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Excess Crude Account Is Illegal – Auditor-General Warns

Excess Crude Account Is Illegal – Auditor-General Warns

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The Auditor-General of the Federation, Anthony Ayine, has advised the Nigerian government to legalise its continuous maintenance of the Excess Crude Account, ECA.

The remarks were contained in the recently released annual report of the Auditor-General for the Federation on the accounts of the Federation of Nigeria for the year ended December 2016. The report is the most recent by the Auditor-General and was released last month.

Details of an on-going analysis of the report, obtained by PREMIUM TIMES on Monday, shows that N361 billion (361,230,422,517.15) classified as royalty was deducted from total oil and gas revenue collected in 2016 before the balance was paid to the Federation Account. The sum, the report said, was in respect of the ECA.

“Examination of records and documents presented to the Audit Team in respect of the Excess Crude Account (ECA), revealed that a sum of N361,230,422,517.15 summarized below and classified as PPT/Royalty was deducted from total Oil and Gas revenue collected before the balance was paid to the Federation Account,” the report said.

“These deductions would appear to contravene the provisions of Section 162 (1) of the Constitution of the Federal Republic of Nigeria, 1999 which states that ‘The Federation shall maintain a special account to be called “The Federation Account” into which shall be paid all revenues collected by the Government of the Federation’.”

The report said it was noted by the audit team that there was no legal authority for the creation of the Excess Crude oil/PPT/Royalty Account which is operating contrary to the provisions of the constitution. “Efforts made by the audit team to obtain legal authority for the creation of Excess crude Oil/PPT/Royalty Account proved abortive,” it added.

Mr Ayine noted that, “This observation has been consistently mentioned in my previous reports since the year 2007 without any positive action taken by the Federal Government to address this anomaly.”

The report recommended that relevant government agencies and Federation Accounts and Allocation Committee, FAAC, should initiate the process to legalise the creation of the Excess Crude Oil/PPT/Royalty Account through the National Assembly.

Chambers of the Nigerian Senate used to illustrate the story.

Last November, the Senate declared the ECA illegal, with some senators describing it as the “biggest slush fund” for governors.

The ECA is an account used to save oil revenues above a base amount derived from a defined benchmark price.

In April, the Accountant-General of the Federation, Ahmed Idris, disclosed that the balance in Excess Crude Account (ECA) as at April 23 stood at $1.8 billion ($1,829,862,047.42).

Meanwhile, the report also showed that an audit review of Domestic Crude Report in respect of the utilisation of the domestic crude allocation to NNPC revealed a low percentage utilisation by the local refineries in Kaduna, Port Harcourt and Warri (KRPC, WRPC & PRPC).

From the total intake of 126,163,388 Bbls (barrels) domestic crude oil lifting made between January to December 2016, only a marginal 23,085,639 Bbls, representing 18 per cent, was used to service these refineries. On the other hand, a total of 67,386,566 Bbls, representing 53 per cent, was lifted for off-shore processing.

The report noted that the implication is that, the local processing of crude contributed very marginally to the domestic consumption while imported refined products from processed exported domestic crude largely account for the domestic consumption.

“Also, this partly explains the high cost of petroleum products domestically as the bulk of supplies were made from offshore processed products and through product exchange,” the report added.

The Group Managing Director of NNPC was advised to review the Crude oil allocation to local refineries and ensure there are no unwholesome practices in the application of the amounts surplus to local refinery requirements, it noted.

“The Federal Government is also advised to take all steps necessary to ensure local refining capacity can absorb the amounts of crude allocated, and the volume of imported products is made minimal.”

Nigeria’s refineries have not been able to serve the nation’s need despite years of Turn Around Maintenance, TAM. In May, official figures obtained from the NNPC showed that none of Nigeria’s four refineries worked up to 50 per cent of their capacity at any time in 2017.

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