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  • NNPC should be replaced – El-Rufai

    NNPC should be replaced – El-Rufai

    • Full text of Malam Nasir El-Rufai, Governor of Kaduna State at the 2015 Wole Soyinka Centre Annual Media Lecture, delivered on 13 July 2015.

     

    There is every danger that addressing a topic like this might yield another exercise in vain lamentation when what our country needs to do is take and give effect to rational decisions about the oil sector. For instance, the discourse around the resource curse has had a deep resonance for many Nigerians because it vividly sums up the paradox between the huge earnings from oil and the reality of poverty and underdevelopment for most Nigerians.

    Thus we have jobless growth, a fact that statistics touting high GDP growth rates tend to obscure but which is painfully real for many people. And we continue to suffer the consequences of our affliction with the Dutch disease. The easy money from oil has led to the neglect of other endowments, most especially agriculture.

    Yet talk we must when a problem persists in the embarrassing dimensions that Nigeria’s oil debacle represents, in the hope that we can deepen understanding about the precise nature of the problem, and build national consensus about the possible solutions.

    Even the crafters of the topic of this lecture imply that something is rotten in the governance and outcomes of Nigeria’s oil industry. Yet they helpfully infuse an air of optimism by not describing it as oil misfortune.

    Thus I approach this assignment not as an fortune-teller, but as a Nigerian who has had the duty and the interest to pay more attention to this issue than most of my compatriots. During the Obasanjo years, I had the responsibility to constitute Oil and Gas Implementation Committee that led to the drafting of the original Petroleum Industry Bill as an instrument for reforming the oil sector.

    Eight years after the exit of that government, the PIB has not become law, mainly through the wilful neglect of the successor governments that prioritized their personalized stranglehold on the sector’s revenues above its reform and efficient performance for national benefit.

    We now have another chance to anchor our oil sector reform agenda on the current and projected realities in that sector. And we must do that in the knowledge that the world is not waiting for us, that while we dallied new suppliers have come in to the global oil business and buyers have more choice.

    Some of our traditional customers have become self-sufficient, while others have developed alternatives thus reducing their reliance on our ‘light, sweet crude oil’.

    Is there an oil fortune?

    In fiscal terms, the answer is a massive yes. That the revenues have de-clined, or not been used to build human capital or enduring physical infra-structure is another matter. Nigeria’s oil reserves relative to our population is puny by comparison to the Gulf states. But you only need to imagine what national budgets would look like without the oil receipts to appreciate the fact that some oil is better than no oil.

    And we are not talking peanuts here. Despite a 60% fall in oil price between June 2014 and the end of that year, Nigeria still earned USD 77 billion from oil exports in 2014. The Punch newspaper of 2 April 2015, quoting figures from the United States Department of Energy, placed oil export earnings for the year 2011 at USD 99 billion. Indeed in the five Jonathanian years, Nigeria earned nearly USD 500 billion from crude oil and gas sales.

    The 2014 earnings of $77 billion is rather small compared to the $246 billion that Saudi Arabia made, but it cannot be sniffed at. So there are oil fortunes and there are oil fortunes. What we need to interrogate is how responsibly we have managed that fortune, how diligently we have tried to expand and sustain it and whether having that national fortune has impacted significantly on the fortune of the average Nigerian.

    About 40% of Nigerians are estimated to be very poor. That is about 70 million living people living below the poverty line in a country that has earned at least 1trillion in current dollars from oil in 50 years. For our vast masses, oil is no fortune.

    It is more of a mirage, but a more insidious kind, because the fortune is visible in the lifestyles of a few thousands of the privileged elite but is stubbornly inaccessible to tens of millions of ordinary people. Our rich enjoy the lifestyles of the richest in the world, while our poor are truly the wretched of the earth. This inequality is most unfortunate.

    That wide gulf in living standards is clearly problematic. It is, in my view, a major responsibility of a democratic government to strive to move more people away from the attrition that extreme poverty inflicts. This is not attained by wishful thinking, or by merely affirming the intent. It is about managing our resources in a way that sustainably builds our people, diligently collecting revenues and applying them in a determinedly cost-effective and result-oriented manner.

    The best fortune a country can have is its people. But like many gems, they have to be polished and nurtured for their talents to glow. Spending efficiency and effectiveness is best reflected in outcomes such as more educated and healthy people, living longer lives productively and happily.

    That, for me, is the major reason we must seek to enhance and responsibly manage Nigeria’s oil fortune. It must become the people’s fortune.

    Sketching the Oil Industry

    Let us examine some statistics to give us a picture of the oil industry in Nigeria. In 2014, Nigeria was producing on the average about 2.2 million barrels of crude oil per day, while importing most of its daily consumption of 43.5 million litres of refined petroleum products.

    That reliance on imports of refined products has seen unsustainable expenses on questionable subsidy payments, exemplified by USD 8.99 billion in the 18 months between January 2012 and June 2013.

    About N971 billion was budgeted for subsidy payments in 2014 alone (more than twice that was eventually paid). You all recall how trillions of Naira were paid out as oil subsidy in 2011, when only N254 billion was appropriated

    No one has been successfully prosecuted for this scam. Huge deficits in gas supply have ensured that the country’s thermal plants cannot produce power at optimal levels. In the eight years leading up to 2014, joint venture production declined by 50.4%. Some 100,000 barrels per day, about five percent of total production, is estimated to be lost to organized theft.

    And we all dread the ease and rapidity with which supply shortages lead to endless queues, widespread panic and mortal consequences for the many victims of tanker accidents.

    The long and short of the situation of our oil industry is best exemplified by the parallel government called the NNPC. In 2012, it sold N2.77 trillion of ‘domestic’ crude oil but paid only N1.66 trillion to the Federation Account.

    In 2013, it earned N2.66 trillion but paid N1.56 trillion to FAAC, in 2014 N2.64 trillion but remitted N1.44 trillion, while between January and May 2015, it earned N733.36 billion and remitted only N473.2 billion!

