Nigeria will carry out a forensic audit of the way the state oil company allocates fuel subsidies and accounts for some other disputed costs in a bid to draw a line under a furore over billions of dollars of oil revenues allegedly missing from the Treasury.
The audit was initiated on Thursday by a Senate committee investigating allegations made by Lamido Sanusi, central bank governor, that the Nigerian National Petroleum Corporation was short-changing the government by as much as $1bn a month.
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“We believe we should have an independent forensic audit of these accounts. It is the only way Nigerians will be satisfied that a proper accounting is being done. That is what we recommended,” Ngozi Okonjo-Iweala, finance and economy minister said.
She was speaking after a heated hearing in the Senate at which she appeared, along with Mr Sanusi, petroleum minister Diezani Alison-Madueke and the NNPC.
The allegations of missing billions have contributed to investor nervousness at a time when emerging and frontier markets are under financial stress.
The currency, the naira, briefly plunged in intraday trading on Thursday to its lowest level in at least 20 years, touching N166.98 against the US dollar, as foreign investors sold off amid worries of a decline in the country’s foreign reserves this year.
But the naira recovered sharply after the central bank intervened heavily in the local foreign exchange market by selling dollars. In afternoon trading, the naira was at N164.65 to the dollar.
Mr Sanusi’s revelations about alleged mismanagement of oil revenues, which began with a leaked letter to the president, Goodluck Jonathan, in December, have sparked a row at the political heart of Africa’s leading oil producer, with Mr Jonathan last month seeking the central banker’s immediate resignation. Mr Sanusi, who is due to stand down in June, refused and can only be forced out prematurely by the Senate.
Mrs Okonjo-Iweala has also been angered that the governor has exposed the alleged racket, rather than confining his findings to a government committee she chairs that has sought to reconcile the gulf between the value of the oil Nigeria produces and the funds remitted to the state by the NNPC.
“We have a track record of getting the NNPC to pay back what it owes. I am not saying there is no shortfall and that money doesn’t disappear. But we have to be careful. What we want from the point of view of the government, and of the country, is to have more transparency. In other matters outside oil we already do,” she told the Financial Times.
The government reconciliation committee had questions about $10.9bn, most of which the NNPC has sought to justify as fuel subsidy costs deducted at source and outside formal budgetary procedures.
But in his latest memorandum to the Senate, Mr Sanusi provided hundreds of pages of data, evidence in the form of contracts, legal opinion and analysis to question why $20bn was not remitted by the corporation between January 2012 and July 2013.
Included were $3.5bn in kerosene subsidies. At Thursday’s senate hearing, both the NNPC and Ms Alison-Madueke struggled to explain why the NNPC was still financing a subsidy eliminated by a presidential directive in 2009.
Ms Okonjo-Iweala told the FT that at no point under her watch in the past three years had there been any budget allocation for kerosene subsidies.
The senate has required initial findings from the audit to be submitted within six weeks. It has also required the attorney-general to provide legal counsel on disputed billions withheld by the Nigerian Petroleum Development Corporation, the NNPC’s exploration and production subsidiary.
At least initially, however, the audit does not appear to cover crude oil swaps, which are equally contentious. These opaque arrangements, in which billions of dollars in crude exports are exchanged for refined fuel imports without money changing hands, are the real “Bermuda triangle”, according to industry experts.
Ms Okonjo-Iweala said: “I am not saying there will not be challenges to keep things tight in an election year but every attempt will be made to shore the finances up. We are going to rebuild the buffers. Wait and see.”
Charles Robertson of Renaissance Capital said in a report that many investors in Nigeria were expecting a 5-10 per cent depreciation this year. “They see this as a normal concern in the run-up to February 2015 elections,” he said.
The main index of the Lagos stock exchange also suffered on Thursday and the yield of short term bonds in local currency rose as investors demanded more to hold Nigerian paper.