Dr. Fabian Ajogwu (SAN) has over two decades’ experience in litigation and arbitration. He is also an expert in Foreign Direct Investments (FDI) and corporate restructuring in the financial services, among others. In this interview with Assistant Editor BOLA OLAJUWON, Ajogwu, an author, speaks on the new appointments at the Nigerian National Petroleum Corporation (NNPC), the need for efficient and effective reforms in oil and gas industry, the non-passage of the Petroleum Industry Bill (PIB) and the controversial oil subsidy.
What is your position on the appointments made so far in the oil and gas sector by the President, specifically in the Nigerian National Petroleum Corporation (NNPC)?
First of all, I must say that President Muhammadu Buhari has made a well-thought-out appointment in the person of Dr. Emmanuel Ibe Kachikwu, and I say this for so many reasons. The President has made a promise to the people of this country that he would be embarking on reforms within the oil and gas industry. It is important to note that these are qualitative reforms that will need to cover more than 80 per cent of the revenue base of the country. So, it is a crucial sector, and it means that whoever would drive the reform has to be first and foremost, somebody who has integrity, is competent, has the wherewithal, good understanding and experience of how that industry works productively; not just how it works but how it works productively. He must also be somebody who is business-minded. There couldn’t have been a better person that comes to mind than Dr. Kachikwu.
Now, it is important to highlight that Dr. Kachikwu comes with him with a good degree of pedigree. He is a first class graduate from a university in Nigeria, and he held that record for more than 20 years, there was no other first class. He also graduated with LLM with Distinction from Harvard and a PhD, which he completed in record time from Harvard University. And what was his specialty? Petroleum and Investment Law strategies. And this is critical to what the NNPC ought to be in bracket, which it was doing and which it now need to start doing immediately. Petroleum and investment; that is what is needed. And these were his specialties. He hasn’t just bagged those academic degrees, he has also worked the talk in terms of industrial experience, having worked for Texaco Nigeria and Texaco Overseas for over 10 years, having worked for Exxon Mobil Group, risen to the point where he was not just a general counsel or being on the board, but also overseeing Mobil activities all across Africa. So that is a great deal of stamp of approval and from Mobil, who are partners with the Federal Government. There is so much trust invested in this man and I think it is a good decision to allow him come in and assist the President with the reforms that are needed in that sector.
What do you think of Dr Kachikwu?
I must mention that Dr. Kachikwu himself is somebody who has run something successfully: publishing as entrepreneur streaks in his blood, he is full of new ideas and has a good understanding of the contractual regimes of the NNPC. Now, it is important, because I know many would say, he is a lawyer, comes from a legal background. We must understand that the critical thing NNPC does is actually managing a lot of those contracts with its partners and getting the best for the country. Here is a man who has fingertip experience on those arrangements: production sharing; joint ventures and how they all work, having been on the other side of the partnership. He knows what the multinationals seek to do, he knows what their interests are, he knows what is good for Nigeria on the long-term, as well as the medium term and it is good that he brings all these experiences of over three decades, to bear on what the NNPC does.
I think that at this point, what we need to anticipate is a clean out of non-essentials from the NNPC; it needs to run not like the big elephant, sluggish elephant that it used to be. But it needs to move limbs, needs to be efficient and productive. The NNPC needs to impact on the lives of its shareholders who are really the people of this country. It needs to deliver on the reasons for which it was established in 1977. If you have set up something for more than 38 years and it turns like the NNPC, it needs to be born anew. This is what I think and have a lot of confidence that Dr. Kachikwu will do, with the able support of President Buhari, to ensure that there are no distractions or contrary policies that may impede the business focus of the NNPC.
What are the specific legal areas you will want a reform in the NNPC?