    That means that the NNPC only remitted about 58% of the monies earned between 2012 and the first half of 2015. A company with the audacity to retain 42% of a country’s money has become a veritable parallel republic!

    The NNPC feels entitled to consume more resources than the 36 states, the FCT and the Federal Government combined! The example just given is only with respect to domestic crude oil sales. Similar leakages exist in NPDC, NAPIMS procurement and subsidiary budgets.

    How could a country so dependent on oil revenues have been so lax about the proper governance, efficiency and security of its oil industry?

    How can a mono-product economy be so relaxed that it takes up to 24 months or more to make decisions on vital oil industry projects? Why is it that in this most crucial of sectors it has been possible for briefcase companies to walk away with big assets, billion naira subsidy payments and ‘local content’ contracts?

    Can an oil industry with virtually no serious barriers to entry yield fortunes beyond a narrow circle? For so great are the miracles that oil has performed in the lives of a few, there is not much left for the many.

    Having strayed into lamentation in describing the Nigerian oil industry, let me quickly return to trying to draw lessons and to suggest ways by which we may successfully navigate a different track. We can agree that what passes for the oil industry is a mismanaged, costly, corrupt and grossly inefficient operation. These negatives are not the way to grow or retain fortune.

    So what should we consider doing?

    Let us first learn the appropriate lessons. We are neither immune from the laws of economics nor from the consequences of sheer folly.

    Now that more countries are producing and selling oil and gas, we can safely assume that barring a new phase of explosive global economic growth, oil will remain relatively cheap at the $50-$60 per barrel range, for the foreseeable future. What do we intend to do with these diminished earnings?

    If we persist in indulging our appetite to consume rather than save, import rather than produce domestically, or neglect to prioritize capital investments, we will simply sink deeper into poverty. We must resolve to spend wiser, and do more with less.

    Our general national orientation has been impacted for worse due to our attitude to the oil cash cow. Let us firmly resolve that growing our people’s potentials will be a primary goal, and that in the pursuit of that aim, we shall commit to an efficiently and transparently managed oil industry.

    We can demonstrate this new purpose by slaying three huge dragons:

    1) A fixation with public ownership and control of every major oil asset

    2) the corruption and distortion that oil subsidy is inflicting on our economy, and

    3) the NNPC in its current form is in our collective national interest.

    End the fixation with public ownership: You will recall the outcry when the Obasanjo government sold two of our refineries shortly before it left office in 2007. The successor-government reversed the sale.

    Eight years and millions of dollars in turn-around maintenance later, the refineries are at best a minor component of our supply sources for refined products while remaining a suction pump of our resources.

    One of the men whose purchase of the refineries was aborted is now building his own, and it can be expected to be more modern, far more efficient and more productive than the public facility we turned into an object of baseless veneration. Let us be realistic enough to choose the most pragmatic options when we confront national problems.

    We should incentivize competent investors to acquire majority shares and management control in all our refineries and sell to them crude oil at market prices, and remit the proceeds directly into the Federation Account!

    Tackle the corruption and distortion in subsidy regime: I daresay that the oil subsidy regime has neither grown our people nor guaranteed stability of refined product supplies. What subsidy has achieved is create a huge hole in the budget and a new array of overnight billionaires.

    The downstream oil business in Nigeria has morphed into one optimised for the pursuit of subsidy payments. We see thinly-disguised periodic hostage-taking as the subsidy barons seek to pry open government coffers. It is time to tackle the corruption in the subsidy regime.

    We can discuss how the resulting subsidy savings will be spent to improve lives, while guaranteeing stability of supply to the domestic market.

    We have a president with both the integrity to responsibly manage the savings and the experience of managing special interventions based on subsidy savings.

    Let us say bye to foreign exchange drains, opaque crude swaps, offshore processing agreements and other devices that have derailed and distorted the subsidy regime, to our national detriment.

    Reverse missed opportunities: I have already highlighted the fact that our country has neither saved nor wisely invested oil proceeds from the five oil booms that my sister Oby Ezekwesili identified.

    I may only add that the oil industry itself is a victim of this lack of proper investment. We have been as unable to utilize what it yields us as we are remiss about expanding what it can yield us, by prudent and focused re-investment.

    Nigeria’s oil reserves are not growing at a fast enough pace. The gas potential is still largely that, an untapped potential amidst pressing needs. Since Bonny LNG we have not been able to complete and commission any other – Brass and Olokola LNG projects remain on the drawing board. The implementation of the national gas masterplan has stalled since 2009.

    And so there is simply not enough natural gas collected and dried to feed our power turbines, industries and households. There has to be a commitment to sustained investments to stimulate a proper gas sector.

    The multiplier effects of this will be immense, from contributions to improving the country’s power capacity, fuel homes and industries, create jobs and improve export earnings. We must be ambitious about what we can achieve here.

    We similarly need to encourage more local refining, and not just to assure stability in the supply of refined products for the domestic market but to cut costs and save jobs.

    We also have untapped potentials in petrochemicals, which can help fast-track domestic industrial activity and improve export earnings.

    In short, we must take steps to reposition our oil and gas sector as one that is properly integrated into the national economy, helping to create jobs, raise skills level, drive industrialization and earn more from exports.

    The rents therefrom can then be applied towards investments in human capital, physical infrastructure and economic diversification.

    How do we attain this wish list?

    We need a mix of fresh strategic thinking and a firm commitment to reform. We need to define exactly what we want the oil industry to be and to achieve, and then define the structure that can best deliver it. An efficient and productive oil sector, able to create jobs, spur industrialization and earn more revenues requires that we tackle the monster that the NNPC has become.

    This country can no longer afford to maintain an NNPC that arrogantly, unlawfully and unconstitutionally spends an unhealthy proportion of national oil earnings on itself.

    We should replace the NNPC with brand new organizations that are fit for purpose: – among others – a commercialized and corporatized national oil company and new industry regulators.

    This new national oil company should be capitalized once and for all, and then freed to fend for itself like other national oil companies do, seeking its financing independently from the financial markets and paying due taxes and royalties.

