The Office of the Auditor-General for the Federation has uncovered financial irregularities and revenue shortfalls totalling about N94.4bn in the operations of the Midstream and Downstream Gas Infrastructure Fund.
According to The PUNCH, the findings were contained in the Auditor-General’s 2024 Annual Report on Non-Compliance and Internal Control Weaknesses in Ministries, Departments and Agencies.
The Fund, established under the Petroleum Industry Act to finance gas infrastructure development and environmental remediation, was faulted over alleged under-remittance of gas flare penalties, uncollected statutory revenues, questionable consultancy fees and breaches of procurement procedures.
The largest concern involved gas flare penalties. Auditors identified an alleged N51.09bn shortfall covering 2023 and 2024.
For 2023, the Nigerian Upstream Petroleum Regulatory Commission reported N140.54bn in gas flare penalties. After deducting four per cent as collection costs, N134.92bn was expected to be available to the Fund.
However, only N122.44bn was reportedly accounted for by the Fund, leaving a difference of N12.48bn.
The audit report said, “There was no justification for non-collection of the actual net revenue generated by the Commission from gas flaring, and prompt payment into the MDGIF Account.”
The Fund disputed the finding, attributing the discrepancy to differences in reporting periods and accounting procedures.
It explained that the NUPRC remitted its collections to the Federation Account, after which the Office of the Accountant-General of the Federation deducted the four per cent collection cost and transferred the balance to the Fund.
The auditors, however, rejected the explanation and maintained their finding.
A similar discrepancy was identified in 2024, when NUPRC reported N391.26bn in gas flare penalty revenue. Following the four per cent deduction, N375.61bn was expected to accrue to the Fund, but the MDGIF accounted for N337bn, resulting in an alleged shortfall of N38.61bn.
Management again disputed the calculation, claiming that reconciliation of its records showed no significant shortfall.
The Auditor-General rejected the explanation, stating, “The management’s response to the issue has been noted; however, it is deemed unsatisfactory because the calculation in the audit response is not correct.”
Auditors also identified problems with the statutory 0.5 per cent levy on petroleum products and natural gas.
In 2023, N39.90bn was expected from the levy on petroleum products, but only N13.35bn was reportedly remitted, leaving an outstanding N26.55bn.
For 2024, the report identified another N12.94bn gap, with N102.24bn expected compared with N89.30bn accounted for by the Fund.
The Auditor-General recommended that the outstanding revenues be recovered and evidence of payment forwarded to the Public Accounts Committees of the National Assembly.
The audit also queried N3.52bn paid to a private consultant for the recovery of gas flare penalties. According to the report, the consultant received five per cent of N65.44bn allegedly recovered.
Auditors said the Fund failed to provide evidence of written approval from the President authorising the engagement of a private consultant for revenue recovery.
The report stated, “Evidence of express/written approval of the President of the Federal Republic of Nigeria was not produced to the auditors to justify the engagement of a private consultant.”
It further noted that documents relating to due process, due diligence and evidence of the consultant’s performance were not sufficiently provided.
Although the Fund said the engagement had been approved by its Governing Council, the Auditor-General considered the explanation unsatisfactory and recommended that the N3.52bn be accounted for and recovered.
Beyond the financial discrepancies, the audit raised concerns about the Fund’s financial transparency.
The MDGIF reportedly failed to submit its audited financial statements for 2022, 2023 and 2024 to the Auditor-General and also did not publish its certified annual audited accounts for the three years.
Management attributed the delay to procedural difficulties, saying the audits were being concluded and awaiting sign-off.
The auditors warned that the failure to submit and publish the accounts could undermine legislative oversight, accountability and public confidence in the management of the Fund.
They also cautioned that weak internal controls and inadequate collection of gas flare penalties could lead to revenue losses and reduce funding available for environmental remediation in communities affected by gas flaring.
The findings come amid changes to the Fund’s financing structure following President Bola Tinubu’s Executive Order 9 of 2026.
The order, signed on February 13, 2026, directed the suspension of gas flare penalty remittances to the MDGIF, with the proceeds instead paid into the Federation Account.
The Federal Government said the move was aimed at protecting oil and gas revenues and increasing funds available for distribution to the three tiers of government.
Despite the change, the MDGIF remains a statutory institution under the Petroleum Industry Act and continues to receive revenue from other sources, including the 0.5 per cent levy on petroleum products and natural gas, grants, donations, investment income and other permitted sources.
The Fund has also continued to support gas infrastructure projects. In May 2026, President Tinubu commissioned four MDGIF-backed compressed natural gas infrastructure projects in Lagos, Abuja and Owerri.
However, the audit findings have renewed concerns about the management of public revenues earmarked for Nigeria’s gas infrastructure development and environmental remediation.
