http://aguntasolo.com/2015/04/29/this-yam-this-goat-this-country-part-1/

“Friends and countrymen; I beseech you by the mercies of God that ye do whatsoever it is within thine powers to prevent a frolic between the yam and the goat. For, as surely as the rising and setting of the sun, such an enterprise yieldeth only corruption, nay a sad ending for the yam” – Goodluck The Jonathan, First of His Name

Finally, we get a chance to see what PwC, the auditors, saw when they looked into the black hole that is NNPC. The full report is here (200 pages). It is not pretty.

I am not an oil and gas expert and much of the industry and how it works confuses me. But the PwC report is written in English so let’s try to parse it.

Remember The King?

A quick recap of what started all of this – King Mohammed Sanusi II, in his former life as SLS, the Central Bank Governor, told the nation that, based on what he had calculated, NNPC sold $67bn worth of crude in the period from January 2012 to July 2013. He then said that as custodian of the nation’s purse, he had only received $47bn of this amount. In other words, up to $20bn of the money was not accounted for.

Contrary to popular perception, SLS never did say the money had been stolen and he certainly didn’t name any names in his 300 page report submitted to the National Assembly. His main issue at the time was that, as CBN Governor, his job was to manage the exchange rate and the nation’s reserves. If there was $20bn out there in the wild, then his job was being made a lot harder than it needed to be.

He identified 3 ways in which the country was losing money as follows

1. Strategic Partnership Agreements – In 2011, as part of the efforts to promote local content, Shell sold its shares in 5 oil fields where NNPC was the majority shareholder. Shell had been the operator of these oil wells but NNPC awarded the operator rights to its subsidiary NPDC i.e. it allowed Shell to sell its shares but not the rights to operate them as it previously did.

NPDC then signed an ‘agreement’ worth almost $7bn with Seven Energy (3 fields) and Atlantic Energy (2 fields) for them to operate the fields. These companies of course had no clue how to operate the oil fields – Atlantic was registered as a company the day before it signed the agreement – so of course they sub-contracted the work to other companies. Seven Energy’s contract entitled it to 10% of the profits from the 3 fields while Atlantic was entitled to 30% of profits in its 2 fields.

SLS complaint was that these 2 companies were pointless and were just collecting money that should have accrued to Nigeria for doing nothing. Why didn’t NPDC just sub-contract the work by itself? The 2 companies also did not pay any taxes or royalties whatsoever to Nigeria.

2. Kerosene Subsidies – This one is fairly straightforward to understand. SLS did an analysis of kerosene prices in all 36 states of the federation in his report and found that prices ranged from N170 to N270 per litre.

Importers bring in kerosene and sell it to government at N140/litre. The government then sells it to local retailers at N40/litre with the understanding that they sell it to the ‘common man’ at N50/litre i.e government subsidises it by N100/litre. The retailers take the kerosene and sell it for what they like as stated above.

There is no sweeter corruption than this one. According to SLS, Nigeria was spending $100m per month on this pointless exercise. Not a single Nigerian anywhere bought kerosene for the ‘official’ N50/litre.

3. Swaps – Even with all the money going into NNPC, like a true apa, it is always broke. Due to the semi-dead refineries we have, NNPC of course has to import refined products (petrol and kerosene) but it often doesn’t have the money to pay importers in cash. So what it does it tell importers to import the refined products, then calculates the value of that product in crude oil and pays the importers with crude oil. This is how human beings traded before money was invented – trade by barter.

The problem here is that SLS said he had no idea how the amount of crude to be swapped for refined products was calculated. All he was able to find was that at one point, NNPC was ‘swapping’ 200,000 barrels of crude per day. That is a lot of crude. Did Nigeria get that much value in refined products? Who knows?

Enter PWC

The first thing to note is that PwC was asked to investigate all money due to the federation from crude sales to see what had been remitted and what, if any, was outstanding. It did NOT investigate the swaps or the Strategic Partnership Agreements as those were not part of its remit.

So what did it find? That the total revenues for the period in question were $69bn and not $67bn as stated by SLS. It had also remitted $50.8bn and not $47bn as initially thought. So, there was still a gap of roughly $20bn to be explained as before.

Somehow NNPC managed to overpay $740m to the federation account if we accept its own numbers. As we shall see; NNPC cannot count, it cannot buy, it cannot sell.