    The corruption and nonchalance that have hobbled the NNPC are symptoms that its best days are over. We should give it a deserved funeral so that a new institution, active and nimble, can promptly replace it.

    NNPC’s subsidiaries and associated companies can be reviewed, restructured and privatized or commercialized as appropriate consistent with national interest and objectives.

    The government should review the Joint Venture strategy, with the governing principle being to shift the financing and operational risks to the markets and operators respectively.

    Government should avoid owing the oil companies, and should more proactively review the terms and implementation of the Production Sharing Contracts (PSCs) and concentrate on collecting the royalties and taxes due to it.

    No one is better qualified to do this than the person that birthed the NNPC through the merger of the NNOC and the Ministry of Petroleum in 1977 – President Buhari himself.

    No one can appreciate the gap between the vision of NNPC’s founding fathers, the beautiful baby of 1977 and the 38 year-old monster it has become better than President Buhari.

    The NNPC of today must make Chief Sunday Awoniyi of blessed memory squirm in his grave. Something fundamentally decisive must be done to tame this monster.

    We must have the political will to make all oil industry transactions transparent. There should be clear rules and processes for licensing, concessioning, procurement and contracting. Opaque systems tend to be corrupt, and it is time to shine the light.

    The president has already taken the commendable step of directing that all revenues be remitted either to the Federation Account or the consolidated revenue fund as required by sections 80 and 162 of the Constitution.

    President Buhari is therefore clear that oil industry revenues will no longer be treated as some slush fund of the federal government.

    It is the national consensus that we arrive at regarding the oil sector that we can finally codify in a new petroleum act, which should be a simply worded, concise piece of legislation that spells out the general governing principles for the industry. Specific matters can then be based on subsidiary legislation, regulations and agreements. Complex and densely worded laws conduce to opacity and should therefore be avoided.

    I am by no means underestimating the titanic struggles that might be necessary to change the Nigerian oil industry. The vested interests will be all out to thwart change and uphold the status quo. The media and civil society organizations (CSOs) have the major role of pushing for transparent disclosures and adherence to due process.

    No other institutions have the power of CSOs and media to advocate, educate and enlighten the public to support and demand the most pragmatic, rational and effective measures that can make Nigeria’s oil fortune become the people’s fortune. The media in particular must lead from the front in this effort.

    To be in a position to accurately educate, the media must itself be knowl-edgeable about the issues. Apart from the obvious advantages of having specialists leading the reporting of certain industries, the media performs an immense service when it affords the public the resources to partake in informed debate.

    And the media must enhance its capacity for follow-up, to focus on an issue long enough to report its resolution. It must use the Freedom of Information Act maximally to ensure that wrong-doing and impropriety are not protected by official secrecy. If we successfully remake the oil industry, we would have significantly remade our country.

    And our poverty stricken majority will be the better for it. This, ladies and gentlemen, is the burden of responsibility placed on us as leaders in our various spheres of influence.

    Thank you for listening. God bless the Federal Republic of Nigeria.

  • NNPC targets 20% petrol supply from local refineries

    NNPC targets 20% petrol supply from local refineries

    The Nigerian National Petroleum Corporation (NNPC) hopes that its domestic refineries can cover 20 per cent of domestice product needs, the head of refining has told Reuters.

    Group Executive Director of Refining and Petrochemicals Ian Udoh said he expected to receive six cargoes a month of Nigerian Bonny Light and Escravos crude oil to run 180,000 barrels per day (bpd) or 40 per cent, of Nigeria’s total refining capacity.  He said he expected to produce 8 million litres a day of petrol, accounting for about 20 per cent of the estimated consumption.

    The 125,000 bpd Warri refinery resumed last week after maintenance and it is expected to run at 60,000 bpd. The Port Harcourt complex will start ramping up over the next two weeks but only the newer of the two plants at the site is functional and at 90,000 bpd versus its 150,000 bpd capacity. The last refinery to restart will be the Kaduna Refinery as it will take about two more weeks to repair the pipeline bringing crude from the oil-rich delta in the Southsouth.

    Nigeria has wholly depended on subsidised fuel imports and crude-for-product swap agreements and suffered acute fuel shortages since February.

  • The NNPC, ECA probe

    The NNPC, ECA probe

    •The job is better done by professionals

    Rising from its inaugural meeting last week, the National Economic Council (NEC), mandated the governors of Gombe, Edo, Akwa Ibom and Kaduna states to probe the Nigerian National Petroleum Corporation, NNPC. Edo State Governor Adams Oshiomhole, who addressed the media on behalf of the NEC, gave the reasons why the probe had become necessary. He referred specifically to the submissions to the NEC by the NNPC and officials of the Office of the Accountant-General of the Federation that showed that the NNPC earned about N8.1 trillion between 2012 and May 2015, out of which N4.3 trillion was paid by the corporation into the Federation Account.

    Aside seeking answers to how the huge differential of N3.8 trillion withheld by NNPC was spent, he also disclosed that the quartet will seek to unravel the circumstances surrounding the disappearance of another $2.1 billion allegedly withdrawn unilaterally by the Goodluck Jonathan administration in the last six months of its tenure, without the authority of NEC.

    Merely by the depth of the fiscal crisis across most states of the federation, a good part of which can easily be blamed on the spendthrift accounting of oil revenue by the immediate past administration of President Jonathan, we can understand the urgency and earnestness of the NEC to deliver results – and more money to the treasury. Yet, as important as that element is, it is only a minor part of the more complex, exacting task of stripping the NNPC of its opaque practices that continue to deny the country value for money, as a first step in the process of its overdue restructuring.

    We start on the basic premise that the governors are perfectly in order – and that Nigerians are entitled to know how the funds, right down to its most minute details, were spent. We also accept as given that there can be no revenue without costs. What Nigerians would like to know is how a corporation that has never successfully drilled a water aquifer let alone an oil well, an entity globally renowned for playing the collecting agency could justifiably claim to spend nearly 47 percent of its entire collection on itself?

