Following increased losses and negative capital as a result of wide differentials between excess of liabilities over its assets as stated in the recently published 2019 Audited Financial Statement of the Nigerian National Petroleum Corporation (NNPC), independent auditors have raised doubts over the ability of the corporation to survive as a business concern.
Auditors of the Corporation in the financial statement noted that material and circumstantial evidence exist that point to significant doubts on the ability of the NNPC to escape bankruptcy in no distant time.
The NNPC auditors comprise international auditing and financial advisory firm, Pricewaterhouse Coopers, as well as indigenous accounting firms, SIAO Partners and Muhtari Dangana & Co.
The auditors drew attention to the fact that the NNPC Group and Corporation recorded net losses of N1.8 billion and N107.8 billion respectively in 2019; compared to N803.1 billion and N254 billion in 2018, respectively, while its current liabilities exceed its current assets by N4.4 trillion and N1.1 trillion for the Group and Corporation respectively, compared to N3.3 trillion and N968.7 billion in 2018, respectively.
Specifically, NNPC Group and Corporation’s current assets, according to the financial statement, stood at N5.3 trillion and N4.5 trillion in 2019, while total current liabilities stood at N9.7 trillion and N5.6 trillion respectively.
The report recalled that in 2018, NNPC Group and Corporation’s total current assets stood at N5.4 trillion and N4.8 trillion respectively, while total current liabilities stood at N8.7 trillion and N5.7 trillion respectively.
“If all the information in the financial statement is materially correct, the opinion of the auditors would be unmodified opinion, while on the contrary, if there are the chances that the information in the financial statement are having some material errors, the auditors gives a modified opinion.
The report said that the management of the national oil firm; Group and Corporation, had sustained recurring losses over the years, which had culminated into accumulated losses of approximately N1.5 trillion and N474 billion, compared to N1.6 trillion and N490.7 billion for the Group and Corporation in 2018, respectively.
“The Group and Corporation both continue to incur losses. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Group and Corporation’s ability to continue to as a going concern, and therefore, may be unable to realize its assets and discharge its liabilities in the normal course of business,” the NNPC management said.
The management however, stated that mitigation procedures are currently being executed, while the corporation is receiving support from the Federal Government to ensure that both the Group and Corporation have adequate resources to continue in operational existence for the foreseeable future.
NNPC said the Federal Government had commenced the elimination of cost drivers responsible for accumulation of the shortfalls in settling Domestic Crude Obligation; and the introduction of the Price Modulator mechanism in the Petroleum Products Pricing Regulatory Agency, PPPRA template, designed to eliminate the major cause of the losses.
It said the government was also minimizing breaches to the country’s pipeline networks; pursuing the passage of the Petroleum Industry Bill, PIB, and its implementation, which would restructure the petroleum industry, improve transparency and governance, and also give the NNPC the autonomy to operate profitably.
The NNPC management further revealed that there were plans to recapitalize the NNPC with steps to resolve all outstanding related party payables and receivable, to enable the national oil company start on a clean slate.
By Chibisi Ohakah, Abuja
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