Sanusi’s Letter, Jonathan’s Burden? By Olusegun Adeniyi
Sometime early in November last year, I saw a copy of a letter said to have been written by the Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, to President Goodluck Jonathan. In the letter dated September 25, 2013, which I was handed only to read, the CBN Governor alleged that the Nigerian National Petroleum Corporation (NNPC) failed to remit a whooping sum of $49.8 billion to the Federation Account within a period of 19 months between January 2012 and July 2013.
While drawing attention to some concerns earlier raised about what appeared to be shortfalls in remittances to the Federation Account, the CBN Governor noted that the failure of the NNPC to repatriate the said monies constitutes not only a violation of constitutional provisions but also of both Nigeria’s foreign exchange and pre-shipment inspection of exports laws. To address the issue, he recommended that the president should compel the NNPC to provide evidence for the disposal of all proceeds of crude sales diverted from the CBN and Federation Account; investigate crude oil lifting and swap contracts; and authorize the prosecution of suspects in money-laundering transactions.
After reading the letter, I came to certain conclusions. One, if indeed Sanusi authored the letter, it could mean that his relationship with the president had broken down to such an extent that he no longer had access to discuss critical issues in private. Two, given my little knowledge of our oil and gas industry, the amount quoted in the letter as unaccounted for was too huge to be accurate. Three, since the person from whom I saw the private letter was not our President, it stood to reason that it would eventually be in the public domain and could become a political weapon in the hands of the president’s opponents. Four, the issues raised in the said letter were similar to the revelations by a Switzerland-based advocacy group, the Berne Declaration, which accused the NNPC of conniving with some Swiss oil dealers to rip Nigeria of nearly $7 billion through the sale of crude oil below the market value.
As it would happen, about a month later, the story of Sanusi’s letter broke in the media. Unfortunately, at a time one expected a strong and robust defence from the NNPC, a statement personally signed by its Group Managing Director, Eng. Andrew Yakubu dismissed the CBN Governor’s letter as “political” before adding that it “is borne out of lack of understanding of how revenues from crude oil sales are remitted into the Federation Account.”
That Yakubu would impute political motive to a demand for his corporation to render account speaks to how petty politics trumps professionalism within the system today while there is only one of two conclusions to draw from his claim that Sanusi is ignorant of how the NNPC accounts work. It’s either that the man in charge of our Central Bank is the worst ignoramus in the country or the NNPC accounting process is so complex that it would take only some geniuses from Mars to understand the numbers.
Given Sanusi’s pedigree in the banking sector and his unquestionable intellect, even his worst enemies must come to no conclusion other than that he is anything but a dunce. We are then left with the option that the workings of the NNPC account would require some special education to understand. That is more plausible to believe and my own personal experience bears eloquent testimony to that fact though I will come back to this later.
The core mandates of the CBN include ensuring monetary and price stability; maintaining foreign reserves to safeguard the international value of the national currency while providing economic and financial advice to the Federal Government. If in the course of performing those functions, the CBN Governor notices that funds that should statutorily hit the Federation Account do not, it would be criminal for him not to bring the attention of the Number One citizen to such issues. To that extent, it is difficult to fault what Sanusi did but there are questions about his approach. That Sanusi got his figures wrong is neither here nor there, what I query in his letter is the assumption that the monies not captured by the CBN could only have been missing (or stolen) although to be fair to him, he did not expressly state that.
It is therefore unfortunate that the whole issue has been marred by politics. But to the extent that the letter has forced some reconciliation meetings between critical stakeholders, the intervention has added value to our system. And the suggestion that we should dismiss the whole issue because “only” $12 billion or $10.8 billion is yet to be “reconciled” as against the figure of $49.8 billion quoted by Sanusi is most unfortunate. If just one dollar of public money cannot be accounted for, it is an issue, or at least should be an issue, for any serious society.
What is galling really is the institutional arrogance of the NNPC that has always held on to the notion that it is not accountable to any authority except perhaps the presidency even when the revenues it earns belong to the three tiers of government. The corporation has never really felt it has anything to do with the federal ministry of finance, it treats the Revenue Mobilisation Allocation and Fiscal Commission with contempt and, as it is now evident, it merely tolerates the CBN. The situation is not helped by the fact that the federal government and its agencies appropriate the Federation Account almost as sole owner. That then explains why the FAAC monthly meetings most often end up in acrimony.
