Nigeria has lost ₦517 billion from the operational inefficiency of Petroleum Product Marketing Company (PPMC), a downstream subsidiary of NNPC.
- The loss, according to the Company’s 2018 financial statement, occurred because of various irregularities such as unpaid taxes, debt cleared off, excessive spending on employees’ salaries;
- On its personnel cost, three directors received ₦236.51 million in 2018, with the highest director going home with ₦86.35 million (excluding pension contribution);
- Despite declaring ₦11.12 billion as profit, PPMC financial records showed that it did not pay the parent company NNPC any dividend for the year.
State-owned oil firm’s subsidiary, Petroleum Product Marketing Company (PPMC) cost Nigeria ₦517 billion. This comes on the heels of the nation’s revenue shortfalls and moves to borrow money from foreign and domestic lenders.
And according to the Company’s 2018 financial statement, the loss was a consequence of various irregularities including unpaid taxes, debt cleared off and expenditure on salary. Per usual, parent company, NNPC came to the rescue, clearing off an accumulated debt of ₦423 billion. But perhaps what’s perplexing about this was that NNPC did not receive any financial incentive in return.
Now just think what ₦517 billion could do for a downturn Nigerian economy. Infrastructural advancement? Yes. Said sum could have constructed about 900,000 boreholes at ₦600,000 each across the country to salvage Nigeria’s lingering water resource challenge. With this, each Local Government could have had 1,200 boreholes.
What is PPMC’s major work as a subsidiary of NNPC?
PPMC is NNPC’s autonomous Business Unit with responsibilities of ensuring efficient transportation of crude oil to the refineries. She has the added role of ensuring products supply efficiency from imports too, per notes on its website. Yet, despite being an autonomous unit, NNPC remains the company’s sole financier.
And while NNPC remains the company’s sole financier, its records show that it sold over a trillion naira worth of fuel in 2018. Within the same period, analysis of the financial records showed it only booked revenues for ₦29 billion, mostly from “commissions” on sales of petroleum products. Its financial records further showed how PPMC earns ₦1.10 per liter on sales of NNPC products.
Red flags from the PPMC financial statements
Apart from these shortcomings, there were also financial irregularities in payment of taxes, unpaid royalty (dividends) to the parent company, NNPC. In essence, PPMC management ran the subsidiary to pay wages and salaries. In 2018, NNPC reimbursed PPMC the sum of ₦257 million for the payment of income tax for the 2017 financial year.
Further analysis of the report reveals red flags in the following areas:
The alarming staff costs– wages amounting to ₦7 million per month
In its 2018 financial year, the PPMC incurred ₦23.3 billion in staff costs and ₦7.6 billion on pension, gratuity, and other post employment benefits.
Analysis of the personnel cost by Dataphyte showed that three directors received ₦236.51 million in 2018. Further breakdown showed that three personnel received between ₦60 million and ₦90 million, with the highest director going home with ₦86.35 million (excluding pension contribution). This represents an 80 percent increase from the 2017 emolument.
The three directors who served the company during the financial year were Umar Isa Ajiya, as the Managing Director; Okey Billy Okoye served as Executive Director Commercial, and Mustapha Diso Mohammed, as the Executive Director Shared Services.
With the appointment of Mr Mele Kyari as the Group General Manager of NNPC in 2019, Umar Isa Ajiya, from North-west, is now the Chief Financial Officer of the NNPC.
The other two directors have resigned from the company.
By implication, in 2018, the highest-paid director earned more than ₦7 million per month. The amount is more than the monthly take-home pay of President Muhammadu Buhari and Vice President Yemi Osinbajo combined, according to RMAFC records.
Apart from the three key management personnel, the subsidiary had 270 personnel, with the lowest employee earning ₦300,000 monthly on average.
Number of Personnel in PPMC, a subsidiary of NNPC (2018)
| Position | Number of Staff |
| Management | 17 |
| Senior | 240 |
| Junior | 13 |
Non-payment of dividend
Dividends serve as profits or a certain percentage from the operating profit of the company.
Despite declaring ₦11.12 billion as profit, PPMC financial records showed that it did not pay the parent company NNPC any dividend for the year.
A report by the Natural Resources Governance Institute (NRGI) said NNPC lacks an explicit revenue collection framework for its subsidiaries. The report also added that most countries establish explicit rules for National Oil Company financing. It cited Malaysia’s Petronas as an instance. The Oil Company keeps profits on earnings, but transfers royalties, dividends, and export duties to the state. Petronas further paid a set tax rate on its profits.