    As far as we know, financial activities of entities, whether public or private, are supposed to be captured in the relevant budget instruments. Why should the NNPC continue to be an exception? Does the current practice of collect and spend –almost without restrictions – have basis in law? How does one measure if indeed value was delivered? Could NNPC as the collecting agency for the Federation Account on its own determine what it spends for whatever reasons without reference to the states?

    These are questions for which Nigerians have long sought answers to no avail. But then, a panel of four governors to undertake the probe? This is where our misgivings derive from. As professionals in diverse fields in their own rights, we have no doubt that the governors would be able to prise through the complex maze designed by NNPC to escape scrutiny. The real issue is whether they would have the energy and time to undertake a thorough job in view of their busy schedules. Asking the governors to sift through the thousands of pages of documents in addition to taking testimonies from dozens of witnesses seems to us a needless and gratuitous addition to the job brief of their Excellencies at this point in time. We advise the NEC to turn over the assignment to professionals; the latter in our view would do a far more credible and thorough  job than the quartet would be able to deliver.

    ‘Asking the governors to sift through the thousands of pages of documents in addition to taking testimonies from dozens of witnesses seems to us a needless and gratuitous addition to the job brief of their Excellencies at this point in time. We advise NEC to turn over the assignment to professionals; the latter in our view would do a far more credible job than the quartet would be able to deliver’     

     

  • Ashafa hails Buhari over NNPC board dissolution

    Ashafa hails Buhari over NNPC board dissolution

    Senator Gbenga Ashafa on Wednesday commended President Muhammadu Buhari over the probe and dissolution of Nigerian National Petroleum Corporation (NNPC) board.

    Ashafa made this remarks while defending the likely results of a motion he made recently on Fuel Tanker Tragedies on Nigeria’s Highways at a plenary session on the 25th of June.

    The lawmaker, representing Lagos-east, Senatorial District, who described the move as a fallout of legislative actions, noted that the Buhari led administration is willing to reverse the negative economic trends caused by the unregulated management activities of the NNPC.

    “The dissolution of the NNPC board, the current probe, amongst other things to follow, is a direct fall-out from the plenary proceedings.The prayers sought by the motion have been granted and it further underscores the need for legislators to face up to the task of keeping the executive arm of government and its various agencies in check.” he stressed.

    “June 29, the National Economic Council chaired by Vice President, Yemi Osinbajo set up a four-man committee to probe and unravel the sum of N3.8trillion not remitted to the Federation Account by the NNPC between 2012 and May 2015 as well as $2.1bn purported to have been deducted from the Excess Crude Account (ECA) without approval.

    “The gradual cleansing of the nation’s economic rot is as a result of Buhari’s vision and the steady nature of change which is aimed at placing Nigeria’s economy, which is currently dependent on crude oil, back on its once-enviable pedestal in Africa.”  He observed.

  • What next for NNPC after board dissolution?

    What next for NNPC after board dissolution?

    Last week’s dissolution of the Board of Directors of the Nigerian National Petroleum Corporation (NNPC) was longoverdue. There were allegations of corruption and calls for its overhaul. But will the Board’s sack will lead to the creation of an incorruptible and efficient national oil company?  Assistant Editor EMEKA UGWUANYI reports.

    MEMBERS OF THE DISSOLVED BOARD

    •Mrs. Diezani Alison-Madueke •Dr. Joseph Dahwa, GMD
    •Mr. Bernard Otti, GED, F&A •Dr. Dan Efebor, GED, CS
    •Ikechukwu Oguine, CLSS •Alhaji Abdulahi Bukar
    •Mr. Danladi Wadzani •Prof Olusegun Okunnu
    •Mr. Danladi Kifasi •Mr. Steven Oronsaye

     

    TO stakeholders in the oil and gas industry, last week’s dissolution of the Nigerian National Petroleum Corporation (NNPC) Board was belated.

    They argue that the Petroleum Act stipulates that the tenure of the board expires the day the government that constituted it leaves office. Leaving the board a month longer is enough grace in view of corruption allegations, sharp practices, such as oil swap, offshore processing agreement, violation of regulations, illegal deductions and non-remittance of funds as well as the failure to account for the several billions of naira that should have accrued to the Federation Account.

    The National Economic Council (NEC), which was constituted on Monday by President Muhammadu Buhari, alleged that the NNPC  shortchanged the Federal Government by withholding N3.8 trillion from the N8.1 trillion it generated in the past three years.

    At the end of its maiden meeting, Vice President Yemi Oshiomhole, who doubles as the Council chair, mandated Governors Adams Oshiomhole (Edo), Ibrahim Dankwambo (Gombe), Mallam Nasir el-Rufai (Kaduna) and Udom Emmanuel (Akwa Ibom) to look at the accruals and what happened to the Excess Crude Account (ECA).

    The committee of four is to bring its findings to Council at its next meeting on July 23.

    PricewaterhouseCoopers (PwC), a firm hired by the former administration to forensically audit the NNPC and look into the allegations of unremitted funds into the Federation Account by the corporation, said in its report that the NNPC has a lot of questions to answer. According to the consultant, the NNPC operation was shrouded in secrecy. Messrs PwC alleged that the corporation did not allow it full access to the accounts and records of its exploration and production arm – Nigerian Petroleum Development Company (NPDC).

    According to PwC, in the NNPC’s analysis made available to it, all costs and activities of its loss-making subsidiaries were provided but, those profit-making subsidiaries and the dividends received were excluded from the analysis.

    The firm recommended that the NNPC Act be reviewed as the content contradicts the requirement for the corporation to be run as a commercially viable entity.

    PwC wrote in the report: “It appears the Act has given the corporation a ‘blank cheque’ to spend money without limit or control. This is untenable and unsustainable. It must be addressed immediately.

    “The corporation should be required to create value and meet its expenses entirely from the value created. Proceeds from the Federal Government’s crude oil sales should be remitted entirely to the federation accounts.”