Based on this, we can conclude that ‘no money is missing’ and close the case. Afterall, the numbers have been made to add up one way or the other – the $20bn that we thought was missing has been accounted for wan kain, as the outgoing President is wont to say.

But who or what gives NNPC the right to withhold nearly 30% of the money it receives on behalf of Nigeria and then spend it as it wishes? Here we have a goat locked in a room alone with a yam and no one to supervise what’s going on.

PWC’s opinion is that this practice of withholding money and then spending as it sees fit is highly dubious and that the NNPC act needs a legal opinion to determine whether it has the right to do this. What stops NNPC (the goat) from withholding 50% of revenues (the yam) and then telling us later that it spent it on one thing or the other? Based on this, nothing.

Kerosene Subsidy

From the chart above, we can see that the biggest expense in the accounting of the ‘missing’ $20bn is the petrol and kerosene subsidy at $8.7bn. Of this amount, NNPC claimed to have spent $3.38bn on kerosene subsidy. Yet, whether or not subsidy should have been paid was doubtful in the first place. Here’s the gist of what happened


In other words – anyhowness. Between President Yar’Adua who cancelled the subsidy but did not gazette it (perhaps because he was trying to avoid a public outcry) and President Jonathan who ‘unlooked’ Yar’Adua’s cancellation, NNPC stuck its fingers in its ears and continued paying the subsidy. A lot of magic happened as a result.


First, PWC found $40m of kerosene subsidy payments were duplicated (see above). That is, subsidy was paid to the same marketer twice or more for the exact same kerosene. This was apparently a ‘mistake’. But even if we accept this, there’s more.


The table above shows how NNPC is supposed to calculate subsidy on kerosene. That N34.51 is what it costs to get it to Nigeria. In other words, NNPC is supposed to sell it to marketers at that price (N34.51) and the marketers then sell to consumers at N50 – the difference of N15.49 being used to cover all their costs and a profit margin.

Instead, NNPC sells the kerosene to marketers at N40.90 i.e. taking some of the profit margin for itself. Why it does this, is a mystery. Nevertheless, when NNPC was calculating subsidy to be deducted (remember the yam and the goat are together), it used the figure of N34.51 even though it sold it to marketers at N40.90. In other words, NNPC charged marketers for a cost and also charged Nigeria for the same cost. This overcharging of subsidy on kerosene came to a cool $204m in total.

Nobody Is Above Mistake

It’s not easy for NNPC. When you are counting so much money, you are bound to make one or two mistakes here and there. It is these ‘mistakes’ that yielded the $1.48bn PwC asked NNPC to pay back to the federation. Some of these errors are as simple as wrongly adding a column in excel. These addition errors came to $40m.

There was also the overclaim of subsidies on petrol and kerosene (as described above). As well as other monies that should have been paid to the federation and were not paid. The table below shows the breakdown of the $1.48bn.


One must ask – if PWC hadn’t gone in to audit the place, would NNPC have just let a $40m addition error go on like its nothing? The mind boggles.

Money Wey No Get Receipt

As part of the accounting for the difference of $20bn between what was received and what was paid to the federation, NNPC submitted some other costs it claimed it had incurred as part of its operations. In total, these costs came to just $2.8bn as shown below


As an auditor, when someone tells you they have spent this amount of money, what do you do? You guessed right, you ask for receipts.

A big chunk of the costs were for pipeline maintenance contracts. Anyway, NNPC could not provide any evidence for $305m of the money it claimed to have spent as the breakdown below shows


Perhaps it thought PwC won’t ask for evidence. Some of it is quite hilarious (one must laugh when one cannot cry). In January and March 2012, it claimed to have paid salaries totalling $14m. No evidence to back it up. In November 2012, it claimed to have paid another $6m in salaries. Again, no evidence to back it up. Who was it paid to? Mr Who.

Almost $60m went on ‘charter hire’. To charter what? When you find out, tell me (Actually I know what this ‘charter’ is – it is the payment for the Petroleum Minister’s jet i.e. NNPC was paying for the cost of purchasing the jet on her behalf. But please don’t quote me). For January 2013, it entered a cost of $31m. But PwC found that this was the same cost it had claimed in 2012. When asked for the evidence for the January 2013 payment, it presented the same evidence as the one for January 2012. It claims to have spent $2.6m on buying cars. No evidence. $48m ‘right of way’ costs. No evidence. And so on and so forth.

Also, as you can see from above, in return for all the selfless and glorious work NNPC is doing for the country, it paid itself a total of $1.5bn in salaries for the 18 months in question that PwC looked into.

