Oil firms underpaid FG by $2.33bn

Nigeria Extractive Industry Transparency Initiative, NEITI, audit report has revealed that recalculations of royalty for the years 2006-2008 estimated an underpayment of $2.33 billion arising from subjective interpretation of volume, pricing and API (American Petroleum Institute grading variable). The report also said that between 2006 and 2008, the Nigerian National Petroleum Corporation, NNPC, received $3.789 billion as dividends from Nigeria Liquefied Natural Gas, NLNG, which it did not confirm that the payments were made to the Federation account. It further stated that under-assessment of $690 million in Petroleum Profit Tax, PPT, was due to pricing mechanism used (realizable price instead of official selling price) while the discrepancies between annual PPT returns and Annual Financial Statements was responsible for the under-assessment of $424.6 million in the determination of Petroleum Profit Tax, PPT, value. The report said that Operating Expenses, OPEX, indicated a possible under assessment of $364.9 million.

Following the disclosures, NEITI is currently working with the Federal Inland Revenue Service, FIRS, and the Department of Petroleum Resources, DPR, to review the assessments as well as recover these underpayments from companies and remit same to the federation account.