Buhari to Sack all Top Management, Probe and Break up NNPC
The new administration of Nigeria’s president elect Muhammadu Buhari will first sack and replace the top management of the Nigeria National Petroleum Commission, NNPC, before restructuring the oil company. Then it will investigate its accounts to restore credibility, APC sources say.
A bill will be drafted to break the NNPC into four entities, as already prescribed in the latest PIB draft. But it will also, crucially, remove the oil minister from the NNPC’s board of directors to curb political interference.
One APC source also told Reuters that more generally, the petroleum minister’s current powers would be heavily trimmed.
Oil and gas will have separate companies for upstream, with a third covering pipelines and refining, and a fourth will be an inspectorate. It could be submitted to the National Assemblyy in the first quarter of next year, one NASS APC source said.
The immediate implication of all these is that foreign oil firms keen to know how Nigeria’s president elect plans to tax them could be waiting a long time as he makes ending corruption and reforming the opaque national oil company his most urgent sector priorities.
The World Bank has already thrown its weight behind Buhari’s promise to probe NNPC over allegations of missing funds.
Four party sources from Buhari’s All Progressives Congress (APC) told Reuters the issue of fiscal terms, seen as crucial by the industry, will have to wait on current thinking about oil and gas policies for Africa’s leading producer.
Crude output has stagnated close to 2 million barrels per day over the past few years, owing partly to underinvestment.
“We need to address the structural issues and leave the fiscal for now,” Senator Bukola Saraki, whose APC party controls both houses of parliament after a landslide win, told Reuters.
“A more transparent NNPC (Nigeria National Petroleum Corporation) is needed with reasonable accounting,” he said.
Buhari owes his March 28 victory against incumbent Goodluck Jonathan partly to a perception that Jonathan allowed corruption to get out of control — especially in the oil sector.
A string of multibillion dollar oil corruption scandals tainted the NNPC and other bodies that handle energy.
By contrast, Buhari was seen as one of the few Nigerian leaders to have cracked down on corruption during his military rule in 1983-1985. Many Nigerians hope he will again.
“The worry is that there’s going to be a lot of time wasted in witch-hunting…That could take a year in which nothing else will happen,” said a Nigerian investment banker focused on upstream oil and gas projects, who declined to be named.
APC leader Bola Tinubu, whose support was instrumental in Buhari’s victory and wields huge influence, told Reuters a transitional committee would be set up.
“No way will we discuss that now,” he said.
Jonathan’s administration re-drafted a Petroleum Industry Bill (PIB) in 2012 that had been in the works for a decade.
The PIB was meant to change everything from fiscal terms to overhauling the NNPC, environmental rules and revenue sharing, but its comprehensive nature caused disputes between lawmakers.
Yet the main thing the oil companies were worried about was tax. The bill proposes 20 percent tax on offshore projects and 50 percent for onshore. Shell, Exxon and other majors had all complained publicly that the terms are unfair, given the risk associated with operating in Nigeria.
Uncertainty over the fiscal terms of the bill have been holding back billions of dollars of investment, especially into capital-intensive deepwater offshore, leading some to propose the bill be broken up into several pieces debated separately.
“It doesn’t need to be an omnibus, you can take things piecemeal,” one APC source said.
Hopes that doing so would resolve the fiscal issue quicker look slim, since the voting public are much more concerned about cleaning up graft than making oil majors happy.
The average Nigerian benefits little from the country’s huge energy resources while politicians wear gold watches and build monster homes in the capital Abuja.
Also, says Control Risks’ Thomas Hansen, “The cabinet needs to strategise first and fiscal terms are likely to take longer and require discussions with the (international oil companies).”
The World Bank reportedly supports Mr Mohammadu Buhari to probe the Nigerian National Petroleum Corporation.
Speaking during a video conferencing from Washington to journalists from across Africa on the release of the bank’s analysis of issues shaping Africa titled ‘Africa’s Pulse’, top officials of the bank said looking into financial record of the country, especially into allegation of corruption at the NNPC, would check impunity and build public institutions in the future.
Answering questions from journalists, World Bank’s Chief Economist for Africa, Mr. Francisco Ferreira said, “One norm that has to change is the norm of impunity. I am from Brazil myself. So, I am also used to a country where people could be corrupt and escape justice. That keeps the people to keep doing it.
“So the current stand of the government-elect to look into what happened in the past hopefully will have consequences for the future. And those consequences will be that institutions will be stronger; norms will be cleaner and people will not have to steal millions of dollars from Nigerian National Petroleum Corporation.
“People have alleged in the past that there had been major corruption scandals there. If that stops, then that will have very high returns in terms of the money staying around to be spent on education, health, roads and power that the poor people in Nigeria across the country need.
“So my sense is that it will be good to promote cleanliness in politics.”