    The NNPC problem goes beyond board dissolution. The corporation requires a total overhaul and  the reorientation of its workforce, including the management team.

    As presently constituted, the NNPC is only a rent collector and a gatekeeper to which every successive government run to for cash.

    Stakeholders are asking the President to also come up with a vision for the incoming NNPC board. The board, they insist, must ensure the actualisation of that vision, enthrone good corporate governance, accountability, adherence to regulations and standard processes without which it will still be business as usual.

    But, all these abnormal practices may soon become a thing of the past.

    An official of the NNPC told The Nation that after going through the handover note from the immediate administration, Prof. Osinbajo invited tNNPC’s Group Managing Director Dr. Joseph Dawha to update  him on the operations of the corporation.

    Dawha was guest to the vice president last Tuesday, three days before the dissolution of the 10-member board.

    The source, who predicted more surprises in the near future, could, however, not say when the axe will begin to fall and on who. “The changes that will be made, nobody knows for now,” the source added.

    According to the source, some of the allegations levelled against the NNPC are unverified because the critics do not know the workings of the corporation.

    The official insisted that the NNPC remits revenue into two accounts – the Federation Account and the Federal Government Consolidated Account – but the one the public knows and hears about is the Federation Account.

    Because the NNPC holds in trust all government’s business involvement in the oil and gas sector, whatever revenue is due to the three tiers of government is paid into the Federation Account but, dividends from its stakes in the joint venture projects are paid into the Consolidated Account, to which only the Federal Government has access.

    Some of the expenditures made by the corporation are not known to the public.

    The source alleged: “For instance, as we speak, the refineries are 98 per cent ready and anytime in July, production will commence full blast. The problem we have is the Kaduna refinery.

    “The pipeline to the refinery from Abaji to Kaduna has become vandals’ haven. Whenever we go out there to carry out a  repair, the vandals will be on the flank to strike. So, it is not every project that we undertake that we announce for security reasons.”

     

    Agenda for the incoming board

     

    The board acts as a bridge between the NNPC and the presidency. By the Act establishing the corporation, the board should be made up of nine members, consisting of a representative from each of the six geopolitical zones, the group managing director of the NNPC and the permanent secretary of the ministry of Finance. The ninth member and chairman of board must be the Petroleum Resources minister.

    Where the president is the substantive minister as it was the case under the former administration of Chief Olusegun Obasanjo, the president either nominates an alternate chairman, or relates directly with the NNPC’s group managing director for regular updates.

    At the end of every meeting between, the board chair meets with the president to brief him and for the ratification of any decision taken.

    But,  not every Nigerians knows that most decisions and actions taken by NNPC are ratified by the president. The presidential approval also extends to employment.

    For instance, employment of senior-cadre officers from the rank of a general manager and above must be approved by the president. But, where a management staff, apart from the group managing director, is a nominee from a geopolitical zone, the person stands for the two positions.

    In the dissolved board, the Group Executive Director, Finance and Accounts, Mr. Bernard Otti,  doubled as a management staff and the representative of the Southeast.

     

    Stakeholders’ view

     

    Dr. Austin Nweze, a lecturer at the Pan Atlantic University, Lagos, said the board dissolution may not change much because its members do not do the work. They only influences governance, he said, adding that the expected change can only be effected  with a clear-cut vision for the corporation and the oil and gas industry by the president. Such vision will be a mandate for the incoming board to pursue and achieve.

    Nweze said: “The board members are not the ones doing the job. I don’t think the dissolution of the board will change much but a little in governance if the incoming board members have the will power. NNPC’s problem goes beyond board dissolution.

    “The corporation needs process re-engineering in the sense that it should get things done right, block the loopholes through which funds are siphoned. Sacking the board is one thing, bringing in credible people is another thing because many people are on the wings waiting to grab their own ‘national cake.’

    “The calibre of members of the incoming board will be critical to whatever the NNPC will be in future. To me, the appointment of new board members shouldn’t be based on political patronage.

    “But, if political patronage is inevitable, the membership should be a mix of technocrats who understand the oil industry and politicians. The board will look at the entire NNPC structure, the processes and undertake a reorientation of the management and staff with a view to letting them know that it will no longer be  business as usual.

    “The management team should  work hard to entrench good governance  in the corporation. Let the board strengthen and reinforce the management, even it entails bringing on board those who will create the change.

    “The NNPC needs to be repositioned to be able to take risks as other national oil companies. It should invest in the country and outside the shores of the land. It shouldn’t remain as a government tool, or be compelled to operate under thestranglehold of government.

    “It’s the government that is holding the NNPC down from taking such risks. The corporation should be encouraged to invest in Africa and other countries of the world and go beyond lifting and selling crude.

    “The board should act as an inclusive institution that stimulates the growth of the economy, redefine the role of NNPC and ensure that corporate governance is fully imbibed and entrenched.

    “It (NNPC) can expand its operation by ensuring that petrochemical companies are sited across the country, find alternative sources of generating revenues through corporate strategy. This will boost job creation.

    “Such strategy will help in restructuring the NNPC to grow and deepen the oil industry; develop local capacity and new products through research and development.

    “It is unthinkable that despite the strategic role the corporation is expected to play in the economy, considering the fact that it sits on such an important sector that contributes 80-90  per cent of revenue receipts of the government, it employs less than 20,000 people and contributes less than 20 per cent to the Gross Domestic Product (GDP).

    “Malaysia, Singapore and United Arab Emirates (UAE) have policies that compel multinationals to build local capacity. When Shell went to Malaysia, it was given a 10-year ultimatum to build local capacity, otherwise let it go.

    “In less than 10 years, Shell achieved that objective. Today, Shell has Malaysians as its expatriate staff all over the world. Malaysia exports its manpower for foreign exchange.

    “That is what the new NNPC board should strive to achieve. It is unhealthy to leave control of such a critical sector in the hands of foreigners.

    “Foreigners have roles to play in the industry but, not to control and to dictate the direction the sector goes. NNPC should expand the sector to employ more people and don’t lean on foreigners because it lacks the requisite skills. Foreign control of the industry is not favourable to the country.