However, I need to stress that within the NNPC today are not only respected and seasoned professionals who can hold their own against their colleagues from anywhere else in the world but also honest and patriotic Nigerians. The real challenge is the way the corporation has always been run almost as a slush fund by the federal government to undertake all manner of assignments. This much can be glimpsed from the latest NNPC clarification, this time to the allegation that the yet-to-be-“reconciled” amount of $12bn or $10.8bn out of the alleged unremitted $49.8bn is “missing”. The NNPC spokesman, Dr. Omar Farouk Ibrahim, said the monies “can be located in the expenses on some of the responsibilities which the Corporation carries out on behalf of the Federal Government with respect to the domestic crude oil utilization.”
Yet the truth of the matter is that the NNPC has been doing more than the repairs of broken pipelines or paying for controversial kerosene subsidies, as enumerated by Dr Ibrahim. If there is crisis in any state of the federation and there is need to mobilize resources for security agencies, the next thing you hear from whoever is the president of Nigeria is “call me the GMD”. If a leader of one of the ECOWAS countries visited and was genuflecting before our president about how rough things were for his country (and may be later behind closed doors, for himself), the instant instruction would be, “call me the GMD”. And I am aware that for several years (may be even now), the activities of the military Joint Task Force (JTF) were solely funded by the NNPC. Given such a situation, how would the Federation Account that is essentially dependent on oil revenues but is jointly owned by the federal government, states and local governments balance?
What the foregoing means in effect is that the problem of the NNPC predates President Jonathan though most critical observers believe that things have in recent time gone haywire. It is within that context that one can understand Sanusi’s letter. And we should thank him for it because for the first time, the NNPC has been forced to come out to render some account, even though in a manner that also shows very clearly that the corporation can still not get it. The figure we are talking about here (that is yet to be “reconciled”) is almost two trillion Naira and some NNPC fat cats believe they can just dismiss such a whooping amount that ordinarily belongs to the three tiers of government as no more than their operational cost without any rational explanation. But as I stated earlier, this is an issue that has engaged my attention for some years now though it may be necessary to explain and I crave the indulgence of readers for the digression.
On February 19, 2004, President Olusegun Obasanjo launched the Nigeria Extractive Industry Transparency Initiative (NEITI) as the Nigerian subset of a global initiative aimed at following due process and achieving transparency in payments by oil companies. He also appointed the membership of the National Stakeholders Working Group (NSWG) made up of 28 individuals from Civil Society (2); Media (1); Government (14); Indigenous and Multi- National companies (3); the Organised Private Sector (4); National Assembly (2) and State’s (Regional) Houses of Assembly (2).
While Mrs Obiageli Ezekwesilli was appointed the Chairperson, President Olusegun Obasanjo, in a rare act of magnanimity also appointed me to represent the Nigerian media in the NSWG at a time I was very critical of him and his government. Other members were Engr. Funsho Kupolokun, then GMD of NNPC; Engr. Phil Chukwu who then headed NAPIMS; Mrs. A. Lawan-Ali who was at that time the Permanent Secretary, Federal Ministry of Petroleum Resources and Dr. Bright Okogu, the current DG, Budget who was at that period Head, Oil & Gas Accounting Unit at the Federal Ministry of Finance. There were also Mrs. Gwen Nwachukwu, then Director of Revenue, Federal Ministry of Finance; Dr. Aboki Zhawa, then Permanent Secretary, Federal Ministry of Solid Minerals and Mrs Ifueko Omoigui-Okauru, then Federal Inland Revenue Service (FIRS) boss.
Other members of the founding NSWG were Mr. Chris Haynes, then Managing Director of NLNG; Mr. B.O.N. Okafor, then Desk Officer, Oil Accounts Research Department at the CBN; Mr. Hassan Tukur, then Director, Nigeria-Sao Tome and Principe Joint Development Authority (JDA); Mr. Joseph Ajiboye, then Auditor-General of the Federation; Senator Maeba Lee, then Chairman, Senate Petroleum Committee; Hon. Dr. Cairo Ojougboh, then Chairman, House of Representatives Petroleum Committee; Hon. Chibuike Rotimi Amaechi, the current Rivers’ Governor who was at that period speaker of the state House of Assembly and Hon. Kawu Peto Dukku Speaker, Gombe State House of Assembly.
There were also Mr. J.R. Pryor, then Managing Director of Chevron-Texaco; Mr. Basil Omiyi, then Managing Director, Shell Petroleum Development Company (SPDC); Dr. Imo Itsueli Chairman, Dubri Oil Co. Ltd.; Dr. H. Assisi Asobie, then President, Transparency in Nigeria (TIN); Dr. Louis Brown Ogbeifun, then President of PENGASSAN; Mohammed Hayatu-Deen, representing the Nigeria Economic Summit Group (NESG) as well as Mr. Gbite Adeniji, Mr. Trevor Akindele and Engr. (Mrs) J. Maduka.
