NNPC Lost Over N20 billion In 2019 – Audit Report

NNPC Lost Over N20 billion In 2019 – Audit Report

The Nigerian National Petroleum Corporation(NNPC) recorded a loss of N20.2 billion in 2019, according to the state-owned firm’s latest audited annual financial statement.

Details of the consolidated statement of account for the year ended December 31, 2019 showed a comprehensive loss of over N16.3 billion by the corporation and N20.2 billion by the group.

In 2018, the corporation recorded over N203.2 billion in losses while the group lost about N68.95 billion.

However, the report said recurring losses by the NNPC over the years have culminated in an accumulated loss of about N1.55 trillion and N474 billion respectively, compared to N1.6trillion (group) and N490.7billion (corporation) in 2018.

The report warned that the NNPC may be pushed into bankruptcy by its unsustainable operational processes.

The audit report released Thursday said although the corporation’s losses were cut last year by over 91.9 per cent, and the Group’s losses by over 70.7 per cent, more needs to be done to sustain the NNPC as a going concern.

“These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group and Corporation’s ability to continue as a going concern, and therefore may be unable to realise its assets and discharge its liabilities in the normal course of business,” the report noted.

Despite the net loss of about N1.8 billion by the Group and N107.8 billion by the Corporation, compared to N803.1billion and over N254billion for the two entities respectively in 2018, being an improvement, the report said the Group’s current liabilities still exceed its current asset by over N4.4 trillion, and the Corporation’s by N1.1 trillion.

In 2018, Group’s current liabilities was over N3.3 trillion and the Corporation’s N968.7billion, although in the opinion of the Directors, the market value of NNPC’s asset was not less than the carrying value reported in the financial statement.

The NNPC Group consists of the NNPC Corporate headquarters and 21 strategic business units or subsidiaries, including the National Petroleum Investment Management Services (NAPIMS), Nigerian Gas Company Limited, Nigerian Petroleum Development Company Limited, National Engineering and Technical Company Limited.

The others include Integrated Data Services Limited, Nigerian Pipeline and Storage Company Limited, Kaduna Refining and Petrochemical Company Limited, Port Harcourt Refining Company Limited, Warri Refining and Petrochemical Company Limited, Duke Oil Global Energy Investment, NNPC Retail Limited, Hyson- Hydrocarbon Services (Nigeria) Limited and Petroleum Products Marketing Company.

Steps to avoid bankruptcy

To save the NNPC from going bankrupt, the report said the current management under the leadership of the Group Managing Director, Mele Kyari, with the support of the federal government has initiated a number of mitigating procedures to help in mobilising adequate resources to ensure the corporation continue to operate into the foreseeable future.
Apart from the NNPC’s cost optimisation and efficiency policy, indications are that the federal government is committed to assisting the corporation remain commercially viable by removing all cost drivers responsible for the accumulated shortfalls over the years.A source close to the NNPC said some of the policies include the removal of fuel subsidy, which constituted a major drain on the corporation’s revenue, making it difficult for it to settle domestic crude oil obligations to the Federation Account.Also, it was learnt that the introduction of the price modulation mechanism in the Petroleum Products Pricing Regulatory Agency (PPPRA) fuel pricing template under the deregulation policy in the downstream sector of the petroleum industry was to curb a major cause of losses by the NNPC.Other policies by the government include reducing petroleum products pipelines sabotage; fast-tracking the passage and implementation of the Petroleum Industry Bill (PIB) and restructuring the petroleum industry.The PIB aims to improve transparency and corporate governance in the petroleum industry and allow the NNPC to operate as a commercial entity.Besides, it was learnt that the government was contemplating the recapitalisation of the NNPC to help it in clearing all outstanding debts to related parties and receivables to enable the NNPC restart on a clean slate as a commercial entity.Other details in the reportTotal revenue realised by the corporation during the year (about N2.58trillion) dropped by N55.56 billion, or 2.13 per cent, from N2.64trillion in 2018, while the Group’s revenue of about N4.6trillion was lower by N105.95billion, or 2.24 per cent from the corresponding figure in the previous year.The revenues came from the sales of crude oil, petroleum products, gas and other services, including seismic contracts, and gas transmission tariffs.The corporation recorded a profit of about N24.39 billion in 2018, an increase in its cost of sales by about N5.61 billion, or 0.22 per cent in 2019, from N2.61 trillion in 2018 to N2.62 trillion, resulted in a loss of N36.8 billion during the year.However, a reduction in the corresponding costs by the Group by about N219.4billion, or 5.3 per cent, from N4.14 trillion in 2018 to N3.92trillion led to a rise in profit from N600.6billion in 2018 to about N714billion during the year under review.The corporation’s total operating costs, including expenses on sales and distribution, general and administration as well as net impairments losses on financial assets, rose from N354.3 billion in 2018 to N355.9billion, against the Group’s operating losses of about N301.6billion, down from N771.6billion.General and administrative expenses included Directors fees and expenses of N21 billion for the corporation from N60 billion in 2018, and N606billion for the Group, from N403 billion in the previous year.ADVERTISEMENTIn the report, the NNPC identified under-recovery as incurred cost which the federal government allow it to take from its revenues before passing the balance to the Federation.These include cost of crude and pipeline losses, pipeline maintenance and under-recovery of the difference between the landing cost of fuel and the regulated price fixed by the government.