    “The President must have a vision for the new board, the corporation and the industry and encourage the  board to support his vision and achieve it. He should assemble committed like-minds who will help him achieve the desired objective if he wants to be a hero because certainly, he must make sacrifices.

    “He must work with people, governors and other relevant stakeholders to be in alignment with his vision so that nobody jeopardises his plans for the sector. The NNPC should not be a conduit for people, politicians and political parties, and also the consumption mentality it has today should be discarded.

    “Let it be a productive entity like its contemporaries in Saudi Arabia, Malaysia and other parts of the world. The passage of the Petroleum Industry Bill (PIB) is one part of achieving this objective. Without a vision, there will be no strategy. And if there is no strategy, there will be no action.”

    An analyst and Lead Director, Centre for Social Justice (CSJ), Eze Onyepkere said: “The dissolution of the board is a step in the right direction as NNPC is associated with fraud and allegations of non-remittance of revenues into the federation account. If the government wants to probe the activities of the corporation, there is no need to leave the board members because they will cover up some activities and thus  make the probe ineffective.

    “We expect transparency in the NNPC because there is so much money there but with little supervision. The NNPC structure doesn’t allow for some level of transparency.

    “Even if angels are taken to the corporation, without substantial supervision, they will be compromised and when they steal N10, 000 today and nobody asks questions, or mete out punishment, tomorrow they will be emboldened to steal trillions because there is no sanction.

    “The dissolution of the board is just an interim measure taken to sanitise the NNPC. However, if the Seventh Assembly of the National Assembly did their job by passing the PIB, all these issues could have been history because the corporation would have been unbundled. There would have been processes and agencies in place to effectively monitor the industry including the NNPC. But the President can reduce corruption in the corporation if he supervises it directly while he makes effort for a speedy passage of the PIB.”

    The former Executive Secretary, Petroleum Products Pricing Regulatory Agency (PPPRA), who doubles as the immediate past Executive Secretary, Petroleum Technology Development Fund (PTDF), Dr. Oluwole Oluleye, said President Buhari has been in the industry and knows what to do to reposition the NNPC.

    Oluwole said: “I think President Buhari  has his job cut out for him. Mr. President is not a green horn in the industry. A lot of the infrastructures you see today, were provided during his time. So, he is pretty well versed within the industry for him to make contributions.

    “What is required more in the industry, which he is also preaching is transparency, honesty and accountability. Once he is able to enforce that by virtue of personnel he brings on board, although people are complaining he is slow but he is not slow.

    “He is a military man and he is taking his time because the team that he forms will give a signal to Nigerians on where he is actually going. He understands the industry very well. The President is not alien to  the pipelines, refineries and depots.”

     

    Inside the NNPC

     

    The NNPC is the national oil company, through which the Federal Government regulates and participates in the country’s petroleum industry.

    An Act to dissolve the former Nigerian National Oil Corporation and to establish the NNPC was created in 1977.  The NNPC was established on April 1, 1977, as a merger of the Nigerian National Oil Corporation and the Federal Ministry of Mines and Steel.

    By law, the NNPC manages the joint venture between the Federal Government and some foreign multinational corporations including Shell, Agip, ExxonMobil, Chevron, and Total. Through collaboration with these companies, the Federal Government conducts petroleum exploration and production.

    For lack of supervision, the NNPC degenerated to a rent-collector for the government with less attention to transparency and accountability.

    Between 2007 and 2009, auditors found that the corporation over-deducted funds in subsidy claims to the tune of N28.5 billion and has not been able to account for the money.

    In 2008, Willbros Group Inc of United States (U.S.) admitted making ‘suspicious’ payments of over $6.3 million to officials of the corporation and its subsidiary – the National Petroleum Investment Management Services (NAPIMS) for assistance in obtaining and retaining contracts at the Eastern Gas Gathering System (EGGS).

    In 2004, ABB Vetco Gray, a U.S. company and its UK subsidiary –  ABB Vetco Gray UK Limited – admitted paying over $1 million in bribes to  NAPIMS’ officials,  in exchange for obtaining confidential bid information and favourable recommendations from government agencies.

    After the publication of a report In November 2013 by Swiss, a non-governmental advocacy organisation – Erklärung von Bern – allegations of fraud surfaced, placing the NNPC under suspicion of siphoning $6.8 billion of crude oil revenues.

    From 2013, the NNPC has been battling with the allegation of non-remittance of $20 billion into the Federation Account.

    These allegations, among others are responsible for the continued calls for the sanitisation and repositioning of the corporation.

     

  • Four-man panel to probe how NNPC blew N3.8tr

    Four-man panel to probe how NNPC blew N3.8tr

    Excess crude cash depleted by $2.1m

    Buhari: revenues must for treasury

    How did theNigerian National Petroleum Corporation (NNPC) spend  N3.8 trillion in three years?

    This is the puzzle a four-man committee has been asked to resolve.

    The four “wise men” are: Governors Adams Oshiomhole (Edo), Ibrahim Dankwambo (Gombe), Udom Emmanuel (Akwa Ibom) and Nasir El-Rufai (Kaduna).

    Oshiomhole yesterday broke the news to State House correspondents after the National Economic Council (NEC) meeting chaired by Vice President Yemi Osinbajo at the Presidential Villa, Abuja.

    He was accompanied by the Chairman of the Nigeria Governors’ Forum and Zamfara State Governor Abdulaziz Yari, Kaduna State El-Rufai and Emmanuel.

    According to him, from the reports presented to NEC by NNPC and the office of the Accountant General of the Federation on Monday, N8.1 trillion generated from oil sales during the period ought to have been remitted to the Federation account.

    Only N4.3 trillion was remitted to the Federation Account by NNPC, Oshiomhole said.

    He also disclosed that former Minister of Finance Ngozi Okonjo-Iweala spent $2.1 billion from the Excess Crude Account without approval between November last year and May 2015.

