For many Nigerians, a new damning audit report is a reminder that the promised cleansing of the Nigerian National Petroleum Corporation by the Muhammadu Buhari administration needs to be fast-tracked. While its worst excesses appear to be over, the aftershocks of its financial banditry are still being felt. For an effective and enduring reorganisation of the company, all its dark secrets must be exposed, all stolen funds recovered and the perpetrators brought to justice.
The latest scandal comes in the midst of an ongoing re-modelling by Ibe Kachikwu, the Minister of State for Petroleum Resources, who doubles as the Group Managing Director of the state-owned oil company. The familiar ingredients of opacity, corruption and impunity are evident.
The Auditor-General for the Federation, in his recent 2014 Annual Audit Report to the National Assembly, alleged that the NNPC withheld N3.23 trillion due to the Federation Account in 2014. He said $235.68 million revenue from gas sold by the Nigeria Liquefied Natural Gas Corporation was also not remitted as required by law but transferred to some shadowy escrow accounts. Although the NNPC was not the only agency indicted, it responded 48 hours later, alleging that the report was full of “errors.” By its own accounting, it owed the Federation Account only N326.14 billion, a figure that it added was still being “reconciled.”
As the public digested this, the Revenue Mobilisation Allocation and Fiscal Commission, the body established by the constitution to fix the remuneration of public office holders, weighed in a week later to declare that the NNPC owed the Federation Account N4.9 trillion in unremitted revenues that accrued between January 2011 and December 2015. But it could not confirm the AGF’s figure of N3.23 trillion unremitted for 2014 alone. Instead, said the RMAFC, the NNPC withheld N1.99 trillion realised from domestic crude oil sales for that year.
With public finances badly hit by falling oil revenues, Nigeria can no longer afford a renegade entity that brings in over 70 per cent of government revenues to continue to operate with impunity. For how much longer should Nigeria continue the embarrassment of multiple statutory agencies giving conflicting figures of the NNPC’s financial transactions? A report by the The Economist magazine in 2006 found that of the world’s 20 biggest oil companies, 16 were NOCs. An August 2014 report in Upstream, the international oil and gas news outlet, cited research findings proving that these NOCs are prime targets for corruption in countries where it is endemic. Research by the Natural Resources Governance Initiative in 2015 said the NNPC “is (riddled) with financial irregularities and governance failings.” This was confirmed by two former GMDs, Austen Oniwon and Andrew Yakubu, who in recent parliamentary testimonies confirmed that a former minister solely approved $24 billion worth of oil swap deals without reference to them while they were CEO.
Not only must we end what the PwC, the global audit firm, described as its “blank cheque to spend money without limit or control,” those who fleeced the company, awarded dubious contracts and broke laws and regulations should be made to refund all missing funds, while past political figures that authorised fraudulent transactions should be investigated and prosecuted.
Brazilian prosecutors have hauled in the popular former president, Lula Inacio Da Silva, his son and 14 other top figures in a widening corruption investigation at the NOC, Petrobas. There can, therefore, be no sacred cows here. The NNPC has to be reined in. The government should not make the mistake of relying on the perceived integrity of the current petroleum minister alone. It is about processes and openness. The laws must be applied to the letter to disallow the NNPC and ministers from ever again spending as they like. Instructively, the NNPC’s reaction to the AGF’s report reverted to type: it accused the auditors of being “ignorant” of oil sector operations; it claimed to have made deductions for subsidy, for oil pipelines maintenance and for losses from vandalism. This is a recipe for fraud.
The government should tidy up and totally overhaul NNPC’s accounting procedures in line with global best practices. The NNPC is the only public corporation in the world where “reconciliation” is permanently ongoing to determine its financial activities. Such reconciliation was arranged in 2014 after the then CBN governor alleged that perhaps $20 billion had not been remitted to government. But many issues remain unresolved and that should be the primary concern of Kachikwu. There is no word yet on the $6.8 billion that according to the Switzerland-based NGO, Berne Declaration, was stolen through dubious deals between “letter-box” firms and the NNPC, or the $1.6 billion that NEITI says it failed to account for.
The Federal Government should instead of reforms that entrench the failed state capitalism model, privatise all downstream assets of the NNPC. It should be a holding company, with a lean, compact workforce, holding the government’s equity in oil producing firms. Let the private sector run the downstream, while the government builds a strong, investment-friendly regulatory framework and provide efficient tax policies that will maximise the benefits of value addition and job creation, while promoting industry and exports.
Due to corruption and incompetence, the NNPC continues to incur losses, while NOCs like Saudi ARAMCO, according to Fortune Global 500, had revenues of $478 billion in 2015, Kuwait Petroleum Corporation $251-94 billion; Malaysia’s Petronas $100.74 billion, and Norway’s Statoil, $82.48 billion.
The institutional failure is most severe at the parliamentary level where federal lawmakers fail to exercise their constitutional oversight, but instead, wallow in corruption and extortion. If the National Assembly had been diligent these past 16 years, NNPC’s and the Executive’s lawlessness would have been squelched.
The change agenda demands very strong action from all arms of government to uncover all past misdeeds, tidy up the books, restructure the NNPC and prosecute all law breakers.
