*Company admits owing oil traders *Experts allege creative accounting, fraud in NNPC report *Fuel price surges as scarcity bites harder
Chuks Isiwu
Lagos — At what it termed a world press conference on Monday, August 19, the Nigerian National Petroleum Company Limited, NNPC, announced the release of its 2023 audited financial statement, AFS, revealing a net profit of N3.297 trillion for the financial year ended December 2023.
The performance, according to the company, marked 28 percent increase of over N700 billion on the N2.548 trillion profit recorded in 2022.
NNPC’s Chief Financial Officer, Umar Ajiya, told newsmen at the event at the NNPC Towers in Abuja that the release of the financial statement underscored the company’s commitment to transparency and accountability.
“Our fiscal performance reflects strategic foresight and operational resilience. Despite the challenges in our operational and economic environment, we have enhanced the productivity and financial performance of this great company,” Ajiya said.
He also stressed that the impressive returns demonstrate NNPC Ltd’s dedication to maintaining profitability and supporting national energy security, as spelt out in the Petroleum Industry Act, PIA, 2021.
The Chairman of the NNPC’s Board of Directors, Pius Akinyelure, also attributed the financial results to the PIA and the dedication of the company’s board, management and staff, and disclosed that the company shareholders have approved a final dividend of N2.1 trillion in line with the PIA 2021 provisions.
A statement by NNPC’s Chief Corporate Communications Officer, Olufemi Soneye, said the N3.297 trillion profit as declared in the 2023 audited financial statement is the highest in the company’s 46-year history.
The statement added: “It would be recalled that in 2021, NNPC declared profit in its operations for the first time. From a loss position of N803 billion in 2018, it reduced the loss further down to N1.7 billion in 2019.
“However, in 2020, it posted its ‘first ever’ profit of N287 billion, then in 2021, it recorded a N674.1 billion profit and in 2022, the profit grew to N2.548, an unprecedented achievement in its financial performance. The N3.297 trillion profit declared for 2023 is the highest since the Company’s inception, 46 years ago.”
Amid the backslapping and celebrations by the NNPC board and management, experts are pointing out a major flaw in the declared profit: That the company cannot be declaring a profit while it is carrying a debt of US$6.8 billion (about N11.237 trillion) owed to international oil traders, as reported by Reuters, SweetcrudeReports, and some other media organisations earlier in July.
The experts allege that the action of producing a financial statement that excluded an amount of liability as high as $6.8 billion was fraudulent while the secrecy over the matter clearly showed the lack of transparency and accountability at the state oil company.
They allege that this amounted to wrong accounting or poor accounting and also called it creative accounting, which is allegedly fraudulent and criminal.
Renowned political economist, Prof. Pat Utomi, labelled the NNPC as one of the world’s most opaque companies and referred to it also as an unreliable institution, at the same time calling for its clean-up.
A financial expert, Samson Ugwuaja, said it was a matter of concern that the NNPC board and management would overlook a debt as huge as $6.8 billion and claim in their books that the company had recorded a huge profit.
“This smacks desperation, it is fraudulent, if you ask me. It is a matter of income and expenditure. It is also a matter of credit and liabilities. You can’t declare a profit when you are exposed to liabilities. To arrive at a credible financial report, you can’t overlook your liabilities and go ahead to declare a profit. It is as simple as that,” Ugwuaja said in an interview with SweetcrudeReports.
Also, an oil and gas industry player, who pleaded anonymity over closeness to the company, said “it is no longer news that the NNPC was indebted to international oil marketers as the company has itself admitted that”, but questioned the company’s initial denial of the debt.
“Now that the company has admitted the debt, what next? Will they have to rework the 2023 audited financial statement? It is not done, that you are owing $6 billion, which is over N9 trillion, and you decide to declare a profit of N3.297 trillion. If the audit is properly done, that financial statement should clearly show a deficit of over N5 trillion,” he told SweetcrudeReports.
$6.8 billion debts
The news agency Reuters, indeed reported the over $6 trillion NNPC debt to international oil traders in July, stating that the amount owed the marketers doubled since early April as the state oil firm, NNPC, struggled to cover the gap between fixed petrol pump prices and international fuel costs.
Citing six industry sources, Reuters reported: “Nigeria’s debt to its international suppliers of the Premium Motor Spirit, PMS, also known as petrol, has surpassed $6 billion – doubling since early April – as state oil firm, the Nigerian National Petroleum Company, NNPC, struggles to cover the gap between fixed pump prices and international fuel costs….
