Don't Miss


Home   >   Business   >   Industries   >   Economy   >   Oil revenue: PIB will enhance accounting methods

Oil revenue: PIB will enhance accounting methods

By on December 25, 2013

A quick passage of the Petroleum Industry Bill, PIB, has been identified as a major tool in reversing the skewed accounting methods leading to observed discrepancies currently pervading Nigeria’s petroleum industry.

This is one of the consensuses reached by attendants at the just concluded, Revenue Reconciliation Meeting, to trace the sum of $49.8billion  crude oil proceeds recently declared “missing” by the Central Bank of Nigeria, CBN.
The furore generated over the money, revealed the poor book keeping methods in accounting for government’s receipts among the respective agencies.

At the end of the two-day closed-door meeting last week, participants observed that: “As a result of the changing structure of the business arrangements – from joint ventures to production sharing contracts, alternative financing arrangements, and the impact of the fiscal regime on gas development – the government take in recent years has been declining. In this regard, a quick passage of the Petroleum Industry Bill (PIB) will help to reverse this trend.”

This was contained in a summary of findings by participants to the meeting to unravel the “missing” sum made available to Vanguard.
Attendants included the Nigerian National Petroleum Corporation, NNPC; the Department of Petroleum Resources, DPR; the Federal Inland Revenue Service, FIRS; the Office of the Accountant General of the Federation, AGF; the Budget Office of the Federation; the Federal Ministries of Finance and Petroleum Resources; and the CBN.

Revelations thereafter, which followed a public hearing by the Senate Committee on Finance, as well as a joint press briefing by the ministries of Finance and Petroleum Resources, showed that the CBN spoke too soon without cross-checking the facts.

The CBN in a letter to the Presidency had reported that about $49.8 billion could not be accounted for from crude oil exports by the NNPC over the period January 2012 to July 2013.
However, the Reconciliation Meeting defended that “the CBN raised this concern in the context of low accretion to the foreign exchange reserves despite sustained high oil prices.”

The meeting added that the concern “is the outcome of a reconciliation exercise among the aforementioned stakeholders, held at the Ministry of Finance, to clarify the issues raised by the CBN.”

The meeting also discovered that the CBN based its assertion on “data from pre-shipment inspection agents, over the period January 2012 to July 2013, (during which) a total of 594.02 million barrels of crude oil were lifted by the NNPC, amounting to about USD65.3 billion. However, the amount remitted into the Federation Account at the CBN amounted to only USD15.53 billion.

This prompted the CBN to raise the issue of an observed gap in expected revenues,”
Other findings of the meeting included the clarification by the NNPC between crude oil exports and actual proceed during the period in review.
According to the NNPC, “the actual proceeds from crude oil exports over the period amounted to USD67.12 billion, and was thus about USD1.79 billion higher than the revenues reported by the CBN (possibly due to timing differences and NPDC liftings, which were not included in the CBN report).”

Furthermore, the Corporation’s records showed that the $67.12 billion was comprised of the following revenues accrued from:
•NNPC (for the Federation Account) -$14 billion
•for FIRS – $15 billion,
•for DPR – $2 billion,
•for NPDC – $6 billion
•for other third party financing – $2 billion
•NNPC domestic crude lifting – $28 billion.

But the meeting noted that “This domestic crude component was not reflected in the CBN’s foreign accounts, but rather paid directly in Naira into the Federation Account.
“Taking account of these various exports conducted on behalf of the non-NNPC parties, the total of USD67 billion was mostly accounted for. This substantially addresses the issues raised by the CBN.”

Notwithstanding these clarifications, a shortfall of N1.716 trillion from the domestic crude oil receipts was discovered in the Federation Account.
According to the meeting, “This shortfall was acknowledged by NNPC, and explained to be the result of subsidy claims, unrecovered crude/product losses, and cost of strategic petroleum storage (which is currently not captured in the PPPRA template for refunds).

“This figure is also well-known to all stakeholders at the Federation Account Allocation Committee (FAAC), and is reported and updated on a monthly basis.”
Head of the passage of the PIB, the meeting indicated that “Government has initiated various steps to address these challenges from both security and operational fronts,” to tackle this shortfall in revenues.

 

 

[Vanguard]