Nigeria: Audit Report Indicts Nnpcl Over N684 Million Irregular Contracts, Abandoned Projects

The audit paints a troubling picture of weak controls, opaque transactions and potential diversion of public funds by the state-owned oil company.

A new report by the Office of the Auditor-General of the Federation has indicted the Nigerian National Petroleum Company Limited (NNPCL) for questionable expenditures totalling about N684 million on abandoned projects, unexecuted contracts and irregular procurements.

The findings are contained in the 2022 Auditor-General’s annual report, an 808-page document recently submitted to the National Assembly in compliance with the Constitution.

The audit paints a troubling picture of weak controls, opaque transactions and potential diversion of public funds by the state-owned oil company.

The report shows that NNPCL made several payments without evidence of project execution, renewed contracts irregularly, and failed to enforce financial regulations designed to safeguard public funds.

In some cases, auditors found no proof of work done despite full payments to contractors.

According to the report, making payments on abandoned contracts violates the Nigerian Constitution and Financial Regulations (FR) 3104 and 3106 (2009), which govern the economy and accountability in public expenditure.

The regulations specify: “Where a contractor or supplier who is paid a mobilisation fee for a job fails to perform after collecting the fee, he shall be given 30 days’ notice to refund the money. Failing which, the mobilisation fee shall be recovered en bloc, and the contractor shall be blacklisted and referred to the Economic and Financial Crimes Commission (EFCC) for prosecution.”

Similarly, FR 3104(ii) states: “Where a contractor presents a false certificate of completion and is paid, he shall be given 21 days to complete the job or refund the full contract sum. In addition, the contractor shall be referred to the EFCC for prosecution.”

N292 million paid for abandoned project

One major indictment concerns a N533 million contract awarded in May 2020 for the construction of an Accident and Emergency Facility along Airport Road, Abuja.

The contract, jointly overseen by the then NNPC and the State Security Service, was expected to be completed within six months.

However, by September 2020, the company had already released N292 million, covering the first three project milestones, including detailed engineering drawings, mobilisation, and completion of substructure works.

However, when auditors visited the site on 2 December 2022, they found it to be abandoned. None of the listed components, including the Accident and Emergency Centre, medical wards, mortuary, physiotherapy centre, and external works, had been executed.

The auditors noted that the payment violated Financial Regulations 3104 and 3106 (2009), which require recovery of mobilisation fees from non-performing contractors and referral of offenders to the EFCC.

Auditors attributed the lapses to weaknesses in the company’s internal control systems and noted the risk of payment for work not done, loss of government funds, and diversion of public resources.

In response, NNPCL requested the SAP payment number for the disbursed funds, arguing that verification within their system was impossible without it.

The auditors, however, deemed the response unsatisfactory, maintaining that the findings remain valid until corrective action is implemented.

The report recommended that the Group Chief Executive Officer (GCEO) recover the N292 million from the contractor, remit it to the government treasury, and provide evidence of remittance to the Public Accounts Committees (PAC) of the National Assembly. The GCEO at the time the infractions occurred was Mele Kyari, who was removed earlier this year and replaced by Bayo Ojulari.

N246 million paid without evidence of supplying materials

The audit also found that N246 million was paid to another contractor for the purchase and supply of 2,400 metres of seamless carbon steel pipe to the Warri Refinery and Petrochemical Company (WRPC).

The contract was extended from 31 October 2019 to 30 June 2020 due to the delivery of incorrectly specified pipes, which were reportedly rejected by NNPCL.

By the time of the audit in December 2022, only 1,908 metres had been delivered.

The outstanding 492 metres had not been supplied, yet the contractor had received full payment. Auditors said this violated FR 708 (2009), which prohibits payment for goods or services not rendered, as well as FR 603(i) and 415, which mandate detailed documentation and due economy in expenditure.

NNPCL argued that the delays were due to global supply chain disruptions caused by the COVID-19 pandemic, which impacted production and delivery timelines.

The company also cited a Goods Receipt Note dated 20 October 2020 as evidence of delivery.

Auditors rejected the justification, saying it was inadequate, and the findings remain valid until the recommendations are implemented.

The report instructed the GCEO to recover the N246 million, remit it to the treasury, and justify the expenditure to PAC. Sanctions for irregular payments and non-executed contracts under FR 3104(ii), 3106, and 3115 would apply if compliance is not demonstrated.

N152 million irregular procurement for the Nigeria Police

The audit also flagged a N152 million payment made by NNPCL to a contractor for a procurement allegedly requested by the Office of the Inspector-General of Police.

Auditors reported that neither the details of the procurement nor the certificates of completion were provided. They added that the transaction violated a 2008 Establishment Circular, which forbids ministries and agencies from soliciting or accepting financial support from parastatals under their supervision.

The auditors faulted NNPCL’s claim that it required a SAP reference number to trace the transaction. They said the response did not address the core issue of irregular procurement and lacked documentary evidence.

The report recommended the recovery and remittance of the N152 million, warning that sanctions for irregular payments and unexecuted work, as stipulated in Financial Regulations 3106 and 3104, may apply.

Overall, the Auditor-General attributed the irregularities to weak internal controls within NNPCL, exposing the government to potential financial losses, payments for unexecuted contracts, and diversion of public funds.

The report emphasises the need for urgent corrective actions and full compliance with financial regulations to safeguard public resources.

Past controversies

Over the years, the NNPCL has become one of the most opaque national oil companies in the world, evident in the lack of making its audited accounts public for 43 years, until 2020.

Presently, the Economic and Financial Crimes Commission (EFCC) is investigating 14 NNPCL officials, including two former chief executives, Mele Kyari and Abubakar Yar’Adua, over an alleged $2.7 billion fraud in the maintenance and rehabilitation of the Kaduna, Warri and Port Harcourt refineries.

The three refineries have consistently underperformed, recording zero production over the years, despite receiving annual allocations and incurring billions of dollars in turnaround maintenance costs.

Despite the massive financial injection into the refineries, public records and site visits indicate that the facilities have largely failed to resume meaningful operations.

Since June, the Senate Committee on Public Accounts has been probing the NNPCL over N210 trillion allegedly unaccounted for in its audited financial statements between 2017 and 2023. The management was summoned four times to explain the inaccuracies, but only sent a written explanation last week.

The Auditor-General’s 2021 report also flagged the NNPC for unauthorised deductions and diversion of N514 billion.

In an editorial published this week, PREMIUM TIMES urged the state oil company NNPCL to return the missing funds. “No economy survives amid such dubious fiscal exertion on the treasury,” the editorial read.

By Premium Times.