NPDC – Awon Bad Guys

When some people commit murder in broad daylight. They don’t run away. They light a cigar and sit down beside the dead body waiting for police to arrive. When the police arrive and ask who killed the person, they confidently say it was them. People like these are known as bad guys and NPDC is one of such people.

NPDC refused to cooperate with PWC for the audit. It did not submit any information or provide any help.


PWC then had to obtain information from a variety of sources (including NPDC’s website) to try to ascertain how much exactly it should have paid to the federation.


NPDC was summoned to the Senate sometime last year and they gave a presentation of their operations. The $6.815bn figure above in the NPDC column is what they claimed as the amount of oil they lifted. PwC also tried to verify this with the Department of Petroleum Resources (DPR) who gave them the $6.886bn figure. Finally, PwC tried to calculate the figures themselves and ended up with the $5.6bn figure.

Because they are bad guys, NPDC calculated its own tax and decided that the amount it was owing to FIRS in taxes was $1.14bn. Out of this amount, it claimed that it had graciously paid $863m to FIRS but does not yet feel like paying the rest. However, it was discovered that the actual amount it paid was $838m and that the $26m difference was due to a ‘mistake’ in counting the same payment twice.

All told, NPDC is holding on to $5.11bn that it has not remitted to NNPC (NNPC is the owner of NPDC so it should collect the money from NPDC and send to the federation account). This is PwC’s conservative estimate of what NPDC has withheld from Nigeria. Perhaps when the time comes for them to pay the money, in keeping with the goat and yam principle, they might tell us that they spent half of it on ‘costs’ and can only remit $2bn or something. We await that day.

Sorry For Your Loss

Other monies are missing. But what can we do? This is the tragedy of the goat and the yam. NNPC claims that crude oil theft and pipeline vandalism cost it $760m in the period in question. It is unfortunate.

NNPC also holds strategic reserves of petroleum products for the country. It is not free to hold these things and so the holding costs amounted to $460m in the period in question. These costs are made up of demurrage costs ($207m) and charges by Nigerian Ports Authority ($252m). Of the demurrage costs, $64m could not be verified while the entire $252m claimed to have been paid to NPA could not be supported by a single document as backing evidence.

#Forwards

The rest of the points raised are not things I understand very well so I have skipped them. But I think the above captures the gist of what has gone on.

So what can we do about this goat of a corporation? The rot in the place must be from ceiling to floor and you really cannot jail everybody there. A lot of the missing money will also never be recovered. So as much as people must be decisively punished for what has happened, how do we move ‘forwards’ and ensure this doesn’t happen again?

2,300 words is enough for one blog post so watch out for Part 2.

More infographs

Walai top heads at NNPC should face execution

NPDC then signed an ‘agreement’ worth almost $7bn with Seven Energy (3 fields) and Atlantic Energy (2 fields) for them to operate the fields. These companies of course had no clue how to operate the oil fields – Atlantic was registered as a company the day before it signed the agreement

SLS complaint was that these 2
companies were pointless and were
just collecting money that should have
accrued to Nigeria for doing nothing.
Why didn’t NPDC just sub-contract the
work by itself? The 2 companies also
did not pay any taxes or royalties
whatsoever to Nigeria.

Thanks for the detailed summary....front page material.
Seun

Importers bring in kerosene and sell it to government at N140/litre. The government then sells it to local retailers at N40/litre with the understanding that they sell it to the ‘common man’ at N50/litre i.e government subsidises it by N100/litre. The retailers take the kerosene and sell it for what they like as stated above. There is no sweeter corruption than this one. According to SLS, Nigeria was spending $100m per month on this pointless exercise.

The problem here is that SLS said he had no idea how the amount of crude to be swapped for refined products was calculated. All he was able to find was that at one point, NNPC was ‘swapping’ 200,000 barrels of crude per day. That is a lot of crude. Did Nigeria get that much value in refined products? Who knows?

We are in trouble because even a younger military Buhari would have found it difficult to handle this mess...

NNPC spent 300 billion naira on salaries in 18 months how many workers them get?

That's about the yearly allocation of 10 states in Nigeria.

I move a motion that Buhari should send minister of petroleum. NNPC and NPDC executives to INDONESIA to face trial.

ANY SECONDER?

Close to 200 billion on training and consultancy fees in just 18 months.
No receipts for this figures.

keep ur cools



the system need overhauling

NPDC refused to cooperate with PwC for the audit. It did not submit any information or provide any help.
What did our goat vs yam president do? Absolutely nothing.

