Seeking to
“reform” it may likely be a long, costly exercise; we prefer, like el-Rufai,
that it be replaced with an entirely new entity. Overall, Nigeria’s national
interest will be best served if the state-owned behemoth is completely
dismantled and rebuilt with new set of aims and objectives.
We are,
understandably, on the same page with el-Rufai, having advocated the
liquidation of the NNPC much earlier. We strongly advise President Muhammadu Buhari, who has admitted that “only God knows
the amount of damage their (NNPC) actions have inflicted on Nigeria,” to
refrain from any attempt to reform this leviathan: it will not work. His plan,
as enunciated for the first time in Washington, USA, to break the NNPC in two –
one to regulate, the other to “act as an investment vehicle for the country” –
is great as long as it brooks no retention of the agency in any form. The devil
may be in the details.
Speaking at
the Seventh Wole Soyinka Centre Media Lecture in Abuja a fortnight ago,
el-Rufai reinforced our position by recalling how the NNPC had been run like a
parallel government, appropriating money to itself and remitting only what it
deemed fit to the Federation Account, contrary to the Constitution that
requires all government revenues be sent to the pool. He said: “This country can no longer afford to maintain an NNPC that
arrogantly, unlawfully and unconstitutionally spends an unhealthy proportion of
national oil earnings on itself.” We agree.
But unraveling
the financial shenanigans of the corporation will not be easy. Efforts to
verify claims by the then Central Bank of Nigeria Governor, Lamido Sanusi, that the NNPC had failed
to account for $20 billion have so far been frustrated. After initially
admitting to not accounting for $10.8 billion, it set about hindering a
subsequent forensic audit by PriceWaterhouseCoopers,
which in its report, had caveats saying that it was not availed of relevant
information. Earlier audits by KPMG and the Nigerian Extractive Industry
Transparency Initiative (NEITI), among others, uncovered shady deals, illegal
deductions and withholding of state funds, false subsidy claims of N28.5
billion (2007 and 2009 alone) and a culture of bribery and collusion among the
NNPC executives, political office holders and external players.
Put simply,
the NNPC is beyond redemption. Its operations, according to The Economist, a
United Kingdom-based newspaper, are the most opaque of all National Oil
Companies.
“Politicians,
oil workers and security forces are said to be behind the complex cartels that
steal, illegally refine and sell crude oil. They have amassed almost
unimaginable wealth in a country where poverty is still rife,” it said. Oil’s taint has seeped into almost
all levels of government and business. Yet, the central problem is found in the
petroleum ministry, which wields vast unaccountable power. The NNPC, a
state-owned behemoth, is responsible for all aspects of the industry, from
exploration to production and regulation. It is among the most secretive oil
groups in the world, and is accountable to no one. Indeed, the NNPC’s entire
downstream operations amount to one huge fraud. With four domestic refineries,
a recent report said they were operating at just over 10 per cent capacity.
Nevertheless,
the NNPC buys 445,000 barrels of domestic crude, to match its installed
capacity, ostensibly to refine or swap for refined petroleum products abroad,
yet spends vast sums on turnaround maintenance and pays itself subsidies. The
swap arrangement, as Buhari reveals, now allows cabals to fleece the taxpayer
every day. On kerosene, Sanusi, the whistle-blower, said: “In dollar terms every vessel of kerosene imported by the
NNPC with federation money costs about $30 million and it was sold at $10 or
$11 million, generating rent of $20 million per vessel to the syndicate.”
But a former
NNPC Group Managing Director, Andrew Yakubu, promptly accused Sanusi of being
ignorant of the technicalities of the oil industry. Now, the technicalities of
the NNPC’s house of fraud are coming into the open. An exasperated Buhari just
disclosed that up to the 10th of this month, our crude was still being
illegally lifted by people who are in government. An equally infuriated
el-Rufai was pained that despite producing an average of 2.2 million barrels of
crude per day in 2014, the country imported most of its daily consumption of
refined products of 43.5 million litres per day and spent $8.99 billion on
questionable subsidy in the 18 months to June 2013. In 2011, the Goodluck
Jonathan government paid out N2.5 trillion as subsidy when only N245 billion
was budgeted for it that year.
A report
said that in 2012, the NNPC sold N2.77 trillion of domestic crude, but paid
only N1.66 trillion to the Federation Account; in 2013, it earned N2.66
trillion but paid N1.56 trillion; in 2014, it earned N2.64 trillion but
remitted N1.44 trillion, while between January and May 2015, it earned N733.36
billion and remitted only N473.2 billion. According to el-Rufai, the NNPC
remitted only 58 per cent of revenues earned between 2012 and 2015, leaving
only 42 per cent for the federal, state and local governments to share, meaning
that the NNPC appropriated more funds than were available to the federal, state
and local governments combined. A minister has been mentioned as stealing as
much as $6 billion.
The oil
fraud story is not as awful as the NOCs elsewhere. By 2010, the world’s 13
largest oil and gas companies were NOCs, accounting for 75 per cent of all
crude production. Six of the 10 biggest by 2013 were NOCs with Saudi Arabia’s
Aramco the biggest in terms of production and reserves. Though state-owned,
Aramco is run professionally and like Kuwait’s KPC, Mexico’s Pemex, China’s
PetroChina and Sinopec, Russia’s Gazprom and Brazil’s Petrobas, is driven by
the profit motive. Norway’s Statoil, 67 per cent owned by the state with the
rest publicly owned, is the world’s 11th largest oil company by revenue and the
26 largest company of any industry by profit and operates in 36 countries.
For the
NNPC, however, the scandals have been too many with very little value addition.
Successive governments have been part of the looting orgy, which reached its
nadir during Jonathan’s era. It is time to slay the leviathan. A new oil company
to serve as a holding and investment vehicle should be established to take over
its assets, while liquidators are appointed to wind down the NNPC.
Its
subsidiaries should be privatised and Nigeria should move away from running
commercial enterprises to creating an enabling environment for private capital,
while government relies mainly on taxes for its revenues. It should exit the
downstream immediately with the new company remaining only a landlord and
equity holder on behalf of the state. It should be run purely as a commercial
enterprise and shielded by law and strong regulation from political
interference. (Source: Punch)
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