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Order forensic audit of oil earnings – FT tells Jonathan

By BusinessNews Staff on December 27, 2013

The Financial Times of London has advised President Goodluck Jonathan to order a forensic audit of oil and gas earnings in the country to enhance transparency and ensure that the country is not unnecessarily susceptible to oil price shocks.

The FT said, “Jonathan should order a forensic, external audit of the oil accounts to clear up the confusion. This could go two ways. It could expose the real extent of losses owing to gross mismanagement and knock a further dent in public confidence.

“However, it could also show that the government is serious about plugging the holes, while adding urgency to the passage of legislation meant to restore the industry back to health.”

This came on the heels of the controversy trailing the alleged $49.8bn missing oil revenue.

The Governor of the Central Bank of Nigeria, Mr. Lamido Sanusi, had in a letter to the President alleged that the Nigerian National Petroleum Corporation had failed to remit into the Federation Account the sum of $49.8bn between January 2012 and July 2013.

Though reconciliation meetings between the CBN and the NNPC, Department of Petroleum Resources and Federal Inland Revenue Service had pruned the unremitted revenue to $10.8bn, FT said that was not enough; adding that the forensic audit would reveal the extent of oil revenue losses in the country.

It said, “As it turns out, the central bank’s calculations contained big omissions. After poring over the data, officials have whittled the figure for related shortfalls down to more like $11bn. There are big questions still left to answer, however.

“The first is how the state oil company justifies withholding the $11bn identified. This, in turn, is part of a bigger puzzle over falling oil revenues that drove the central bank governor to raise the alarm in the first place.”

According to FT, part of the answer lies in industrial-scale theft direct from the pipelines; adding that another might lie in regulatory uncertainty.

The medium lamented that far-reaching legislation designed to clean up the mess in the sector had been languishing for five years.

“As a result, there has been a marked drop in investment in fresh production by the international oil companies,” it said.

FT further said the shortfalls on the books were not fully explained by production losses and fluctuations in price.

It said, “Oil earnings this year are down by about a third in dollar terms compared with 2011, while the fall in exports is on average 10 per cent. Swap contracts, when crude oil allocated for domestic consumption is exchanged for refined product imports without money changing hands may be hiding further substantial losses.

“To fill gaps in the budget this year, the Finance ministry has had to draw down on the rainy-day savings fund that is financed by windfall earnings above the budgeted price of oil. This has left Nigeria unnecessarily vulnerable to shocks.”

[Punch]

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