Ten months ago, Sanusi Lamido Sanusi, the then Governor of the Central Bank of Nigeria, alleged a multibillion-dollar subsidy racket that plagued the Nigeria National Petroleum Corporation (NNPC). According to him, the racket had caused a shortfall of more than $20 billion in what Nigeria earned from crude oil, which is approximately 3 trillion Naira. The shortfall, on its own, was responsible for the sharp declines in the income Nigeria derives from oil, the foreign reserves and the local currency, and exerted pressure on state finances. And, that the shortfall has occurred in spite of the high prices of oil in the international market.
According to the Financial Times of London, Mr. Sanusi backed his allegation with evidence of more than $1bn a month that NNPC earned from crude oil sales that it failed to remit to the Federation Account. He pointed to a 19-month period between January 2012 and July 2013 in which there is a huge disparity between NNPC’s declared financial returns and activities.
Mr. Sanusi cited kerosene subsidy, which NNPC claimed to have spent $8.49 billion in spite of the Federal Government directive in 2009 eliminating the fraudulent practice. According to Mr. Sanusi, NNPC buys kerosene with federation money at N150, sells the same to syndicates at N40-N50, and, the same kerosene still retails at N170-N250. An estimated $100m disappears from the NNPC’s account each month.
On petrol subsidy, Mr. Sanusi maintained that NNPC’s deduction of billions of dollars at source for the subsidy violates legal budgetary frameworks. He argued that NNPC’s conduct disguises the intent of the money and treats it as an operating account. And that the sheer implication is that NNPC deducts twice the amount of petrol it imports, and without a glut in the Country.
Among others, Mr. Sanusi equally raised questions over the value Nigeria gets when it swaps crude for refined oil, and without any money exchanged in the transactions. It was estimated that Nigeria swaps an estimated 200,000 to 220,000b/d of its total production of 2m b/d, which comes to about 10%.
Mr. Sanusi first disclosed these allegations to the Presidency, then to former President Olusegun Obasanjo, and then to several news organizations including the Financial Times of London.
On its part, NNPC claimed that Sanusi did not understand “the technicalities of the oil industry”. Mr. Andrew Yakubu, NNPC’s group managing director, accused Sanusi and Central Bank of acting as an auditing firm, which went beyond the CBN’s mandate. The trio of Mr. Yakubu, Ngozi Okonjo-Iweala, finance and economic affairs minister, and Diezani Alison-Madueke, petroleum minister, all promised to provide detailed evidence to a Senate oversight panel.
Independent economists from Nigeria’s First City Merchant Bank and Renaissance Capital, an investment bank, dug deep into the allegations raised by Sanusi, and both came to the same conclusion that between $24.3 and $30.8bn discrepancy exists in the account of NNPC.
It is important to note that Nigeria derives more than70 percent of its revenue from oil. And that the last audit of NNPC—the corporation charges with this important sector, was performed by an independent audit firm of KPMG in September of 2010. In its 40-page assessment, KPMG raised concerns of serious fraud and corruption at the NNPC at the time.
Alison-Madueke has continuously headed NNPC since April of 2010 while President Jonathan fired Sanusi in April of 2014. As to Nigerians, the government of Jonathan understood our short attention span as it has shut us out of any further information on the allegations of Mr. Sanusi.