World Bank Flags Lack of Transparency in NNPCL’s Financial Reporting, Raises Concerns on Oil Revenue Oversight

 

The World Bank has expressed serious concerns over the transparency and consistency of the Nigerian National Petroleum Company Limited’s (NNPCL) financial reporting, which it claims hinders effective oversight of oil revenue allocations to Nigeria’s Federation Account. These findings were disclosed in the World Bank's Accelerating Resource Mobilization Reforms (ARMOR) report, released on May 17, 2024.

In the report, the World Bank criticized NNPCL’s governance practices, noting inconsistencies in its reports to the Federal Account Allocation Committee (FAAC). These reports reportedly lack vital details, including pledged revenue specifics, crude oil trade values, and the actual payments and receipts from international transactions. “Non-transparent reporting to the Federal Ministry of Finance (FMF) and FAAC makes it difficult for authorities to oversee NNPCL’s performance,” the World Bank stated.

One key issue flagged was NNPCL’s practice of pledging oil barrels as collateral for business arrangements. A highlighted example involved a deal where 35,000 barrels per day were pledged in exchange for an equity stake in the Dangote Refinery, an arrangement valued at approximately $5.8 billion as of 2022. However, the reported revenue from this deal has fallen short of expectations, raising concerns about the financial implications for Nigeria.

The ARMOR report further noted that while international oil prices surged by 116% between 2020 and 2023, Nigeria’s net oil revenue-to-GDP ratio declined from 2% to 1.8% amid falling oil production and the burden of fuel subsidies overseen by NNPCL. Oil production in Nigeria fell from 1.8 million barrels per day in 2020 to 1.4 million in 2023, largely attributed to security challenges and underinvestment in the sector. The World Bank cautioned that this heavy dependence on oil revenue makes Nigeria’s economy vulnerable to market fluctuations.

The World Bank has urged Nigeria to implement fiscal reforms aimed at diversifying revenue streams and strengthening non-oil revenue collection. As part of its economic reform program, the Nigerian government is seeking a $750 million loan, within a larger $2.25 billion financing package from the World Bank. Access to this funding will depend on Nigeria’s progress in improving VAT and corporate tax collection, as well as modernizing tax and customs administration.