Nigeria’s NNPC Needs Tighter Spending Controls, PwC Says

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Nigeria, Africa’s biggest crude producer, should improve the financial management of its state-run oil company, according to an audit by PricewaterhouseCooper LLP.

Nigeria National Petroleum Corp. has a “blank check to spend money without limit or control,” PwC said in the report released on Monday by the presidency. Accounting and monitoring systems for oil revenue “appear to be inaccurate and weak,” while data from different sources are plagued with “significant discrepancies.”

The review, covering January 2012 to July 2013, also recommends the NNPC refund a minimum of $1.48 billion to the government, which could increase to $4.29 billion depending on an investigation of the validity of $2.81 billion in deductions. Petroleum Minister Diezani Alison-Madueke told reporters on April 22 the national oil company has started to refund the $1.48 billion.

The audit follows a memo to President Goodluck Jonathan by former central bank Governor Lamido Sanusi in 2013 alleging the NNPC had retained at least $12 billion and as much as $50 billion in oil revenue that was due to be paid to the government. The NNPC has denied any wrongdoing.

Sanusi, now Emir of Kano, Nigeria’s second-highest Muslim leader, was suspended by Jonathan, saying under Sanusi’s watch the central bank had become “distracted” from its mandate.

Revised Figures

Total oil revenue during the review period was $69.3 billion and not $67 billion as previously claimed, while $50.8 billion was paid to the government compared with the $47 billion earlier stated, the report showed.

“The NNPC model of operation must be urgently reviewed and restructured as the current model, which has been in operation since the creation of the corporation, cannot be sustained,” PwC said.

The NNPC may need to refund more than the $1.48 billion earlier stated in extracts of the audit released in February by the auditor-general, Kayode Fayemi, the policy director of President-elect Muhammadu Buhari, said last week.

Buhari, who defeated the incumbent Jonathan in a March 28-29 presidential poll, promised a review of oil-revenue collection and reporting at the NNPC and to “lift the veil of secrecy” around the company, according his party.

“The new administration signals an era of accountability and transparency in government and our general expectation is that the President-elect is stricter on corruption and he’s going to take a tougher stance,” Seun Olanipekun, a Lagos-based analyst at Investment One Financial Services Ltd., said by phone. “The oil and gas industry will be a major focus” under Buhari, he said.

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