55mbbls (42.92%), and Service Contracts (SCs) 978.89mbbls (0.17%) Sole Risks (SRs) produced 80,293.90mbbls (14.18%), and Marginal Fields (Mfs) produced 16,670.61mbbls (2.94%).
Out of 2,743,700.32mmscf total volume of Natural gas produced in the period under review, the report revealed that the Joint Ventures (JVs) produced 1,490,096.85mmscf (54.31%), Production Sharing Contracts (PSCs) produced 609,589.49mmscf (22.21%) and Sole Risks (SRs) produced 561,288.67mmscf (20.46%) and Marginal Fields (MFs) had 82,725.31mmscf (3.02%).
Dr. Orji Ogbonnaya Orji, Executive Secretary of NEITI, while presenting the highlights of the report stated that the information and data contained in the NEITI latest reports paid special attention to helping the government at all levels to shore up revenue, support national development and poverty reduction through resource mobilisation.
He lamented that despite the concerted efforts made last year to recover some of the revenues through the Ad Hoc Committee that was set up by the National Assembly, the 2021 figures showed an increase.
The report showed that Nigeria earned a total revenue of $23.046bn from the sector in 2021. The sum is about 13 percent higher than the corresponding total of $20.43bn realized in 2020.
Breakdown of the earnings showed that about $8.67bn, or 37.6 percent of the revenue was realized from the sale of crude oil and gas; $13.37bn, or 58.02 percent, from taxes and other specific revenue flows, and $1.01bn, or 4.38 percent, went into payments to sub-national entities.
An analysis of the total revenue realized, the report stated, showed unremitted revenues and quasi-fiscal expenditure by the NNPCL of $1.95bn (8.47%) and $6.93bn (30.08%) respectively.
Transfers to the Federation amounted to $13.2bn (57.27%), while Sub-national payments totaled $963.63mn or 4.18%.
Available revenue for sharing by the federating units after the deductions and in accordance with the revenue allocation formula was US$13.2billion which represented 57.27% of the total revenue collected. This is lower than the 71.7% share in 2020.
The quasi-fiscal expenditure of $ 6.931 billion (equivalent to N2.651 trillion) was deducted from the Federation’s revenue before remittance without appropriation by the National Assembly.
A breakdown of the $6.93bn deductions showed payments of $3.52bn or 15% for Joint Venture Cost Recovery and $3.031bn (about N1.16 trillion) or 13.15 percent for products subsidy/value loss. Other deductions are $258.43mn for government priority projects; $75.51mn for pipeline maintenance and holding costs and $42.40mn for crude oil and products losses.
The NEITI report also observed that none of the refineries was operational in 2021 despite spending about N200 billion between 2020 and 2021 on refinery rehabilitation which was deducted from the Federation sales proceeds. These deductions the report reiterated, remain a heavy cost to Federation Revenue remittances.
In addition, the report said about $1.95bn, or 8.47% of the total revenue was not transferred to the Federation Account by the NNPCL during the year under review.
A breakdown of the withheld revenue included $722.6million for NLNG dividend; $871.15mn from domestic crude sales, $859,583 miscellaneous revenue and $286.42mn from export crude sales. $24.332million and $45.76million were withheld from transportation revenue and domestic gas proceeds.
A ten – year trend analysis of financial flows from the oil and gas sector from 2012 to 2021 showed earnings of $348.63billion.
On crude oil production and exports, the NEITI report indicated that total metered crude oil production was 634.60 million barrels, out of which Nigeria lost 68.47 million barrels to production adjustment, measurement error, theft and sabotage. The figure showed a 13% reduction from the production volumes of 2020.
The report pointed out that a total of 29 companies suffered crude losses from theft and sabotage amounting to 37.57 million barrels. The decline in crude oil losses due to theft and sabotage from 39.08 million barrels in 2020 to 37.57 million barrels in 2021 was generally due to the decline in crude oil production during this period.
On gas production and utilization, the NEITI report said a total of 2.74 million standard cubic feet of gas was produced during the year, with the volume about 8.96 percent lower than the 3,013,634mmscf produced in 2020. Total gas utilized in 2021 stood at 98%, while 2% could not be accounted for by the companies based on the templates submitted.
With the nation’s gross domestic products put at about $434.17bn, the report said the oil and gas sector contributed about 7.24% to the GDP and $ 36.55 billion (N14.40 trillion Naira) to total exports of $ 47.31 Billion (N18.91 trillion). This represented 76.22 % of the total exports in 2021, 0.8% higher than in 2020. 19,171 employees were said to be working in the sector in 2021.
