Reps to probe NBET over $69.4m owed by two Benin Republic-based firms

The House of Representatives’ Committee on Public Accounts is expected to commence an investigative hearing into the $69.4 million debt owed by two foreign companies operating from Benin Republic for supply of electricity between 2015 and 2019.

The details of the transaction was contained in the audit query issued by the Office of the Auditor General for the Federation on Non-compliance/Internal Control Weaknesses in Ministries, Departments and Agencies (MDAs) of the Federal Government for the year ended 31st December, 2020, being considered by the Committee, chaired by Hon. Bamidele Salam.

According to the oAuGF report, the value of the electricity supply which took place between January, 2015 and January 2019 amounted to US$315,408,623.07, out of which the sum of US$246,023,923.87 was paid.

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In its response to the oAuGF query, Nigeria Bulk Electricity Trading Company alleged that a petition from the Transmission Company of Nigeria stopped it from recovering about $69.4 million debt owned it by two foreign companies operating from Benin Republic.

According to extant law, NBET which is under the supervision of the Federal Ministry of Finance, has the statutory powers for sale of power (electricity).

The NBET management said: “In June 2017, NBET and the Transmission Company of Nigeria (TCN) NIGELEC, through a joint letter, advice the NIGELEC and CEB, respectively that they should continue to credit the account of TCN Market Operator pending the signing of the agreements that would put in place a new contractual /commercial framework with NBET.

“NBET proceeded to negotiate a new contractual/commercial framework with CEB and NIGERLEC respectively, but faced challenges from both TCN and the International customers in finalizing the new Power Sale Agreements that would pave the way to fully assume the administration of these contractual relationships.

“While the government has directed NBET to conclude the international contractual engagements, TCN however wrote to the Federal Ministry of Power asserting that NBET has no role in the ECOWAS regional Electricity market and cannot be executing contracts with CEB and NIGELEC.

“The letter further stated that TCN has the responsibility to recover all outstanding debts and noted that they had reconciled the outstanding debt and were discussing a payment plan for offsetting the debt.

“Thus, it is the TCN that are in the best position to render account for the outstanding payment. NBET is taking necessary steps for the recovery of its portion of the payments that have been credited to TCN”.

In its audit query to the government owned company, the Auditor General for the Federation alleged that NBET failed to recover about US$69,384,699.20 which amounts to N25.187 billion (at the rate of N363 to a dollar as of 31st January, 2019).

It said: “Paragraph 227(ii) of the Financial Regulations (FR) 2009 states “It is the responsibility of Accounting Officers to follow up outstanding items of revenue and to take all necessary steps to ensure collection or, where collection is no longer possible, to apply to the Ministry of Finance for authority for a write-off, explaining the circumstances.

“Also, article 10.3 of Communaute Electrique Du Benin (CEB) and article 13 of Societe Nigerienne D’Electricite (NIGELEC) of the contract agreements allowed for interest of 5% per annum and 1% interest per month to be charged on the outstanding amount owed by CEB and NIGELEC as set out in the CEB and NIGELEC PSAS respectively.

“Audit observed that the Company entered into an agreement with two firms that are based in Benin Republic for the supply of electricity to those firms. From the review of records available to audit, the company commenced supply of electricity in January, 2015.

“As at January 2019, the value of supply made to the two foreign firms amounted to US$315,408,623.07.

“Review of invoices provided for audit, however, revealed that, as at January, 2019, the firms had only made payments to the tune of US$246,023,923.87, leaving an outstanding of US$69,384,699.20

“The company failed to provide for audit clarification and efforts made to ensure the recovery of these huge amount which in Naira, amounts to N25,186,645,809.60 at the rate of N363 to a dollar as of 31 st January, 2019.”

The oAuGF also observed that the company failed to recover a loan of N188.360 million from one of its Managing Directors and seven other staff who are no longer in its employment.

Explaining the loan, the OAuGF said “audit observed that the sum of N321.724 million was paid to a former Managing Director of the Company and seven other officers as staff mortgage scheme/revolving loans for the acquisition of properties while they were in active service.

“Of the above amount, a former Managing Director received the sum of N85,283,867.36 in January, 2018, while the balance of N236,440,927.81 was paid to the seven officers in July, 2016.

“At the time of disengagement from the Service in July, 2020, the former Managing Director had only repaid the sum of N35,707,541.90 leaving an unpaid balance of N49,576,325.48 while the sum of N97,657,416.14 was recovered from the seven former officers of the company, leaving an unpaid balance of N138,783,511.67.

“In all, the sum of N188,359,837.15 remained outstanding at the time of audit in October, 2020, and all the officers in question were disengaged from service in 2018 without paying the outstanding loan of N188,359,837.15.

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However, the management failed to produce the officers’ explanation to the audit query, leading to a recommendation that the Managing Director be made to justify why the officers were disengaged without paying the outstanding loan of N188,359,837.15.

The audit report accused the NBET of failure to submit its audit report account as required by law from 2017 to 2019.

The report said “Paragraph 3210(v) of the Financial Regulations (FR) 2009 states that the Chief Executive Officer shall submit both the Audited Accounts and Management Report to the Auditor-General and the Accountant General not later than 31st May of the following year of Account.”

“In spite of the extant regulations, the Nigerian Bulk Electricity Trading Company failed to submit its audited financial statements for the years 2017 to 2019 to the Office of the Auditor-General for the Federation as at the time of audit in October, 2020.

“The above practice by the Company contravened extant regulations on submission of audited financial statements and the anomalies could be attributed to weaknesses in the internal control system at the Nigerian Bulk Electricity Trading Company, Abuja.”

In its response, NBET management said: “the accounting firm of Aminu Ibrahim and Co, who were engaged following the grant of No Objection by the Bureau of Public Procurement (BPP), have commence the process of carrying out the audit of the 2017, 2018 and 2019 financial statements that are outstanding.”

Other issues in the audit report include: unauthorized conversion of four government vehicles to personal use by two former Managing Directors and failure to collect stamp duty on 66 contracts awarded by it.