NIGERIA'S MISSING BILLIONS

Getting a clear picture of how much money Nigeria has lost to corruption over the years is almost impossible. The system is hemorrhaging cash in so many places that accountants often struggle to make sense of it all. The state oil firm, Nigerian National Petroleum Corporation (NNPC), does not measure its output. The government estimates that average output is 2 million to 2.6 million barrels of oil a day, making Nigeria Africa's biggest producer.

"Right now, no one can tell you exactly how much of our crude is extracted from our soil," said Orji Ogbonnaya Orji, who sits on the board of directors of NEITI. "We depend on records from the oil companies. That clearly has to change."

The NEITI audit shows some startling gaps: $540 million missing from $1.675 billion in signature bonuses - these are advance payments to develop fields, a standard producer country demand. Then there's 3.1 million barrels of oil missing from NNPC declarations about its joint ventures compared with the figures released by NNPC's international partners. That equates to 0.25 percent of the output. NNPC also received $3.789 billion in dividends from Nigeria LNG, a liquefied natural gas venture over the 2006-2008 period, but there is no record of those dividends being paid into the federal accounts.

An NNPC spokesman did not respond to requests to explain the irregularities listed in the report in detail. The firm denies malpractice. When asked about corruption last month, NNPC managing director Austin Oniwon replied that the issue was overblown. "Corruption in NNPC is in the imagination of some people," he said.

The NEITI report says foreign oil majors may have underpaid royalties "of $2.33 billion arising from subjective interpretation of volume, pricing," and grading variables. "We are questioning the basis of those calculations," Orji explained. "They are not calculated on the basis of empirical fact. And there is connivance by officials."

Foreign firms also seemed to have underpaid petroleum profit tax by over $1 billion, NEITI said. The report recommended a review of the tax returns of Chevron and Exxon Mobil. Exxon officials were not immediately available to comment. A Chevron spokesman said the firm "complies with all laws and regulations in the locations where we operate, as a matter of long-standing policy Chevron does not release specific financial details."

The NEITI audit has only just been delivered to the government. Another audit, this time by KPMG and focusing on the state oil firm, was delivered to the oil ministry in Nov 2010. The government has not published it. A copy reviewed by Reuters shows similar practices. It notes that NNPC invoices for domestic crude in U.S. dollars but pays the government in naira and that "exchange rates used by NNPC were lower than (those) ... published by the CBN (central bank)", causing a loss of 86.2 billion naira ($550 million) to the treasury from 2007 to 2009.

KPMG also said fuel subsidy claims were based on unverified declarations of fuel imported or refined rather than actual retail sales at pump stations. Analysts say this highlights a scam: fuel import ships - operated by private importers, not just the NNPC - are declared full in order to claim subsidies but are really half empty, having sold to Nigeria's neighbors where prices are higher.

"Some of the issues that were revealed were shocking," the head of the House of Representatives fuel subsidy probe, Farouk Lawan, said. He added government officials had understated NNPC payments by billions of naira. Daily consumption of petrol is 35 million liters, yet importers were being paid for 59 million liters a day.

"That means subsidy is being paid on 24 million liters but is not being consumed by Nigerians," he said. "Either those products were not brought in or they were brought in and diverted or ... smuggled out. Most likely a combination."

Asked about the KPMG report in January, President Jonathan pointed out that he had set the investigation in motion. "If there are queries, we further those queries to them (the