NNPC as the Whipping Boy By Ijeoma Nwogwugwu
In the last two weeks, the Nigerian National Petroleum Corporation (NNPC) has been at pains to explain its monthly remittances into the Federation Account belonging to the three tiers of government. Its reaction was a fallout of a letter written by the Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Samido, to President Goodluck Jonathan bringing to the attention of the president the non-repatriation of crude oil export proceeds to the tune of $49.8 billion from the months of January 2012 to July 2013.
The letter, which was written by Sanusi as far back as September 25, 2013, included an appendix giving a breakdown of crude oil lifting and repatriations as prepared by staff of the Trade & Exchange and Banking & Payments System Departments of the CBN, based on the documentation in their possession.
It further expressed deep concern over what appeared to be huge shortfalls in remittances to the Federation Account in spite of the strong recovery in the price of oil and made recommendations, not limited to, the request that NNPC be made to account fully for all proceeds that were diverted away from its accounts with the CBN and the Federation Account.
In response, NNPC uncharacteristically opened up its books on crude oil sales through a series of press statements and briefings, showing that Sanusi had underestimated its crude oil lifting and proceeds from the sale of same. It further gave a breakdown of other government agencies responsible for the remittances of proceeds into the Federation Account.
But even as NNPC attempted to reverse the damage Sanusi’s letter had done, politicians of all hues and affiliations jumped on the bandwagon to make mincemeat of the corporation and federal government. There were even those who erroneously confused total national crude oil lifting/sales with the equity portion or NNPC’s share of crude oil lifting/sales, which is what is actually paid into the Federation Account. The balance, on the other hand, belongs to indigenous and international oil companies operating under Joint Operating Agreements (JOA) and Production Sharing Contracts (PSC) and the proceeds that arise thereof are paid into company accounts of the respective companies.
Seeing that Sanusi might have been hasty and failed to seek clarification from NNPC and other agencies before writing his letter, the CBN, penultimate Thursday, had issued an insipid statement expressing concern that the letter, which it refused to confirm or deny, had been politicised. It then tried to extricate itself from the furore it had raised, stating more or less that the letter was borne out of concern for the low level of accretion to (foreign) reserves and the Excess Crude Account (ECA), inspite of strong oil prices, especially as Nigeria’s performance is compared with other oil producing economies.
As a follow up, by Wednesday last week, Ngozi Okonjo-Iweala and Diezani Alison-Madueke, respectively the Ministers of Finance and Petroleum Resources, and Sanusi in tow, held a joint press briefing stating that a reconciliation process was ongoing and preliminary findings had established that it was not $49.8 billion that had not been remitted to the Federation Account.
Okonjo-Iweala and Alison-Maduke were eager to point out that the reconciliation exercise that was still ongoing had shown that it was $10.8 billion, being domestic crude oil receipts that remained unaccounted for. This shortfall, they said, had been disputed by NNPC for several months and was well known to all stakeholders at the Federation Account Allocation Committee (FAAC), and is reported and updated on a monthly basis. Sanusi, on the other hand, maintained that CBN’s record had shown that the shortfall, which was still in dispute, was $12 billion.
From the narrative above, it is clear that Sanusi was wrong, no matter the spin he and the CBN have tried to put on the whole fiasco. Before rushing headlong to write his letter to the president, he obviously forgot that the position he occupies is too sensitive for whimsical statements capable of crashing markets and eroding investors’ confidence in the Nigerian economy. Had he directed the CBN to undertake this same reconciliation process, which is still ongoing, perhaps the country could have been saved the needless gamesmanship that transpired.
By any stretch of imagination, the $49.8 billion he claimed had not been remitted over the 19-month period is mind-boggling. That kind of sum simply cannot go up in smoke in 19 months. It would be impossible to launder without the red flag being raised by overseas financial and law enforcement institutions set up to track the flow of illicit funds, and would have had the federal, states and local governments up in arms long before Sanusi was able to put pen to paper.
Also, after a review of NNPC’s revenue performance for the period under review, it was apparent that Sanusi had no in depth understanding of the subject matter he had written about in the letter and had failed to distinguish between equity crude oil sales by NNPC, third party sales undertaken by NNPC and the royalties and petroleum profit tax, which are respectively remitted into the Federation Account by either NNPC and other agencies of government. Incidentally, this was a point NNPC harped on continuously when Sanusi’s letter was leaked, but was waved off by most of the public because of its credibility deficit.
Nonetheless, the federal government is not entirely blameless for the needless controversy raised by Sanusi’s letter. As the central bank governor pointed out, all stakeholders should be concerned that accretion to foreign reserves and the ECA have fallen well below expectations on the back of strong oil prices.
Data provided by NNPC showed that total national crude oil lifting (NNPC plus indigenous and international oil companies) over 19 months stood at 1,287,742,641 barrels of crude oil. If the total amount were to be divided by 577 days covering January 2012 to July 2013, this would come to an average of 2,231,790 barrels of crude oil per day (bpd), including 445,000 bpd bought by NNPC for domestic crude oil supply.
What this means is that even with pipeline vandalism, crude oil theft and production deferment, Nigeria should have had robust foreign reserves and a growth in savings in the ECA. Lest we forget, vandalism, crude oil theft and production deferment have been institutionalised in the Niger Delta for almost a decade. It started under the so-called militancy and agitation for improved development of the region and has continued unabated well after the Amnesty Programme was introduced in 2009. Yet under the Olusegun Obasanjo administration, the federal government was able to grow its foreign reserves and savings in the ECA appreciably. Evidently, there is something wrong with the manner this administration is managing its resources and needs to put in place better fiscal controls.
Moreover, NNPC has long been the whipping boy of politicians, advocacy groups and other agencies of government for the obvious reason that it is not transparent and insufferably insular. As mentioned earlier, NNPC, uncharacteristically, was forced by Sanusi’s letter to open up its books on crude oil lifting and sales. Such information from the corporation, which is meant to be accountable to the Nigerian public, is rare to come by. Curiously, NNPC has one of the largest and best funded Public Affairs Departments in the country. However, it finds it difficult to regularly update the public on its operations. In the process, it is easy give NNPC a bad name and put it in a reactionary or defensive mode.
The lesson to be learnt from the latest bashing of Nigeria’s national oil company is that it must change its ways. NNPC must know by now that the carryover mindset from the military era when it could play hide and seek is winding to a close. The beauty of democratic governance is that the public would become more demanding and would seek for improved corporate governance structures and accountability.
Accordingly, it must open itself up to scrutiny and in so doing, become more efficient and professional like other national oil companies that it says it wants to emulate. Realistically, we do not need a Petroleum Industry Bill to be passed into law before NNPC’s transformation can come full circle. The time to start is now.
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