Similarly, the total government revenue generated in 2021 was 10.75 trillion Naira to which the oil and gas sector contributed 4.358 trillion Naira. This represents about 40.55% of the total revenue compared to 51% in 2020. The higher export value in 2021 compared to 2020 was due to the increase in crude oil price in 2021 from $41.65 per barrel to $66.97 per barrel, the NEITI report disclosed.
A total of 69 companies were recovered out of which 22 fell within the criteria for reconciliation and their payment represented 95.65 percent of total payment by companies which amounted to US$11, 332,792.48, 69 plus NLNG.
According to NEITI, revenue payment by companies (23 revenue streams) and received by the Government agencies total of $23,046,088,000 consisting of US$8.098billion (35.14%) for the sale of crude oil and gas (less NNPC in-kind), US$13.939billion (60.48%) for taxes and other specific flows, US$1.009billion (4.38%) for payment to sub-national entities.
“From the total of $23,046,088,000, being revenue payment by companies and received by the Government agencies total of US$21,648,054,000 (93.94%) was the reconciled revenue, while US$7,808,000 (0.03%) was unreconciled revenue and US$1,390,226,000 (6.03%) was unilaterally disclosed revenue.
“Out of the total revenue made by the NNPC during the year under review, the Nigerian National Petroleum Company (NNPC)Limited failed to remit US$1,951,115,000 (8.47%), spent US$6,931,285,000 (30.08%) without appropriation, transferred a total of S$13,200,059,000 (57.27%) to the Federation Account and with S$963,629,000 (4.18%) as sub-national payments,” the report stated.
In the breakdown of the Federation Revenue Distribution, nine oil producing states received 13 percent out of the total contribution of oil and gas, while the Federal Government received 52.68%, state 26.72% and local government 20.60%.
The report further showed that sixty-nine (69) companies that made payments for concession rentals, licenses, signature, bonuses, royalty, and/or oil and gas taxes. This is inclusive of four additional companies that were discovered after the completion of scoping work. The material companies were identified for reconciliation from the data received from the companies (before initial reconciliation).
It also showed that Shell Nigeria Exploration and Production Company Limited (SNEPCO) paid the highest crude oil revenue of $1,460,056,000 in the period under review, followed by Equinor Nigeria Energy Company Limited with $1,155,453,000, and Shell Petroleum Development Company with $1,063,175,000.
Mobil Producing Nigeria Unlimited, Total Energies Upstream Nigeria Limited, and Star Deep Water Petroleum Limited paid $1,044,536,000, $986,484,000 and $932,798,000 respectively.
Chevron Nigeria Ltd, Total Energies EP Nigeria Limited, Esso E&P Nigeria Ltd, and Nigeria Petroleum Development Company Limited also paid $739,736,000, $675,312,000, $629,234,000, and $617,313,000 respectively.
The report also revealed that Lekoil Limited did not submit any information to the IA for reconciliation but made payments amounting to $7,756,000, representing 0.03365% of the total revenue and thus considered non-material to this report.
NEITI in its recommendation expressed concern over the non-cooperation of Lekoil Ltd. in the audit and pleaded for the power to take measures to ensure full compliance of covered entities with the annual audit process, in view of revenue implications to the Government.
It also revealed that all companies have some beneficial ownership data publicly accessible except China National Offshore Oil Corporation Limited, Enageed Resources Ltd., Suntrust Oil and Company Nigeria Ltd., and Lekoil Limited.
The report further shows that out of a total metered production of 634,603,337 barrels (both crude oil and condensates) by the 54 exploration and production companies, about 68.47 million barrels were lost to production adjustment, measurement error, and theft/sabotage, leaving a balance of 566.13 million barrels as fiscalized production for 2021.
The report also revealed that some of the covered companies did not provide information on the natural person(s) who own or control interest in the companies, neitand her were links to public listings provided.
It showed that Addax Petroleum Development Ltd, Addax Petroleum Exploration Nig. Ltd, Chevron Nigeria Ltd, Midwestern Oil & Gas Nigeria Agip Exploration, NNPC E&P Ltd, and Oando Oil Limited failed to provide details of natural person(s) who own or control interest in the companies neither were links to public listings provided. They also do not have this information on the NEITI or CAC portals.
NEITI also reported on the 2020/2021 marginal fields awards. It observed that NUPRC regulation expected all successful applicants whose names were in the Notice of Preferred Bidder Status to make payments for signature bonus prior to award.
However, the report observed that the list of awardees contained names of companies that had not paid signature bonuses, with four companies whose names were not on the list of awardees making payment of signature bonuses.
