MDGIF: Rejects N94.4bn Gas Flare Audit, Clarifies Collection Role

• The Midstream and Downstream Gas Infrastructure Fund (MDGIF) has refuted a N94.4 billion audit query from the Auditor-General, denying any under-remittance of gas flare penalties.
• MDGIF, a directorate of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), asserts that it does not collect gas flare penalties.
• The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is statutorily responsible for collecting these penalties, which are then remitted to the Federation Account before being disbursed to MDGIF.
• MDGIF attributes the reported discrepancies to timing and reconciliation issues within the multi-agency Federation Account remittance process, not unaccounted revenue.
• The fund has formally requested a review from the Auditor-General, providing relevant records to clarify its position.

The Nigerian Upstream Petroleum Regulatory Commission is solely responsible for collecting gas flare penalties under the existing statutory framework.

The Midstream and Downstream Gas Infrastructure Fund (MDGIF) has vehemently rejected allegations of under-remittance concerning N94.4 billion in gas flare penalties. These claims were highlighted in the Office of the Auditor-General of the Federation’s 2023/2024 Annual Report on Non-Compliance and Internal Control Weaknesses, which identified significant financial irregularities and revenue shortfalls.

Operating as a directorate under the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), MDGIF clarified that the discrepancies flagged by the Auditor-General do not signify missing or unaccounted revenue. Instead, the fund asserts that these variances stem from timing differences and reconciliation challenges inherent in the multi-agency process for remitting funds to the Federation Account.

The NMDPRA issued a formal statement on Tuesday, signed by its Director of Public Affairs, George Ene-Ita, to address the audit query. This response directly counters earlier reports from PUNCH Online on Sunday regarding the Auditor-General's findings, emphasizing that the reported shortfalls are not attributable to MDGIF's operations.

A central tenet of MDGIF's defense against the N94.4 billion query is its assertion that it does not, in fact, collect gas flare penalties. The fund explicitly stated that it should not be held accountable for any potential shortfalls in the collection and remittance process, as this responsibility lies elsewhere.

Under the existing statutory framework, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) holds the sole responsibility for collecting gas flare penalties. These collected funds are subsequently remitted into the Federation Account. Following this initial deposit, disbursements are then made to MDGIF's dedicated account at the Central Bank of Nigeria through the Federation Account Allocation Committee (FAAC) during its monthly meetings. This process, according to MDGIF, is well-documented and supported by readily available records.

MDGIF's role, therefore, is strictly limited to receiving statutory revenues rather than actively collecting them. Consequently, any established shortfall in gas flare penalty collection would fall within the purview of the collecting agencies, primarily NUPRC, and not the fund itself.

The MDGIF maintains that the variances noted in the gas flare penalty remittances are a reflection of the complex movement of funds through various agencies involved in the Federation Account channel. These timing and reconciliation issues, it argues, are distinct from actual unaccounted revenue, which is a critical distinction in its response to the Auditor-General's query.

In a proactive move, the fund has formally communicated with the Office of the Auditor-General of the Federation. This communication included the submission of relevant FAAC records and a request for a comprehensive review of the audit position. This step underscores MDGIF's commitment to resolving the dispute and providing clarity on its financial operations.

Reconciliation of all revenues accruing to MDGIF is described as an ongoing, joint undertaking involving all relevant regulatory institutions within the petroleum sector. This collaborative effort aims to ensure that any outstanding amounts are properly accounted for and reconciled across the various entities involved in the collection and disbursement chain.

This clarification from MDGIF emerges amidst heightened scrutiny of public institutions, a trend driven by the regular publication of the Auditor-General’s annual reports. These reports frequently highlight financial irregularities, unremitted revenues, and weaknesses in internal controls across various Ministries, Departments, and Agencies, prompting a demand for greater accountability.

Established under Section 52 of the Petroleum Industry Act 2021, the MDGIF's core mandate is to support investment in crucial midstream and downstream gas infrastructure. This aligns with Nigeria's broader objectives of increasing domestic gas utilization, fostering industrialization, and advancing its energy transition goals.

The ongoing reconciliation process, therefore, is not just about addressing a specific audit query but also about reinforcing transparency and ensuring the efficient operation of a fund vital to Nigeria's energy sector development.

This article clarifies the statutory responsibility for collecting gas flare penalties, identifying NUPRC as the sole collector, not MDGIF. Lawyers and compliance officers advising clients in the Nigerian oil and gas sector should note this distinction to ensure proper remittance channels are followed and to anticipate potential increased scrutiny or reconciliation efforts regarding these payments.

Source: Original reporting via PUNCH Online