While our assignment lasted, we met at least once in a month as a whole body and we also had different committee sessions. But at our very first workshop attended by President Obasanjo, a member of the civil society (can’t remember who now) said our assignment was akin to attempting to instill transparency into a secret society. That summation turned out to be very apt because but for the tenacity of Ezekwesili and the strong backing Obasanjo gave us, NEITI would have been dead on arrival. The two Multinational chief executives in the committee told us bluntly at one of our early meetings that there was nothing NEITI could do differently because as one put it, “we cannot re-invent the wheel.” But perhaps what I found rather interesting was that the NNPC people, including those we usually invite for our meetings, were equally as cynical of our assignment, while their positions on industry issues were never different from that of the multinational oil companies.
It is noteworthy that despite serious challenges (and due principally to the efforts of Ezekwesili who had Obasanjo’s strong support), we succeeded in drafting the NEITI bill which we saw through passage in the National Assembly and we conducted the first physical, process and financial audits of payments in the upstream sectors. Those audit reports, and the interactions we had with critical stakeholders in the course of our sessions, were most revealing of the challenge of our oil and gas sector.
For instance, according to the financial audit report for the years 1999 to 2004, “there are remarkable differences in the monthly payments of domestic crude made by NNPC Treasury and the actual amount received into the Federation Account”, while on the Cash Call, the reports states that “the percentage share of the Approved Budget Performance (ABP) sometimes do not agree arithmetically on a linear calculation in the case of NNPC.”
The physical audit which “materially verified the volumes of crude exported by NNPC”, was as revealing: “These volumes lifted by NNPC, which have been derived from the physical reconciliation of flows, are however, slightly different from sales volumes recorded by COMD (crude oil marketing department). Volumes used by the companies for Royalty and PPT show significant differences between the reconciled hydrocarbon flows and the taxation and royalty returns… DPR was not able to provide us with procedures and guidelines to be used in measuring crude and liquid flows throughout the system, with the exception of a ‘Manual of Procedure Guides for the Petroleum Inspectorate’, which is not comprehensive in this respect. There seems to be no process for keeping procedures up to date and in line with international best practice. The metering infrastructure and the records do not allow the hydrocarbon balance to address the question of unaccounted oil…”
What the foregoing suggests is that with our oil and gas sector, it has always been a case of the more you look, the less you see but because the then GMD of NNPC was a member of our committee, the corporation commenced a remediation process. While some efforts were made as a result of pressure from President Obasanjo, it is very clear now that those lessons have been lost. And we are only talking of the upstream sector where there is even a semblance of accountability because the transactions are basically international. The downstream sector with all the subsidy payments is another story altogether.
Interestingly, my NEITI engagement ended at about the time I would join government in 2007 and that gave me further insights into the management of our oil and gas sector from a rather vantage position. That then explains my conviction that until we have the Petroleum Industry Bill (PIB) in place and there is genuine commitment to repositioning the sector, there can never be real transparency and accountability in the management of our oil and gas assets. And it will continue to be difficult to follow the money, even by the CBN.
However angry the president may be about the leakage of Sanusi’s private letter to him, I believe he should look at the bigger picture. Except of course he is certain there was bad faith on the part of Sanusi (and here he should be wary of mischief makers who tell tales they cannot substantiate), it would be unfair to take the issue personal. Bringing fears about possible financial leakages to the president’s notice, even if via a letter, is within Sanusi’s remit as CBN Governor and to foreclose such interventions would be to expose our system to serious danger.
President Jonathan says he is running a transformational administration. It’s a nice catchphrase. Now, there are opportunities for him to deliver some significant lasting legacies in the oil and gas sector. Sanusi has exposed a glaring weakness with regards to its opacity which has been further confirmed by the responses from the NNPC. If the president can deliver on a PIB that will reposition the sector and make it more transparent and accountable, he will be making positive history.
The foremost aspiration in the energy sector should be to transform NNPC into a national oil company (NOC). This strategy has in other countries introduced value chain, including power generation, refining for export and ownership of LNG vessels for the export of their specialized cargo. In those countries, the NOCs sell their shares, they access financial markets at home and abroad to raise funds to finance their investment activities and they don’t over indulge cash-calls. They pay taxes, royalties, lease rentals and dividends to their national governments. They patronize own country businesses in rigs construction and servicing, and even ship building.
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