Overview of the Audit Findings
The recent audit report on the Nigerian National Petroleum Company Limited (NNPC) has uncovered a series of systemic violations, including mismanagement of funds, unexplained payments, and failure to comply with financial regulations. The 808-page document, submitted to the National Assembly in September 2025, highlights numerous irregularities that occurred between 2020 and 2021. These anomalies involve over $51 million in questionable settlements, raising serious concerns about the company’s internal controls and financial practices.
Unpaid Taxes and Regulatory Violations
One of the most significant issues identified in the report is the failure to deduct statutory taxes from payments made to contractors. Specifically, the NNPC did not deduct the 1% Stamp Duty on payments totaling N24.7 billion and $52.98 million. This resulted in unpaid taxes of N247 million and $529,863. The report states that this breach of Treasury Circulars and Financial Regulations poses risks such as overpayment to contractors, fund diversion, and loss of government revenue.
The audit directed the Group Chief Executive Officer (GCEO) to account for the unpaid taxes, recover and remit the sums to the Treasury, and provide evidence to the Public Accounts Committees (PAC) of the National Assembly. However, the response from NNPC management was deemed unsatisfactory by the auditors, leaving the findings valid until recommendations are implemented.
Irregular Payments and Contract Issues
Another key issue highlighted in the report is an irregular payment of $22.84 million to a contractor for Direct Sales Direct Payment (DSDP) contracts. Although crude oil and petroleum products were supplied, reconciliations showed that amounts owed to NNPC were far below what was paid. The company responded by stating that the Crude Oil Marketing Division (COMD), which managed the DSDP contracts during the period, no longer exists. However, the auditor found this explanation unsatisfactory, and the payment remains unresolved.
The audit also noted that the GCEO was instructed to recover and remit the $22.84 million to the government treasury. In all cases, the audit emphasized weak internal controls, poor documentation, and potential misuse of public funds.
Unauthorized Contract Renewals
The audit observed that the Chief Operating Officer (COO) Downstream of the NNPCL unilaterally renewed a contract for Charter Hire of Coastal Vessel and provision of MT Barwasa on emergency grounds for one year (1 May 2020 – 30 April 2021). Payments of $1.8 million were made for nine months before official approval. The NNPC cited the COVID-19 lockdown as justification for anticipatory renewal, but the auditor deemed the explanation unsatisfactory.
The report warned that such anomalies risk government payments without a contractual basis and potential compromise of funds, reflecting weaknesses in the company’s internal control system.
Provisional Payments Without Supporting Documents
The audit also highlighted payments of $2.01 million and N478.5 million for the Atlas Cove Depot Optimisation Project without invoices or receipts. The NNPCL claimed that the provided references were insufficient for tracing the transaction. However, the auditor insisted that the payments were irregular and instructed the GCEO to recover and remit the funds to the Treasury and report to PAC.
Emergency Installation of Custody Transfer Meters
Another issue raised in the report is the payment of $8.2 million for the emergency installation of custody transfer meters. The audit noted that the first and second batches of meters were delivered to the Port Harcourt office rather than the specified locations, violating contract provisions. The NNPCL management stated that SAP details provided by the audit were insufficient to trace the transactions, but the auditor rejected this explanation, leaving the findings valid.
Payment for Legacy Debt
The audit observed that a company was engaged to provide charter services for coastal vessels, and the amount claimed to be outstanding to the company between 2007 and 2010 was $1.03 million. Instead of paying the outstanding amount to the company, the NNPCL management unilaterally paid the $1.03 million to another company without evidence of a contractual relationship or a Power of Attorney indicating the transfer of the contracts to another contractor. The auditor ruled this explanation unsatisfactory, and the findings remain valid.
Irregular Variation and Inflation of the Contract
The audit flagged $1.93 million in questionable payments for coastal vessel charters. The report revealed that a two-year contract for the time charter of vessels to transport petroleum products was signed, but after six months, the contractor substituted a vessel at a higher rate, creating a daily variance. The auditor noted that no justification was provided for the unavailability of the original vessel, breaching the original contract terms.
Payment of a Doubtful Outstanding Amount
The auditor observed that $156,000 was paid to a Joint Financial Adviser for the financing of the rehabilitation of PHRC as an outstanding payment following his disengagement. The amounts were not supported with proper computation, reconciliations, or meeting records. The NNPC management claimed that the payment records include details of the disengagement process and the reconciliation conducted with the consultant, but the response was ruled as unsatisfactory.
Non-Deduction of VAT
The auditor noted that a payment of $52,000 to a consultant was made without deducting VAT and WHT, resulting in an overpayment of $8,355.18. The NNPCL stated that the Contract Agreement predates the implementation of the 2019 Finance Act, which mandated the inclusion and deduction of VAT and WHT for foreign vendors. However, the response was rejected as unsatisfactory.
Delay in the Execution of Contracts
The audit report also noted that the contract for the procurement and installation of four diesel generators at Mosimi Depot was awarded in 2017 but was not fully executed in 2020, three years after the award. The NNPC management attributed the delays to the complexity of the project and the impact of the global lockdown during the pandemic. However, the auditor ruled this explanation unsatisfactory, and the findings remain valid.
Payment to Contractors Without Supporting Documents
The report highlighted payments of N1.2 billion and $684,323.41 to 13 contractors for various works done during the financial years 2020 and 2021. The payments were made without written or visual interim reports of work done by the contractors, attached as a necessary supporting document. The management stated that performance-based documentation, including invoices, time sheets, and work logs, is used to validate the milestones achieved before payments are processed. However, the response was ruled as unsatisfactory.
Past Controversies
Over the years, the NNPCL has become one of the most opaque national oil companies in the world, as evident in its 43-year history of not releasing its audited accounts to the public until 2020. The Economic and Financial Crimes Commission (EFCC) is currently investigating 14 NNPCL officials, including two former chief executives, over an alleged $2.7 billion fraud in the maintenance and rehabilitation of the Kaduna, Warri, and Port Harcourt refineries.