NEITI in the 2021 report also observed that the majority of the oil and gas companies in Nigeria exhibit complex structures that shield the real identities of their owners, thereby limiting the impacts of efforts at beneficial ownership disclosures. NEITI called on the NUPRC to implement fully the relevant sections of the PIA on Beneficial Ownership reporting.
NEITI also recommended in its 2021 report that NNPC should transparently disclose details of the subsidy and the beneficiaries of the payments, render accounts on project eagle loans transaction and review and investigate all pre-export financing arrangements and other loan arrangements done in exchange for the nation’s crude oil and gas.
It said that the Government should commission a comprehensive audit of the PMS subsidy-related financial transactions between NNPC and the Federation, determine all liabilities and ensure accurate and verified data.
Furthermore, the Agency noted the discrepancies in records by some relevant government agencies on transactions in the sector which it says raises concerns about the integrity and accuracy of the data and pieces of information disclosed by these agencies. It therefore called on the concerned agency to improve its data management processes and establish controls that would prevent future discrepancies and maintain data integrity.
NEITI also drew attention to the practice of computing 13% derivation on the balance of revenue after deductions from the total collections which it advised should be discontinued. Rather, the 13% derivation should be based on total collections for the relevant period in accordance with Section 162(2) of the constitution of the Federal Republic of Nigeria.
It finally stressed the urgent need to strengthen the remediation mechanisms and involve independent third parties to conduct detailed investigations where necessary, especially with the PIA now in place for effective monitoring of the implementation process.
Dr. Orji therefore urged that the NEITI oil and gas report’s findings and recommendations should be taken seriously and used for economic planning and reforms in the sector. He also encouraged civil society to use the information to support their advocacy and public debates, track reforms in the sector, and hold government and companies accountable.
Senator George Akume, Secretary to the Government of the Federation, represented by the Permanent Secretary, Political and Economic Affairs, Mrs. Esuabana Nko while unveiling the report reaffirmed the federal government’s commitment to support and deepen the implementation of the EITI in Nigeria.
According to the SGF, “President Bola Tinubu’s administration is fully committed to the fight against corruption in the extractive industry in particular and in other sectors of the economy. As an Administration, we are convinced that the revival of our economy and the 8-point agenda that we recently unfolded cannot yield the desired result if we do not support and strengthen anti-corruption and reform oriented Agencies like NEITI”.
She added that “The NEITI 2021 Industry Reports being unveiled is quite timely, coming when the present administration is fully committed to shoring up revenues through priority attention to attracting investments to the key sectors of our economy, the oil and gas sector being one of them.”
Engr. Simbi Wabote, Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB),in his goodwill message called on the National Assembly to be apolitical in analyzing the NEITI 2021 oil and gas report. He called for a thorough study of the NEITI report, encouraging them to look at the various recommendations, and address them accordingly.
He emphasized that the report should not be viewed as a political report, but as a report that is expected to add value to the industry. He noted that such reports are often swept under the carpet without necessarily looking at the positives that the result has brought, as well as the negatives that need to be improved for a better Nigeria.
Engr. Wabote, who has been in the industry for 31 years, starting his career in 1991, expressed his concern that the recommendations required to take the industry to the next level are often not followed through. He called on the National Assembly and civil society to hold government agencies accountable for the implementation of whatever recommendations are contained in the report.
He also questioned why external parties fund such research and reports when Nigeria can fund them to improve the extractive industry in the country.
The NCDMB ES further emphasized that there are areas that need improvement to enhance hydrocarbon exploitation and extraction, as well as the solid mineral industry. He commended the use of a local company to produce the report and called on everyone to work together to implement the recommendations.
Sen. Benson Agadaga, Chairman Senate Committee on Oil and Gas Host Communities,reaffirmed the government’s commitment to implement the recommendations of the NEITI oil and gas report.
“Be assured that the Federal Government will carefully study this important report and adopt it as a valuable working document as part of our overall reform programme for the oil and gas sector”, Sen. Agadaga stated.
Sen. Eteng Williams, Chairman Senate Committee on Petroleum Upstream commended the vital role NEITI is playing and urged NEITI to continue to ensure revenue mobilization for the country now that subsidy is gone.
Hon. Ikeagwuonu Ugochinyere, Chairman, House Committee on Petroleum Resources, (Downstream) pledged the support of his Committee to lay the report on the floor of the House and debate it extensively to ensure the implementation of the recommendations made therein, as enshrined in Sections 3 and 4 of the NEITI Act.
“Working together, we will ensure the realization of government’s desire to diversify the economy for the attainment of alternative source(s) of revenue and clean energy, that will bring about the realization of the projected one trillion-dollar revenue for Nigeria in the next 8 years.”