‘Irregularities!’ NNPCL Faces Scrutiny Over N514 Billion Financial Discrepancies in 2021 Operations

Nigeria’s Office of the Auditor-General for the Federation has raised concerns over financial irregularities amounting to N514 billion in the 2021 operations of the Nigerian National Petroleum Company Limited (NNPCL). The findings, disclosed in the Auditor-General’s report on Ministries, Departments, and Agencies (MDAs) for the 2021 fiscal year, have drawn attention to lapses in financial governance and accountability.

The report identified four major infractions involving domestic crude sales, unauthorised deductions, and unsubstantiated payments. These include deductions of N343.64 billion from domestic crude sales at the source, the warehousing of N83.66 billion in a sinking fund account, and unauthorised deductions of N82.95 billion for refinery rehabilitation. Additionally, a payment of N3.75 billion for the sale of petrol was flagged as lacking sufficient documentation.

The Auditor-General’s office pointed out that these actions violated the Constitution of the Federal Republic of Nigeria and the 2009 Financial Regulations Act.

Breakdown of Key Findings

A significant portion of the infractions stemmed from deductions labeled as “Value Shortfall, Strategic Stock Holding Cost, Crude Oil and Products Pipeline Losses, and Pipelines Maintenance Costs.” According to the audit, these deductions, amounting to N343.64 billion, were made unilaterally without sufficient documentation or justification.

In May 2021, for instance, the NNPC reported a net payable sum of N127.075 billion to the Federation Account. However, only N77.075 billion was remitted, leaving an unexplained balance of N50 billion.

The report noted that the financial lapses indicated weaknesses in internal control systems, raising concerns about potential revenue losses, fund diversion, or mismanagement of public resources.

Context and Historical Background

The irregularities occurred before the rebranding of NNPC into a limited liability company in July 2022, a transition aimed at transforming the organization into a fully commercial entity. Despite this, the spotlight remains on its financial governance practices.

NNPCL’s financial performance in recent years has shown mixed signals. While the company declared a N3.3 trillion net profit for the 2023 fiscal year, it continues to face scrutiny for past financial operations. Notably, this comes after the company released financial statements for the first time in over four decades in 2020.

Calls for Accountability

The flagged infractions have sparked renewed demands for transparency in the management of Nigeria’s oil and gas revenues. Stakeholders are calling for a thorough investigation to ensure accountability and prevent future financial mismanagement in the nation’s most critical revenue-generating agency.

The findings serve as a reminder of the need for robust internal controls and adherence to financial regulations to safeguard public resources and maintain public trust.