    His words: “This is the first time we had a National Economic Council meeting in which under the instructions of the President, NNPC and the Office of the Accountant General of the Federation were compelled to provide information in black and white on issues as they relate to the total sales of Nigeria crude from 2012 to May 2015. This has never happened before and for us this is profound.

    “What we saw from those numbers, which I believe Nigerians are entitled to know, is that whereas the NNPC claimed to have earned about N8.1 trillion, what NNPC paid into the Federation Account between 2012 and May 2015 was N4.3 trillion and NNPC withheld and spent N3.8 trillion.

    “We are talking about transparency, we are talking about change. And what we saw from those numbers – I believe that Nigerians are entitled to know – is that whereas the NNPC claimed to have earned N8.1 trillion, what NNPC paid into the federation acount from 2012 to May 2015 was N4.3 trillion.”

    “What it means is that NNPC withheld and spent N3.8 trillion. The major revelation here is that the entire federation — the federal government, the states and all the 774 local governments— the amount the NNPC paid into the federation account for distribution to these three tiers of government came to N4.3 trillion and NNPC alone took and spent N3.8 trillion.”

    He added: “Which means the cost of running NNPC is much more than the cost of running the Federal Government. That tells you how much is missing, what is mismanaged, what is stolen; these are huge figures.

    “We need to earn and spend; it is basic law of accounting that even if you run a cigarette shop where you sell Three-Rings, you don’t sell and spend. You sell, take to your bank account, and you budget for your procurement including cost of running your business.

    “There is no enterprise manager who goes to the market and sells and just begins to spend, otherwise nobody needs to budget. And because you are running a democracy and you are running three tiers of government,  and the resources involved belong to these three tiers of government, the only lawful way decreed by the constitution, this is not an administrative regulation; it is not a policy derivable from a circular; this is from the express letter and spirit of the Nigerian Constitution as amended that for example if NNPC needs to spend money, it is obliged to prepare its budget’ like every other business enterprise, that budget will be scrutinised by the executive and forwarded to the National Assembly and the National Assembly will accordingly appropriate it.”

    He faulted the NNPC for spending without appropriation.

    He said: “If the Federal Government cannot spend without appropriation, why should any agency spend without appropriation? NIMASA, for example, whatever they earned they are supposed to pay into the federation account and also present the budget of their requirement.

    “This is what the constitution provides for. And this is what President Buhari has promised to do that henceforth all monies must go to the Federation Account. What you need, you budget for. Nigeria cannot continue with you-earn-the-money-and-spend it. Where is transparency? Where is the role of the National Assembly?”

    “So, if you were doing that you won’t have a situation where the NNPC alone will spend N3.8 trillion and remit to the federal, states and local governments N4.3 trillion which means NNPC is taking about 47 per cent and that explains all the leakages you are talking about.”

    Oshiomhole went on: “Let us also be clear; nobody says that parastatals should not spend money but they must return to budgetting. There is no major player, there is no major registered private company that will spend money without a budget. Even a private company you will have your board of directors looking at your revenue, total sales, your turnover, your personnel cost, running cost, visible and invisible and you have the budget for the year that is how every sensible business runs.

    “That is the way it was when President Buhari was Minister of Petroleum, so we are not reinventing the wheel; that is the way it used to be and that is the way the constitution says it should be.”

    On the money spent by Dr. Okonjo-Iweala from the Excess Crude Account, Oshiomhole said that the Accountant General’s Office reported to NEC that the balance in the account as at the end of May was $2.1 billion instead of $4.1 billion left in the account in November, 2014.

    He said: “We looked at the numbers for the Excess Crude Account, the last time the Minister of Finance and Coordinating Minister for the Economy reported to the Council and it is in the minutes, she reported by November 2014, that we had $4.1 billion but today the Accountant General Office reported we have $2.0 billion, which means the Honourable Minister spent $2.1billion without authority of the NEC.

    “And that money was not distributed to states it was not paid to the three tiers of government. This is why the NEC has set up a panel to look at what accrued, what it was spent on, when and by whom, so that Nigerians will have the full picture of all the transactions as regards the much talked about excess crude.”

    Yari said NEC constituted a four-man panel  to examine the accounts.

    He said: “The 58th NEC? received the briefing from the director of funds where the state of the economy has been discussed thoroughly. We have gotten the report from the excess crude; what is there and what is not there. And also the Council got the briefing on the unremitted funds by NNPC.

    On that line, a four-man committee – Edo, Gombe, Kaduna Akwa Ibom  – was constituted to go through the books of NNPC and Excess Crude as well as the Federation Account.”

    “The four-man committee will check the books of NNPC, most especially the issue of excess crude and what is not remitted into the Federation Account.”

    “The Federal Government, in conjunction with the CBN, will look inwards to see how to support, how much they will give to states especially in the issue of outstanding salaries owed by the states and even the Federal Government.” he said

    El-Rufai disclosed that the Excess Crude Account was started by former President Olusegun Obasanjo around 2004-2005 as an administrative arrangement to save for the rainy day.

    He said: “And it was meant to have very clear accountability, such that every state and local government, in a particular state, knows their balance in the Excess Crude Account, though you can’t spend it but you know how much of it is yours. That was the arrangement.

    “And in those days, before we spend any money from the Excess Crude Account, the federal and states governments will meet and agree. That is how we agreed to build the seven power stations which is NIPP today; it was from Excess Crude Account. And also met and agreed to build the Lagos – Kano Standard Guage Rail Line from the Excess Crude Account.

    “But what we have seen, in the last few months or years is that the Excess Crude Account was operated unilaterally by the federal government; drawings were made unilaterally without consulting those that actually own the money because the Excess Crude Account is 52 percent owned by the Federal Government and 48 by the states and Local Governments.

    “So the decision of the NEC is to set up this committee  of four to look at the operations of the Excess Crude Account and make recommendation to council on its future.

    “The other thing the committee will do is to look at the operations of the Federation Account, particularly the shortfall and again come back to council with very clear recommendations as to what to do.”

