AN independent audit of Nigeria’s oil sale payments, commissioned by the Nigeria Extractive Industries Transparency Initiative (Neiti), has revealed that the Nigerian National Petroleum Corporation (NNPC) used its unique trading position to make profits at the expense of the government between 2006 and 2008.
The report, released last week, said NNPC waited to analyze oil market movements before choosing the most favourable pricing option to buy Nigeria’s crude oil, while all other oil companies picked the pricing option in advance.
“NNPC is taking advantage of its position as both buyer and agent for the seller (the government) to make profit at the expense of the Federation,” the report by British accountants Hart Group and Nigerian firm S.S. Afemikhe & Co said.
“Restructuring of NNPC should ensure arm’s length dealing between the federation and NNPC in relation to the sale of crude,” the report said.
Nigeria, which produces over two million barrels per day (bpd) of crude oil, is ranked by transparency watchdogs as one of the most corrupt countries in the world. Analysts say mismanagement at NNPC has made it one of the major black holes in the country’s public finances.
The report, which also highlighted discrepancies in dividend payments made by NNPC to the government, noted unresolved oil sale revenues and discovered large gaps between how much oil NNPC and energy companies said was being produced.
NNPC figures showed 2.6 million barrels less the amount that was pumped in 2007. The missing oil would have had a value at the time of more than $150 million.
NNPC officials were not available for comment.
Neiti is a unit of a project launched in a number of countries by former British Prime Minister Tony Blair in 2002, aimed at improving transparency by getting companies to publish what they pay and governments to disclose what they receive.
Problems of inefficiencies and conflicts of interests within NNPC have been acknowledged by the government which has ordered a comprehensive audit. Many of the issues are supposed to be addressed by wide-ranging reforms contained within the Petroleum Industry Bill (PIB) currently before the national assembly.