If probing and jailing the maggots at the NNPC and some ministers is all Buhari can achieve in 4yrs,i will give him a gold medal.

When you some that the stench is suffocating they tell you it's"fresh air".

Lalasticlala

Obiagelli:
NPDC then signed an ‘agreement’ worth almost $7bn with
Seven Energy (3 fields) and Atlantic Energy (2 fields) for
them to operate the fields. These companies of course had
no clue how to operate the oil fields – Atlantic was
registered as a company the day before it signed the
agreement

The more I read this report, the more I think something is fundamentally wrong with the people who support this administration.

The rot is much more than we can comprehend,
God's willing, we will know how far they've ruined this country very soon!
The yam should be separated from the goat as quickly as possible!

omenka:
The more I read this report, the more I think something is fundamentally wrong with the people who support this administration.

Like i said yesterday, anyone that still supports this government after reading this report has no conscience.

NPDC – Awon Bad Guys
When some people commit murder in broad daylight. They don’t run away. They light a cigar and sit down beside the dead body waiting for police to arrive. When the police arrive and ask who killed the person, they confidently say it was them. People like these are known as bad guys and NPDC is one of such people.

NPDC refused to cooperate with PWC for the audit. It did not submit any information or provide any help.

This one don pass awon bad boys........... This is the definition of powerful cabals.

This PwC saga has gotta be the biggest goats and yams party ever in the history of this country and it appears the DJ knocked himself out with so much liquor and had the music playing on auto, completely oblivious of the frenzy in the dance hall.
Heads just gotta roll.

#Stolen from O*menka.
Befitting comment for this thread.

This is just too bad!

Obiagelli:

Like i said yesterday, anyone that still supports this government after reading this report has no conscience.

And it was clearly stated they didn't follow best practices since they were denied access to some records in some agencies like NPDC. Imagine what this would have looked like had they been given unfettered access to all information they sought.

Yet at the backdrop of all these, some dickheads still scream "the admin upholds freedom of information unlike Buhari". What irritating buncha liars.


Smh.

aanumama:
The rot is much more than we can comprehend,
God's willing, we will know how far they've ruined this country very soon!
The yam should be separated from the goat as quickly as possible!

That goat should be slaughtered jor....how much more yam should it eat.

omenka:
And it was clearly stated they didn't follow best practices since they were denied access to some records in some agencies like NPDC. Imagine what this would have looked like had they been given unfettered access to all information they sought.

Yet at the backdrop of all these, some dickheads still scream "the admin upholds freedom of information unlike Buhari". What irritating buncha liars.


Smh.

Let's see how they will hide records after may 29. Gej better place fire trucks at those offices, we must not here of fire outbreaks o.

Did you read how many thread that clown opened on FOI as gej's achievements.

gmaribel:

That goat should be slaughtered jor....how much more yam should it eat.

I swear the goat and its keeper must pay for the yams

Obiagelli:

Let's see how they will hide records after may 29. Gej better place fire trucks at those offices, we must not here of fire outbreaks o.

Did you read how many thread that clown opened on FOI as gej's achievements.

God forbid. Have no time for the beggar. His foolishness is infectious.

omenka:
God forbid. Have no time for the beggar. His foolishness is infectious.

You can only shudder at 4 more years of GEJ's misrule! NNPC surely needs to be purged!

Obiagelli:
NPDC then signed an ‘agreement’ worth almost $7bn with
Seven Energy (3 fields) and Atlantic Energy (2 fields) for
them to operate the fields. These companies of course had
no clue how to operate the oil fields – Atlantic was
registered as a company the day before it signed the
agreement

This killed me!!

Honestly I'm beginning to suspect one of my very close people.. lol. It's this oil and gas thing, overnight millionaire with house in banana island, Rolls Royce, Bentley, range rover, s-class, g wag, in short there's no car he doesn't have, all these in a period of 3-4 years and he hasn't really been able to give me the full gist. It's just I do a bit of downstream and upstream. I won't be surprised if he's part of these companies.

Puff. Puff.. Pass..

The good news is Jonathan lost the election. The bad news is winning an election and governing a banana republic such as ours are two fundamentally different challenges.

Everyone who loves Nigeria will support Buhari and not APC. We must protect Buhari from wolves in sheep clothing. Integrity alone won't rule this country. But it's the right start.