    “We have not been given a time-frame but as you can imagine state governments are under pressure. Many of our state governments are unable to pay salaries on time without recourse to borrowing, so this is very important to us. This is an all-governors committee, we wear the shoes we know where it pinches. So, we are are going to do this as quickly as possible.

    “The  next meeting of the council is on July 23rd, we hope to complete our work and be in position to report to council on that day. So, within the next one month we will be done by God’s grace,” El-Rufai said.

  • NNPC spent N3.7tr without approval – Oshiomhole

    NNPC spent N3.7tr without approval – Oshiomhole

    The Nigerian National Petroleum Corporation (NNPC) in the last three years withheld and spent N3.7 trillion oil revenue without budgetary provision and approval.

    Edo State Governor, Adams Oshiomhole, disclosed this to State House correspondent after the National Economic Council meeting chaired by Vice President Yemi Osinbajo at the Presidential Villa, Abuja.

    According to him, a total of N8.1 trillion generated from the oil sales during the period ought to have been remitted to the Federation account.

    But instead, the governor said only N4.3 trillion was remitted to the Federation Account.

    He also disclosed that the former Minister of Finance, Ngozi Okonjo-Iweala spent $2 billion from the Excess Crude Account between November last year and May this year without approval.

    He said: “This is the first time we had a National Economic Council meeting in which under the instructions of the President, NNPC and the Office of the Accountant General of the Federation was compelled to provide information in black and white on issues as it relates to the total sales of Nigeria crude from 2012 to May 2015. This never happened before.

    “What we saw from those numbers, which I believe Nigerians are entitled to know, is that whereas the NNPC claimed to have earned about N8.1 trillion, what NNPC paid into the Federation Account between 2012 and May 2015 was N4.3 trillion and NNPC withheld and spent N3.7 trillion.

    “The cost of running NNPC is much more than running the Federal Government.”

    He said that $4.1 billion was in Excess Crude Account as at November 2014 while the Accountant General’s Office reported that the balance as at today was $2.1 billion.

    To this end, he said that Okonjo-Iweala spent $2 billion from the account without any approval by NEC.

    Four state governors have been selected into a committee to probe the accounts.

     

  • Oil swap not cause of refineries’ failure, says NNPC

    The Nigerian National Petroleum Corporation (NNPC) has debunked reports attributing the failure of the refineries to the its crude oil Swaps and Offshore Processing Agreements (OPAs).

    The crude oil Swaps and Offshore Processing Agreements (OPAs) are arrangements made by the Federal Government in which crude oil is exchanged for refined product, or crude oil taken overseas for refining by oil trading companies, and NNPC pays the refining and other incidental costs.

    A source at the NNPC who spoke to The Nation on the issue, said it is important to set the record straight in the light of the unverified reports. “The reports are well-coordinated agenda aimed at creating new layers of distraction to cover up decades of political intrigues, corruption and sabotage, which have put paid to all attempts to revamp the four refineries.”

    The source said the history of the nation’s refineries had been dogged by social, political and systemic failures, which had defied solutions in spite of efforts by past administrations. “Our refineries have a history that is known to all. Attributing the failure of the refineries to the Swap and OPA contracts, which only emerged some four years ago, is the height of falsehood.”

    According to the source, the refineries woes began when the administration of the late General Sani Abacha awarded the controversial Turn Around Maintenance (TAM) contract of the Port Harcourt Refinery and Petrochemicals Company to a prominent politician and businessman. The contract was criticised and it led to major labour disputes. From that point on, successive governments have spent billions either carrying out ineffective TAMs or inconclusive privatisation attempts, he added.

    “The woes of the refineries were further compounded by the insurgency that erupted in the Niger Delta with militants regularly blowing up crude pipelines, especially the Kaduna refinery line. The rampart insecurity in the region gave rise to widespread vandalism on crude and product pipelines resulting in a booming illegal bunkering trade for arms business, incessant refinery shutdowns and well documented fatal fires that took the lives of hundreds of ordinary citizens,” he said.

    The source also said former President Olusegun Obasanjo was frustrated by the inability of the refineries to operate effectively despite pumping in millions of dollars to revamp them. Tired of fighting militants and chasing illegal bunkering moguls, he attempted to privatise them but the exercise was hijacked, only to be carried out at the final days of his administration.

    When the late President Umaru Yar’Adua came on board, he reversed the TAM contract on the Kaduna and Port Harcourt refineries awarded it to a local oil consortium because the process was considered not to be transparent.

    From that moment, none of the refineries has functioned effectively.

    Because of this development, advocates of deregulation and private refineries have been sabotaging the government’s efforts at restoring the refineries in order to have their way. Therefore, blaming the oil Swaps and OPA for the failure of the refineries to function is mischievous. The oil Swaps and OPAs were introduced as a solution to steady fuel supply because of non-operational refineries and should not be the reason the refineries are not working, he said.

    The initial crude swap deals occurred between 1977 and 1986 when heavy crude from Venezuela was swapped for Nigeria’s light crude to feed the Kaduna refinery. Because of the state of the local refineries, the government extended the crude swap concept to include crude for refined products.

    The decision to deploy Swap and OPA contracts for reliable and sustainable supply of products was done in the best interest of the nation, and is one of the reasons Nigeria has survived various periods of fuel scarcity that would have grounded the economy. The terms of the Swap and OPA contracts were transparent and had in-built robust clauses, which have made it possible for all parties to reconcile their position amicably, the source added.

     

     

     

     

     

  • Buhari dissolves NNPC Board

    The Board of the Nigerian National Petroleum Corporation has been dissolved by President Muhammadu Buhari.

    The dissolution  was announced in  a statement by the Director Communications, Office of Head of Civil Service of the Federation, Alhaji Haruna Imrana, on behalf of the HoS, Mr. Danladi Kifasi.

    “The directive to that effect was conveyed in a letter signed today (Friday) June 26, 2015 by the Head of the Civil Service of the Federation, Danladi Kifasi. In it, the President thanked members of the dissolved board for their services to the nation,” he said.