VZCZCXRO5296
PP RUEHMA RUEHPA
DE RUEHUJA #1792/01 2481414
ZNR UUUUU ZZH
P 041414Z SEP 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 3892
INFO RUEHOS/AMCONSUL LAGOS 9905
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEAIIA/CIA WASHINGTON DC
RUEKJCS/DIA WASHINGTON DC
RHMFISS/HQ USAFRICOM STUTTGART GE

UNCLAS SECTION 01 OF 02 ABUJA 001792 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS TO USTR-AGAMA 
TREASURY FOR PETERS AND HALL 
DOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFC/OIO/ANESA/DHARRIS 
DOE FOR PERSON, HAYLOCK 
 
E.O. 12958:  N/A 
TAGS: EPET EFIN ECON ENRG PGOV NI
SUBJECT:  NIGERIA:  HOUSE SPEAKER ACCUSES STATE OIL COMPANY OF 
WITHHOLDING REVENUES 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE HANDLE ACCORDINGLY. 
 
¶1. (SBU) Summary.  The Nigerian Speaker of the House accused the 
Nigerian National Petroleum Corporation (NPPC) of systematically 
underpaying what it owes the Government of Nigeria for the sale of 
crude oil.  NNPC sells the government's crude oil on the 
international markets, but in theory NNPC doesn't handle the 
payments received from international buyers.  Unless legislators 
supply specific credible evidence of wrongdoing, NNPC's Byzantine 
accounting will make it hard to prove, or disprove, the allegations. 
 End Summary. 
 
Speaker Claims NNPC Withholds Money from GON 
-------------------------------------------- 
 
¶2. (U) On August 25, the Speaker of the House, Demiji Bankole, 
accused various government agencies of systematically withholding 
revenues from Nigeria's Federation Account. (Note:  The Federation 
Account is the GON's general purpose account from which it pays its 
budget and disperses funds to state and local governments.  End 
Note.)  Bankole claims that over a ten year period, agencies 
withheld N1.5 trillion ($12.8 billion) in collected revenues from 
the GON.  Since NNPC is Nigeria's principle revenue generating 
agency, his accusations focused on the state oil company and its 
sale of crude oil on behalf of the GON.  In a speech to the Nigerian 
Bar Association, he assured listeners that a National Assembly 
committee was looking into the matter. 
 
NNPC: Oil Company or Government Agency? 
--------------------------------------- 
 
¶3. (SBU) The NNPC is Nigeria's national oil company that represents 
the GON's interests in the oil and gas industry.  It operates Joint 
Ventures (JV) with six oil companies: ExxonMobil, Chevron, Shell, 
Agip, Total, and Pan Ocean Oil.  It holds an average of 60 percent 
equity in the JVs.  NNPC acts both as an oil company and a 
quasi-governmental agency, disbursing GON funds to operate the joint 
ventures, receiving an equity share of the profits from the JVs, and 
managing both its own and the GON's share of the oil produced. 
Where the GON ends and NNPC starts is not always clear.  (Note: It's 
this opaque and cumbersome arrangement that oil sector reform 
legislation, recently introduced in the legislature, attempts to 
correct.  End Note.) 
 
The Complexities of Nigerian Oil Sales 
------------------------------------- 
 
¶4.  (U) The GON receives oil from the JV as royalty payments, oil 
which is sold domestically and internationally.  Domestic oil is 
sold to NNPC to be used for local refining.  Proceeds from this 
domestic sale of oil to NNPC are credited to the Central Bank of 
Nigeria.  About 445,000 barrels of crude oil is allocated daily to 
the NNPC for domestic refining with NNPC paying the GON the 
international price for the oil.  (Note: NNPC actually sells some of 
that allocated crude oil in the international market because 
Nigeria's existing refineries operate far below installed capacity. 
NNPC uses proceeds from these sales to import refined products.  End 
Note.) 
 
¶5. (SBU) In separate discussions with EconSpec, Austen Oniwon, Group 
General Manager and Head of NNPC's Research Division, and Bright 
Okogu, Director General of the Budget Office of the Federation, 
stated that the GON's crude oil is sold in the international market 
on the GON's behalf by NNPC's crude oil marketing department.  The 
buyers pay for the crude oil by transferring funds directly into GON 
accounts in either Geneva or New York, accounts operated by the CBN. 
 NNPC cannot withdraw or withhold funds from these accounts. (Note: 
Bright Okogu was Executive Secretary of the Nigerian Extractive 
Industries Transparency Initiative (NEITI) during the administration 
of former President Obasanjo.  NEITI does not have the legal 
mandate, or willpower, to review what happens to oil revenues after 
they hit the CBN's accounts.  NEITI's last audit of the industry did 
not uncover any serious discrepancies in the sale of crude oil by 
international oil companies.  End Note). 
 
Late Payments or Just a "Grace Period" 
-------------------------------------- 
 
 
ABUJA 00001792  002 OF 002 
 
 
¶6.  (SBU) When NNPC buys oil from the GON, it has a 90-day grace 
period in which to pay, while other buyers have a only 30 or 60-day 
grace period.  Oniwon and Okogu contended that allegations that NNPC 
is withholding money from the GON most likely stem from a 
misinterpretation of this 90-day grace period.  They both claimed 
that while it is possible that transfer of funds from NNPC to CBN 
could be delayed, NNPC does pay all it owes the government. 
 
¶7. (SBU) Comment:  We will not know the real answer anytime soon. 
Nigerian legislators are known for making unsubstantiated 
accusations; National Assembly committees rarely get to the bottom 
of anything; NNPC's accounts are notoriously opaque; Nigerian 
journalists do not have the investigative capacity to track this 
story down.  However, it would not strain credibility to think 
long-time NNPC insiders have figured out a way to keep a little of 
the GON's proceeds for NNPC or themselves.  End Comment. 
 
PIASCIK