It was Nigeria’s immediate past Minister
of Finance and Coordinating Minister of the Economy, Dr. Ngozi
Okonjo-Iweala, that popularised the term “unreformable” in her memoirs
‘Reforming the Unreformable: Lessons from Nigeria’. In her book, she
narrates her successes and frustrations as a reformist in the midst of
people, systems and institutions that had long grown allergic to reform.
Of all Nigeria’s economic institutions,
there is apparently none that typifies Okonjo-Iweala’s notion of “the
unreformable” as much as the Nigerian National Petroleum Corporation.
The corporation is the regulator of Nigeria’s oil and gas sector. It is
also the operator of government’s interests in joint venture
partnerships with oil multinationals. But the reality of Nigeria’s state
oil company has been one of trans-generational rot. General perception
of the NNPC has been of an unwieldy and rotten behemoth that had become a
metaphor for public sector inefficiency and corruption.
It
is no longer debatable that the NNPC in particular and Nigeria’s oil
and gas sector in general, urgently need reform. Even if the NNPC were
not corrupt, there is sufficient agreement on the need for far-reaching
reform if only to address the contradictions and conflicts of interest
occasioned by its dual (commercial and regulatory) role.
Another reason for which reforms have
been advocated is the power of the corporation (under the NNPC Act of
1977) to deduct operating costs from its revenue before remitting funds
to the treasury, in contravention of the constitution, appropriation law
and the Fiscal Responsibility Act 2007. A recent figure puts revenues
withheld in this way at N3.8 trillion for 2012 to May 2015. Over the
years, this anachronistic law has worked at cross purposes with the need
to run the NNPC as a commercially viable and competitive entity. It has
also been an excuse for all sorts of shenanigans – empowering the
corporation to run the show at whim, determining its own costs and what
to remit to the federation account in an arbitrary fashion; the perfect
cover for grand corruption. President Muhammadu Buhari’s directive last
week that the NNPC and other revenue generating agencies like it must
pay all their revenues into the Consolidated Revenue Fund gives hope
that this ugly practice will be discontinued. But the NNPC law itself
still needs to change.
So what appears to be in debate is not
whether thorough reforms are needed at the NNPC but rather what should
be the direction of such reforms? Many industry watchers were therefore
excited with the release of the full report of the NNPC forensic audit
in the twilight of the Goodluck Jonathan administration. Another look at
that report is no doubt instructive on the challenge before Buhari and
the direction the reforms should take.
The report by PricewaterhouseCoopers
noted several irregularities bordering on the aforementioned structural
and legal issues as well as outright fraud. It went on to recommend that
“a minimum of $1.48 billion” owed by the NNPC to the federation account
should be paid by the corporation. The amount comprised double payments
for petrol and kerosene subsidy, subsidy computation errors, subsidy
over-claims and claims on un-incurred costs, avoidable computation
errors, vague claims and unsubstantiated costs all running into hundreds
of millions of dollars. It also included unpaid signature bonuses for
divested assets as well as unpaid taxes and royalties. Four months after
the former petroleum minister, Diezani Alison-Madueke, ordered the NNPC
to act on that recommendation, the amount remains unpaid.
The report also revealed that the NNPC
undervalued the price of crude liftings resulting in a loss of $3.6bn to
government, although that has since been amended and remitted. There
were controversial payments for kerosene subsidy to the tune of $3.36bn
in contravention of a presidential directive and without appropriation.
While it was at that, the corporation found a “clever” way of
calculating kerosene subsidy so that it charged marketers for a cost the
government was already paying, pocketing $204m for itself. There were
also several figures that could not be substantiated: $305.88m claimed
to have been spent on pipeline maintenance contracts, $64.8m spent on
demurrage and $250m port charges to the Nigerian Ports Authority, all
without supporting documents. The case was the same for several other
costs, some of them quite laughable.
The Nigerian Petroleum Development
Corporation, a subsidiary of the NNPC has also earned a notoriety all
its own. It calculates and determines what taxes it owes government, how
much it should pay and how much it should keep. It was found that out
of $1.85bn expected to be paid for eight licences it bought, NPDC paid
only $100m. During the review period, NPDC inflated its payments to the
Federal Inland Revenue Service to the tune of $26 million. NPDC
virtually frustrated the audit by refusing to cooperate with the
auditors. And for that reason, up until now no one (not even PwC) has a
clear idea of revenue due to the CRF from NPDC crude liftings and
divested multinational assets that it took up as operator, although the
report puts the later at $5.1bn.
But in all, it is easy to see from the
audit report that spending on subsidy alone accounted for over 43 per
cent ($8.7bn) of the “explanation” found by PwC for the allegedly
“missing” $20bn. This should, at least, give President Buhari an idea on
the direction of needed reforms.
Did the PwC audit go far enough? No, it
did not. The scope of the audit was limited to the specific questions
posed by former Central Bank Governor Sanusi Lamido Sanusi and therefore
covered a definite timeframe of 19 months. But at this point, any
effort at investigating the NNPC must go beyond 19 months. That is why
the Nasir el-Rufai Committee set up by President Buhari holds more
promise as it looks at transactions covering a longer period of eight
years.
Mr. President has to revisit the
recommendations of the PwC report and the series of NEITI reports before
it, among others. These recommendations have included the need to
restructure the NNPC, review the NNPC Act and discontinue its
“unsustainable model” which has it spending 46 per cent of domestic
crude proceeds on operations and subsidies. They have also included
strengthening the NNPC’s very weak accounting and reconciliation systems
and the passage of the Petroleum Industry Bill.
With President Buhari’s scrapping of the
Board of the NNPC and his declaration that the NNPC should henceforth
pay its revenues directly into the CRF, it appears we can finally look
forward to some real action in the days ahead.
But in my view, the biggest test of Mr.
President’s commitment to “reforming the unreformable” will be in how he
responds to the call for withdrawal of the PIB made recently by his
party. The PIB may not be a silver bullet, but it remains, to date, the
single most comprehensive and workable proposal at reforming Nigeria’s
oil and gas sector, including its biggest headache, the NNPC. Will he
will heed the voice of reform, or will political considerations take the
day? We can only wait to see.
Source: Punchng
0 comments :
Post a Comment