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The
senate yesterday opened hearing into the “insolvency” controversy of
the Nigerian National Petroleum Corporation and was presented with a
letter in which the company admitted it has financial difficulties.

In the
correspondence sent to the Federation Account Allocation Committee,
headed by the Minister of State for Finance, Remi Babalola, the NNPC
spoke of the challenges it has faced in meeting its responsibilities
and said it was “insolvent.”

“NNPC is facing
financial difficulties evidenced by amongst others, the inability to
pay for domestic crude as at when due and delays in settling bills for
fuel imports; the financial difficulties essentially stem from
disequillibrium between costs and cash inflow streams; that the
corporation is owed substantial amounts as un-reimbursed subsidy on
petroleum products,” the corporation said in the letter.

“NNPC spends
increasing sums of money in repairing/replacing vandalized assets and
is suffering from products loses arising therefrom; the cost of holding
strategic reserve of petroleum products on behalf of the Federal
Government including demurrage are borne by NNPC.

“NNPC is insolvent
as current liabilities exceeded current assets by N754 billion as of
December 2008 and so; NNPC is incapable of repaying the N450 billion
owed to the Federation Account unless it is reimbursed the N1.156
trillion from the Ministry of Finance,” the letter concluded.

The NNPC Group
Managing Director, Austin Oniwon and Mr. Babalola, yesterday, appeared
before the Senate committee on Petroleum Upstream and Downstream, in
the aftermath of the controversy raised by Mr. Babalola’s comment that
the company is “insolvent”.

Mr. Oniwon said the
memo was to explain the challenges that the cooperation faces which
made it unable to pay up the N450bn it owes the FAAC.

Refusal to pay debt

The corporation’s
boss told Senators that although the NNPC was in a position to pay the
debt, it refused to do so because of the Federal Government in turn
owes it N1.5 trillion.

The amount results
from years of withdrawal effected by past governments who ordered for
funds without receiving National Assembly approvals, the Mr. Oniwon
said.

He said when the
Department of Petroleum Resources (DPR) was to be established, the then
President directed the NNPC to release N651 million for the take off
but the money was not refunded.

Also, he said when
a sugar company was to be established, the president (unnamed) again
asked the corporation to release $18 million, which has not been
refunded.

The Senators who expressed shock at such directives, ordered the corporation to present its annual accounts since 1999.

Mr. Babalola denied knowledge of the Federal Government owing the
NNPC N1.5 trillion as, according to him, the Federal Ministry of
Finance has always released funds for the payment of petroleum subsidy.