Serious flaws in Nigerian oil accounts: audit

By Dave Clark
AFP
ABUJA
Petroleumworld.com 01 13 06

The first independent audit of Nigeria's oil and gas industry has revealed serious weaknesses in the way government accounts for the industry's multi-billion-dollar profits, officials said Thursday.

Unveiling interim results from a probe of the oil business in Africa's biggest producer, the minister leading the Nigerian Extractive Industries Transparency Initiative (NEITI) said it had found no direct evidence of fraud.

But Obi Ezekwesili warned that large differences found between what oil majors say they paid in taxes and royalties and what government said it had received showed a system that could easily fall prey to unscrupulous operators.

"We have some weak systems of accounting control which lead to an environment which allows corruption," she told reporters in the Nigerian capital Abuja at the unveiling of the interim audit.

Nigeria was the first oil producer to take up a challenge set by Britain's Prime Minister Tony Blair, who in September 2002 called on oil companies and their host countries to publish details of all payments between them.

Many countries in Africa and other parts of the developing world with rich mineral resources have found the vast profits to be had from their extraction do more to foster corruption and misrule than to encourage development.

As Africa's biggest oil producer and the world's sixth biggest exporter -- currently pumping more than 2.6 million barrels per day -- Nigeria ought to have had enough capital to begin to lift 130 million people out of poverty.

Instead, the proportion of people living under the World Bank's poverty line of less than one dollar per day has more than doubled -- to 75 percent -- in the five decades since the oil giant Shell drilled its first Nigerian well.

Two years ago President Olusegun Obasanjo assigned Ezewesili to head NEITI, a committee of public officials, oil executives and representatives from civil society to lift the lid on the industry's murky accounts.

The group hired an independent British audit firm, the Hart Group, to go through the payments made by oil firms to the Nigerian government and trace the profits of the business from the well-head to Obasanjo's federation account.

Thursday's ceremony provided the first results of the exercise; a financial audit of payments in 2003 and 2004. Accounts for 1999, 2001 and 2002 and a physical audit of production and export facilities will follow next month.

Hart revealed for the first time that Nigeria earned 41 billion dollars from taxes and royalties paid by foreign oil majors and from selling its own crude in 2003 and 2004. But the report also recorded some odd shortfalls.

For example, the Central Bank of Nigeria reported receiving several hundred million dollars more from the companies than they themselves recorded paying.

It was also found that companies were allowed to calculate their own tax and royalties liabilities and pay them, even if the tax authorities and industry regulators disagreed over production and export figures.

NEITI's executove secretary Bright Okogu, said that the report showed the need for Nigeria to strengthen accounting controls, but added that the results would allow the country to start its oil accounts from a clean sheet.

"It cannot get worse than this," he told a stakeholders' committee.

In the absence of a proper audit of how much oil Nigeria actually produces, which would allow observers to calculate how much is stolen or misdirected, anti-corruption campaigners said Thursday's report was simply a good start.

David Ugolor, Nigerian coordinator of the Publish What You Pay campaign, said his group was keenly awaiting the full report in the scond half of next month but would in the meantime seek an inquiry into the accounting anomalies.

AFP 01 12 06

Copyright © 2006 AFP. All rights reserved

 

 

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