Apart from PPMC, other profitable companies (NAPIMS, NETCO, Nigerian Gas Company Limited, NIDAS Marine Limited, NIDAS Shipping, NIDAS Shipping Services Limited, NIDAS Shipping Service Agency UK, NPDC, NNPC Retail, Port Harcourt Refinery, and Wheel Insurance Limited) – failed to declare dividends in their respective financial accounts.
| Subsidiary | Dividend | Tax | Profit/Loss |
| Petroleum Product Marketing Company (PPMC) | Nil | ₦47.09 million (Income tax expense)₦158.5 million (Minimum Tax) | ₦11.12 billion |
Source: Dataphyte analysis/PPMC financial statement, 2018
Huge Debt – ₦423bn debt cleared off
Analysis of the debt figure showed that the parent company, NNPC, continued to pour hundreds of billions of naira into the downstream subsidiary without ever getting paid back. In 2018, the Petroleum Products Marketing Company (PPMC) reported that NNPC forgave ₦423 billion of debt from years spent covering its costs.
In late 2017, parent company NNPC renamed its subsidiary, Pipelines and Products Marketing Company to Petroleum Products Marketing Company Limited (PPMC) However, NNPC’s rebranding initiatives that sought to see PPMC made profitable were futile, per the 2018 financials. The new business model led to the unbundling of the company, creating new business entities, but we are yet to see results.
As a thank you, PPMC credited a ₦31.4 billion debt from NNPC; after the parent organisation reportedly forgave ₦423 billion old debts.
PPMC shortchanged FG in ₦94 billion unpaid taxes, low tax payments
Further analysis of the company’s tax obligations showed that the subsidiary shortchanged the Federal Government in unpaid taxes over the years. For instance, in the 2018 financial statement, the company carried forward ₦94 billion in “tax losses” from prior years. Tax-loss, according to Investopedia, happens when expenses are greater than revenue. It is a tool for creating future tax relief.
The company also stated that it is not sure about the availability of future taxable profit for the government. With this, the management also incurred another ₦209.4 million as a payment award against it in litigation to business associates. The payments are due for the next accounting year.
Further, 2018 financials shows that PPMC paid taxes late. While PPMC owed ₦483 million in taxes at the start of 2018, it ended the year with a ₦433 million debt.
PPMC, however, paid ₦158.5 million as tax in 2018 (under the Minimum tax legislation) because it claimed no taxable profit; also paying ₦47 million as a Tertiary Education tax for the year.
The cost of wastage on Nigerians and the FG
Inefficiencies led to the Federation account forfeiting ₦517 billion (in debt and tax losses) meant for the NNPC. The amount excludes unpaid dividends, actual tax payment, and the cost of running less expensive personnel.
But perhaps the bitter pill is the opportunity cost on these wastages. They, in truth, could have positioned Nigeria’s sinking economy northbound. For instance, the lost sums could have helped the country to construct 100,000 barrels per day (b/d) refinery plant at $2 billion (about ₦600 billion); instead of importing light petroleum products estimated at $15 billion per annum.
Also, it could have provided 1,436 megawatts of solar electricity to the national grid at ₦360 million per megawatt. At an average cost of ₦28 million per one Primary Health Care Centre, it could have built over 18,000 functional health centres or 30,411 of 3-block classrooms across the country at ₦17 million each.
Is PIB the hope of efficiency and profitable Nigeria’s National Oil Company?
Stakeholders have longed for a Petroleum Industry Bill (PIB); a bill that would strengthen the operational framework of the oil and gas sector. On Monday, September 28th, the Nigerian lawmakers accented the upcoming Bill at the parliament.
The bill, a product of over a decade of back-and-forth, between the government and the oil and gas stakeholders, reportedly costs Nigeria about $15 billion a year from delays.
At a recent webinar organised by the Premium Times Centre for Investigative Journalism (PTCIJ), Mr Henry Adigun, team lead at Facility for Oil Sector Transparency and Reform (FOSTER) in Nigeria, says the operations of the NNPC lacks direction. He believes the passage of the PIB will solve some fiscal transparency issues in the NNPC and result in the establishment of a governance structure for the corporation.
Ms Tengi George-Ikoli, the Program Coordinator of the Nigeria Natural Resource Charter (NNRC), expects to see a bill that will stimulate the Nigerian economy by attracting investors and addressing host community needs.
“I expect the Bill to be an enabler for the midstream sector- gas, infrastructure, and competitive fiscals.”
“As with the global shift from oil, gas remains valuable and viable. Fossil fuels are being phased out globally, as part of the stakeholders, we expect to see plans to address the environmental degradation that will follow when oil loses its appeal.”
For Atiku Samuel, a policy analyst, Nigeria needs more than the PIB to make the oil and gas sector a sane environment.
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