“NNPC began struggling early this year when late petrol payments surpassed $3 billion.
It’s lost 34% over the past year while the wider S&P 500 rose 25%.
“The company has still not paid for some January imports, traders said, and the late payments amount to $4 billion-$5 billion. Under contract terms, NNPC is meant to pay within 90 days of delivery.”
NNPC declined to comment on the story and later outrightly denied it.
Recently, however, the company finally confirmed the debt to the international traders but did not mention the amount involved.
It made the admission in response to the biting fuel scarcity across the country, which has seen petrol prices soar above N1,000 per litre and as much as N1,500 per litre in some parts of the country.
It also admitted the debts owed the international oil traders as a factor in the severe fuel crisis in a statement by its spokesman, Olufemi Soneye.
Blaming the scarcity on supply disruptions arising from outstanding debts to international oil traders, the statement said: “NNPC has acknowledged recent reports in national newspapers regarding the company’s significant debt to petrol suppliers. This financial strain has placed considerable pressure on the company and poses a threat to the sustainability of fuel supply.”
Commenting on the NNPC statement, Ugwuaja maintained that even if the amount owed the traders was not mentioned in the statement by the state oil company, the admission of indebtedness was enough to raise questions and doubts about the credibility of the recently released audited financial statement.
“The statement by the NNPC spokesman shows they were and are well aware of the debt. So, how come this was not reflected in the audited financial statement? Why is this liability out of the audited statement? That’s wrong accounting, it is poor accounting. In fact, it is called creative accounting, which is fraudulent and criminal,” he asserted.
‘NNPC monumental failure, national embarrassment’
Peeved by NNPC’s reaction to the debt issue, a leading national daily, The Punch dedicated its editorial, which is the official position of the newspaper, to the matter, describing the NNPC as constituting an economic danger, and calling for its sale.
“The Nigerian National Petroleum Company Limited has again proven to be a monumental failure and a national embarrassment. After several denials and no more room to manoeuvre given the prolonged petrol scarcity, it has now admitted to owing international oil traders for petrol cargoes.
“It is absurd that a company that declared a net profit of N3.29 trillion for the year ended in December 2023 – an increase of over N700 billion or 28 per cent over the 2022 profit of N2.54 trillion – is indebted by $6.8 billion to international oil traders,” the editorial read.
It added: “This has resulted in crippling petrol shortages nationwide for over two months because fuel cargoes are stranded at the seaports. Petrol now sells mostly between N800/l and N1000/l and is unavailable at many petrol stations. This has instigated hardship and high transportation costs.
“Financial experts have suggested that the NNPC, despite all its simulation, is illiquid to the extent that it has lost its going concern status. If it were a bank, it would have been liquidated.
“This is a pointer to the ineptitude, and maladministration that has defined the NNPC’s operations through the years. The NNPC, as presently constituted, is a danger to Nigeria and its economic future. It should be sold lock, stock, and barrel immediately.”
It described as disgraceful the fact that the NNPC cannot manage its four refineries in Warri, Kaduna and Port Harcourt, with a combined capacity of 445,000 barrels per day, decrying their remaining comatose for over 30 years with different administrations having spent more than $20 billion to overhaul them.
“This gross failure has left Nigeria with the dubious paradox of an oil producer that relies on fuel imports. Even the most recent efforts marked by promises to restart the refineries have seen several postponements. The Muhammadu Buhari administration borrowed $1.4 billion to fix the Port Harcourt plant before the end of 2023. The reopening date has been postponed for the sixth time.
“In contrast, Dangote’s 650,000bpd refinery took eight years from groundbreaking to completion and first fuel delivery,” the newspaper asserted.
It also stated that the NNPC has been a disaster as it “has failed to guarantee energy security, stable fuel supplies, a steady revenue stream for the government, and facilitate the development of the oil and gas sector.”
“The behemoth’s operations are defined by a lack of accountability. It is a cesspool of opacity hijacked by politicians and non-state actors to serve dubious ends. Its management in recent times has exercised power over the state by withholding remittances due to the Federation Account on the grounds of having to defray petrol subsidy costs as well as routinely failing to pay taxes,” the newspaper argued.
Diaspora group laments $6.8bn debt, plans protest
The NNPC’s $6.8 billion debt has also attracted the attention of a Nigerian diaspora group, which lamented the debt, saying it was a mark of failure by the state oil company.