It is important to understand that NNPC was reorganised years ago, starting from 1988 in strategic business units, covering the entire spectrum of the oil industry operations, exploration and production, gas development, refining, distribution, petrochemicals, engineering and other commercial investments. One of the things we need to see is a streamlining of all of these different units, to bring them to more manageable sub-divisions. Each one having what we call a “profit and loss” centre, where they need to be run efficiently and transparently. That is the first thing, to streamline the operations of the NNPC and you see that he has already started taking steps in that direction. The next thing is to improve the earnings of NNPC by the kind of contracts the corporation enters; they should be profitable and advantageous contract, not lopsided contracts in which the NNPC comes out with a shorter end of the stick, because that means Nigerians comes out with a shorter end of the stick. We need a better arrangement with the partners. The third thing that we do need to expect would be transparency and corporate governance. No organisation can be successful, if there is lack of governance structures. It would just drift away.
How do you think NNPC should be managed?
An organisation like the NNPC should have all the ingredients of good corporate governance for which Dr. Kachikwu already draws from his three decades of working for multinationals, who are particular about corporate governance, and also himself being a fellow and director of the Society for Corporate Governance in Nigeria. It is an organisation dedicated purely to the development of corporate governance. We expect him to bring these to bear in NNPC, in terms of instilling proper corporate governance and that includes frequency of board meetings and accountability. The board of NNPC over the past two years barely met, and you cannot deliver governance, if you don’t come together to sit and consider reports – management reports; financial statements; activities; operational activities and strategic direction of that enterprise, especially at the board level, which of course will then distill downwards of the whole organisation. We also expect that he would look at issues of revenues and revenues that end up where section 162 of the constitution says it should end up: consolidated revenue accounts.
The NNPC needs not run as though it was owned by the managers. It is owned by the country, not the managers of the corporation. It is a commonwealth and so we expect to see accountability to that commonwealth. In terms of overall culture change, we don’t want that iconic structure with its towers being referred to as towers of corruption. We want to see them as towers of wealth of the nation – that is what they represent. They should be towers of excellence, where the wealth of the nation is grown and preserved, not where it is dissipated. We expect to see and know that Dr. Kachikwu will make this a reality. I don’t think that it is a dream that is going to take forever. There would be difficulties as with all other things driving change. There would be resistance; as we don’t expect good things to come easy.
But in all, from what I know and have read, I do believe that he is up to the task and would come with a fresh mindset, not the one bug down by bureaucracy and red tapes, but one that comes from results, being himself a result-driven person and an achiever. I see that he would want to continue with that same culture and not take anything less. That is what we expect to see, and I am confidence that should be achieved for the NNPC. In the end, it would not just be the NNPC itself, but its workers, its board and the people – the collective owners – that would benefit from it. Then it would be a positive one for President Buhari and the people would see that he is matching his words with actions.
The Seventh National Assembly could not pass the PIB into law. Don’t you think that the NNPC will carry out its responsibilities at variance with what we have already in the PIB?
We need to look at this from a very practical perspective. It was in 2000 that the Nigerian government established the Oil and Gas Sector Reform Implementation Committee in order to bring about comprehensive industry reform. The committee’s members were charged to make recommendations for establishing a new regulatory and institutional framework within the oil and gas sector in Nigeria. That essentially led to trying to implement one of those recommendations, which is to harmonise the entire regulatory laws into a Petroleum Industry Bill (PIB). I am giving this background to enable us see the journey of PIB. We are now 15 years into that effort and the first draft of the PIB came out in 2008. Seven years after the first draft, there have been several changes, modifications and all sorts. In 2012, the latest version was sent to the National Assembly by former President, Goodluck Jonathan. It stayed there for about three years, until on June 4, 2015, the House of Representatives passed the PIB. I must underline that it is yet to be passed by the Senate and, of course, yet to get the accent of the President.
Do you foresee the PIB being signed into law soon?
