On governance and Nigeria’s oil industry

THE recent dissolution of the board of the Nigerian National Petroleum Corporation (NNPC) and the presidential directive given the corporation to review existing refined product exchange agreements with various trading companies as well as the call for the scrapping of the NNPC are veritable pointers to the fact that the nation’s sole oil corporation has become a cesspool of corruption and an albatross of immense propensity on the nation’s socio-economic and political well-being.

That the NNPC has carried on like a parallel government, capitalizing on the nation’s dependence on oil to wantonly dictate the pulse of the federation, is a blunder in development that Nigerians have been saddled with for several decades. Until the immediate past governor of the Central Bank of Nigeria (CBN) and currently Emir of Kano, Alhaji Lamido Sanusi, made the controversial submission in 2013, that the NNPC failed to remit about $10.8 billion and $20 billion from the sales of oil during a 19-month period of rising oil sales, the management of the nation’s petroleum resources by NNPC seemed like the activity of a cultic bureaucracy rather than as a public national business concern.

Nothing indicates this faux pas better than the discrepancies in the crude oil swap contracts, irreconcilable accounting system, allegation of fiscal impropriety, misappropriation and unauthorised diversion of public funds. For instance, while ordering a fresh probe on the refined product exchange agreement known as crude oil swap, the House of Representatives observed that a three-year report (2009-2012) of the Nigerian Extractive Industries Transparency Initiative stated that the nation lost $8 billion owing to incompatibility in the value of crude given out and the refined product delivered.

Furthermore, the joint Senate committee investigating the management of fuel subsidy indicted the NNPC of operating an illegal account in the United States, where it kept proceeds from the sale of crude oil before transferring same to the Federation Account. There was also the denied allegation that the former co-ordinating minister of the economy and the Minister of Finance, Dr. Ngozi Okonjo-Iweala spent $2.1 billion meant for the three tiers of government from the Excess Crude Account without authorisation from the National Economic Council. These reports tend to corroborate findings in the report of the accounting firm, Pricewaterhouse Cooper, which identified structural and legal irregularities bordering on outright fraud in its audit of the corporation. Irregularities noted include double payment on petrol and kerosene subsidies, undervaluing of crude oil lifted, computation errors, subsidy over-claims, amongst others.

What has so far been demonstrated by the activities going on in NNPC is nothing new. It is the same sad, old story of mind-searing plundering perpetrated by scavengers, who in concert with International Oil Companies control much of its activities by proxy, and turn the corporation into a honey-pot or a conduit through which Nigeria must be milked dry. This misnomer persists, no thanks to the anachronistic NNPC Act of 1977 which empowers the corporation to deduct operating costs and other subsidies before remitting its revenue to the national treasury. If this country must extricate itself from the strangulation of the exploitative cabals that seek to bring Nigeria to a prostrate position, conscientious individuals and groups must lend their voices to put an end to these inanities.

As the most notorious symbol of public inefficiency and corruption, it is a trite fact that NNPC is a national disgrace. In a country of over 170 million people, whose mainstay is petroleum, Nigeria is one country that should be transparent in economic dealings. It should of necessity save itself from mismanagement of resources and global embarrassment. Which is why this newspaper supports the recent dissolution of the board of the NNPC.

However, since the situation in the oil and gas sector is drastic, radical steps towards total transformation must be taken. One of such drastic steps concerns NNPC’s management of revenue. Up until this moment, the rationale behind multiple accounts by NNPC has not been convincingly articulated. Attempts at spurious explanations by some financial theorists have only enraged right-thinking industry watchers, just as they have horrified Nigerians. To ensure transparency and be seen to have done so, NNPC must close every other account and remit all monies from oil deals only into the Federation Account. The ambiguity shrouding the management of extraneous accounts other than the Federation Account is inimical to the financial fortunes of the country.

To provide legal backing for this, there would be need to revisit the 1977 Act establishing NNPC as a corporation that regulates the Nigerian oil and gas sector, while acting as the operator of government concerns in joint venture partnerships. Besides, this government should also as a matter of urgency look into the Petroleum Industry Bill gathering dust at the National Assembly. Although President Buhari has sacked the board of the NNPC, his administration should exercise caution in the appointment of the next board. It should desist from appointing persons solely on the basis of ethnic or political consideration, and thereby undermine the operatory capacity of the corporation.

If the government is to optimise NNPC’s commercial potential and run it as a truly commercial venture rather than as a parastatal, it would do well to ensure that only the best hand, wherever such a hand may be, runs the NNPC. It may not matter if such a person is a foreigner, after all, the Bank of England has employed a Canadian as governor. In Africa, Ethiopian Airlines and the oil corporation in Mozambique are being run by experts from other climes. For proper management, laws, guidelines and provisions should be put in place to compel the new administrators to adhere to the fundamental objectives of the corporation. If what Nigeria needs is total change, the management of NNPC must not be left to government the way it has always been.

The NNPC is also weighed down by an anti-constitutional provision, the absence of true federalism and the lopsided structure that creates room for anti-Nigerian, counter-productive primordial patronages. There will never be transparency in NNPC, no success in the oil sector and no prosperity for Nigeria until the structure is dismantled and rebuilt to serve Nigeria.