The group of Nigerians, known as the Diaspora Good Governance Watch, plans a protest to register its displeasure with NNPC over the debt.
According to Kolawole Akinmosu, a former candidate for the House of Representatives under the flag of the All Progressives Congress, who leads the group, the Nigerians would be protesting in the United States as well as the United Kingdom. The UK protest, he said, will hold in London while that of the US will be carried out at the United Nations General Assembly in New York.
The group said in a statement: “We are outraged by the NNPC Ltd recent admission that it owes $6.8 billion to petrol suppliers, after initially denying any debt. The NNPC’s debt crisis is a result of years of inefficiencies, corruption, and mismanagement, which have led to fuel scarcity, pipeline vandalism, and oil theft becoming the norm.
“The lack of transparency and accountability in the sector has tarnished Nigeria’s reputation and led to billions of dollars lost to fraudulent activities.
“The initial denial of debt by the NNPC is a clear indication of an attempt to cover up and deceive the Nigerian people. This act of dishonesty has eroded trust and confidence in the NNPC and its leadership. It is unacceptable for a state-owned corporation to engage in such blatant deception.”
Akinmosu also lamented the situation in the nation’s oil and gas sector, maintaining that Nigeria’s reputation has been tarnished due to lack of transparency and accountability, with billions of dollars lost to fraudulent activities.
He decried that “the industry is plagued by vested interests, with concerns over the importation of adulterated petroleum products, non-availability of crude oil for domestic refineries, and energy security concerns.”
NNPC unreliable, clean it up – Pat Utomi
Emphasising the opacity and lack of transparency at the national oil company, renowned political economist, Prof. Pat Utomi, referred to the NNPC as an unreliable institution and called for its clean-up.
Utomi, who spoke specifically on the raging fuel scarcity and the issue of subsidy on Channels Television programme, Politics Today, maintained that his proposal for a clean-up of the company would reduce corruption in the fuel subsidy regime by over 60 percent.
He said: “I think that the typecasting of what a subsidy is has put us in a bind. I probably would have begun by trying to clear up the mess in the industry, the NNPC. Believe me, the NNPC is one of the most opaque and unreliable organisations in the world. Quote me any day. The first thing is that you clean up the NNPC, and you will reduce the so-called subsidy by more than 60 per cent by just cleaning up the corruption in the NNPC. If I’m given the job, I can do it
“Then you have to make a choice about strategic use of resources. Look, on its own, subsidy is not a good idea. But there are times when to drive production, to keep quality of life at certain levels, you commit to some level of subsidy. We know that agriculture is massively subsidised in the US and Europe.
“But this is a subsidy that drives production and puts therefore, more money in the hands of some people who produce, and therefore enables the system to keep running. But when you massively subsidise consumption for pleasure, when people don’t have to give thought to how they use the resource, then you are not doing what is best for the system. This is where we are stuck. Subsidy is back. Anybody will tell you that.”
Price hike amid biting scarcity
Meanwhile, the NNPC increased the price of petrol from N650 to N860 per litre. even in the face of the biting scarcity.
In the last two months, the country had faced petrol scarcity with the product selling for between N700 and N900 per litre in fuel stations and for as high as N1,500 per litre in the black market in some states of the federation.
As SweetcrudeReports was going to press, the product was being sold for between N1,080 and N1,300 at fuel stations in Lagos and Port Harcourt, the Rivers State capital, following the NNPC price hike.
The hike in price has led to astronomical increase in public transport fares with the shortest distances hitherto charged at N100 by commercial drivers in Port Harcourt has risen to N200.
The hike in transport fares has also affected Lagos, Abuja and other parts of the country.
Nigerians are, however, hoping that the commencement of petrol production from the new Dangote Refinery in Lagos would ease the petrol scarcity and also help in price modulation.
“The news that Dangote is processing gasoline (petrol) couldn’t come at a more crucial time given NNPC’s statement about its difficulties securing imported supply due to financial strain,” said Clementine Wallop, director, sub-Saharan Africa at political risk consultancy Horizon Engage.
She said this “prompts the question of how NNPC will manage purchasing from Dangote, and impresses the need for greater transparency in its finances”.
Nigeria is Africa’s top oil producer, yet it imports almost all its fuel due to years of neglect of its national refineries.
This article was originally posted at sweetcrudereports.com
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