Fifteen years of waiting, seven years of waiting for the first draft, and I cannot predict how much longer it will take for the PIB to come out. People who want to achieve results don’t get bug down by this kind of lengthy processes, the PIB has taken this long because, as I previously said, it is like a big elephant, which is trying to fly because it is difficult to take off. It includes so many things, and I am sure you would see that there are issues in the version passed by the House of Representatives on June 4, 2015, with definition of what is an oil producing community and so many other things. I think that in seeking to bring everything into one bill, it became too complicated and too many stakeholders disagreeing over too many things. Also keep in mind that while this delay is happening, the NNPC needs to carry on, revenues needs to be earned for the country to continue and so, it doesn’t wait for this PIB, and I don’t expect that the activities or clean-up at the NNPC should wait for the PIB. In any case, I don’t that is the plan of those who want to clean up the place. I expect that within the existing legal framework, and it should be kept in mind, we are not operating in vacuum. The NNPC is a creation of Statute, it’s an Act; it defines how things should be done. The problem hasn’t really been that the legal framework itself is defective; it’s implementation and sanctioning of breaches of the existing framework that has led to the journey-to-nowhere. What I expect from Dr. Kachikwu, which I have a lot of hope and confidence, is that working within the existing framework, he would bring transparency, decency, efficiency and proper governance to bear on NNPC, as it is. If and when the PIB is passed, and becomes the Petroleum Industry Act, the NNPC can work it.
I have no doubt in my mind that the activities of the NNPC will be aligned in compliance with that law when it becomes law. I do disagree with those who suggest that we should hold on until the legal framework being proposed becomes law. I would be a realist in this regard to say let us go with the reality on ground and make the NNPC a better corporation, rather than suspend the reforms and wait till the PIB is passed. Those would be my humble views.
How can the reform in the NNPC tackle illicit financial flows? And is there any need to seek for assistance from the international community to tackle it?
This is a very crucial question; when you look at the quantum, it’s because oil largely accounts for more than 80 per cent of our revenues and rarely qualitative activities, in terms of export and earnings. Whenever there is lack of transparency, questionable payment and oil theft, the money gets somewhere else other than where it ought to go. It highlights itself by the percentage of total; it becomes 80 per cent of all. It then seems as if that is a dominant place where illicit transactions do occur; it is simply because of the relevance. Oil theft goes with receipt of the money for the stolen crude and you will find that this kind of money will go in funny directions. Oil theft is one of the largest destinations of pipelines for illicit flows, and the minute we can tackle the corruption within our sector, we would drastically have reduced those kinds of funds. Would the NNPC led by Dr Kachikwu achieve that alone? I don’t think so. I think the corporation does need the cooperation of other institutions, like the Central Bank of Nigeria, which has already began plugging loopholes in the system and trying to make us compliant with money laundering regulations that are more or less global practices, if we want to be part of that system.
We must also realise that law always move slower than crime and mischief. So, if mischief happens today, you will need an amendment to block that loophole, and then the mischief-makers look for another loophole and when they find it, they will use it for a while until the regulation blocks it. I must commend the Central Bank of Nigeria for responding without fear as they observe loopholes and gaps for illicit funds flow. The NNPC needs institutions like CBN, the organised private sectors, businesses, the Economic and Financial Crimes Commission and global partners to deal with this. I expect that with a man like Dr Kachikwu, who knows how to work in collaboration and partnership with people, we would be able to harness those synergies among those institutions to work together to tackle the common problem.
What is your view on fuel subsidy?
Fuel subsidy continues to be an issue, not because anyone wants to particularly punish consumers of fuel, but because of the quantum that every N4.3 trillion of our budgets, about N1.5 billion – more than 25 per cent – goes into funding fuel subsidy. This figure exceeds what we spend for education, health and other component parts, all put together. This is really a practical question that we must answer: do we want to continue on this? Or do we want to stop and take the hard and painful decision? I think that when we look at the strain it puts on our foreign exchange, external reserves, government revenues, we must understand that the role of government is to allocate resources to the areas where they are needed in an optimum manner, respecting the basic laws of economy, which is that there would always be an infiniteness of needs and demand, and indefiniteness of supply.
