34 Oil Companies Disbursed $896.891 Million Social Expenditure

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Thirty-four foreign and indigenous oil companies disbursed $896.891 million as social expenditure in the 12 months culminating in December 2019, the latest audit report by the Nigeria Extractive Industries Transparency Initiative (NEITI), has indicated.

Social expenditure may be mandatory or non-mandatory, with the compulsory payments being the one remitted to the Niger Delta Development Commission (NDDC) and the Nigerian Content Development and Monitoring Board (NCDMB) in line with their respective Acts.

On the other hand, non-mandatory social expenditure is the voluntary payments made by companies to or for their host communities and other commitments across the federation.

They include the provision of social amenities like roads, communal water boreholes, health centers, provision of scholarships, funding of skills acquisition centers, agricultural support schemes, among others.

The report showed that while remittances to the NDDC and NCDMB totaled $815.594 million, constituting about 90.94 percent of total spend, non-mandatory expenditure was $81.297 million, about 9.06 percent of total payments.

Of the 34 companies, which carried out 690 projects, Nigerian Agip Oil Company Limited (NAOC), expended $12 million, followed by Total, which paid $11 million, Sterling Global with $10.2 million, while the Nigerian National Petroleum Corporation (NNPC) disbursed $10.13 million as part of their non-mandatory obligations.

However, with the implementation of the Petroleum Industry Act (PIA), there’s now a legal framework for host communities’ Corporate Social Responsibility (CSR) which was recently estimated at $500 million, when calculated against last year’s total operating costs by oil companies in the country.

“In 2019, total social expenditure (mandatory and non-mandatory) was $896.891 million. This consisted of a non-mandatory contribution of $81.297miilion (9.06 percent) and a mandatory contribution of $815.594 million (90.94 percent),” the report said.

Other top companies on the list included Shell Petroleum Development Company (SPDC), which NEITI said expended $8.3 million, Chevron Nigeria, which spent $7.67 million, Total’s $4.8 million, Green Energy’s $2.26 million and South Atlantic’s $2 million.

The report further stated that the delay in the remittance of net domestic crude sales proceeds by the NNPC to the federation account due to its 90-day payment circle was costing the country N17.5 billion.

It recommended that the NNPC should ensure that payments are made as and when due, but said that the corporation explained that it was caused by the long-standing practice of bundling domestic sales proceeds remittances with the monthly Federation Accounts Allocation Committee (FAAC) driven by the schedule of the meetings.

It added that at the time of preparing the report, efforts were ongoing to effect necessary internal process changes to ensure timely payment, going forward.

The audit identified three items where quasi-fiscal expenditures (payment for public infrastructure, fuel subsidies, national debt servicing, etc) were made by the NNPC, with the total sum expended amounting to N341.295 billion.

“This amount shows a reduction of 57 percent (from 2018) in the amount spent by NNPC outside the budgetary process. The sum of N96.378 billion was spent above the approved sum on securing and maintaining the nation’s pipelines.

“The sum of N30.287 billion had been approved for this item In the national budget. However, the actual spend was in the sum of N126.664 billion,” it noted.

In addition, it stated that while the sum of N213.074 billion was spent above the approved sum on recovered cost for the importation of petrol for local consumption, N305 billion had been approved for the item in the national budget, while the actual spend was N518.074 billion.

NEITI noted that non-disclosure of revenue from pipeline transportation by the NNPC continued, requesting that NNPC and SPDC should provide the basis for the computation of amount payable to ensure that the government receives what is due, while NNPC should account for the difference.

It pointed out that the excuse by the Joint Ventures (JVs) was that there are no uniform bases for computation, and the rates depend on negotiation with the customers. However, it urged the NNPC to drive the JV operators to ensure full disclosure.

A total of 85 incidents involving environmental damage were reported, according to the report, comprising 64 cases of water pollution, four cases of air pollution, and 17 cases of land pollution during the period.

NEITI also decried a situation where oil companies reported crude oil losses higher than their ‘visualized production, implying that the federation was losing benefits from the production arrangement.

To reduce the loss of products through crude theft and sabotage, NEITI called on the NNPC to ensure proper surveillance and update of the country’s pipeline networks.

Added to that, it recommended that the federal government should ensure the success of oil and gas industrial parks in the Niger Delta region to ensure the development of oil and gas infrastructure in the oil-producing states to reduce unemployment.

–  Thursday

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