The problem with NNPC

Dan Onwukwe

Very so often, the Nigerian National Petroleum Corporation (NNPC) is in the news for the wrong reasons. It appears the corporation has become inured to controversies. The NNPC without controversy is becoming like a doughnut without a hole. No wonder, once again, it has come under intense searchlight. Some days ago, the meeting of the Federation Account Allocation Committee (FAAC) charged with the approval of remittances submitted by NNPC, ended in a stalemate. It was because, FAAC, chaired by the Minister of Finance, Mrs. Kemi Adeosun and commissioners of the 36 states of the federation as members, had insisted on full disclosure on remittance by the NNPC.

The issue in dispute was that the NNPC reportedly remitted only N127bn to the Federation Account for the month of May, instead of N147bn. This is N20bn short of what it ought to have remitted. The Minister of Finance who had briefed the presidency on the matter, frowned at the attitude of the leadership of the corporation. Government, she said, expected the organisation to operate purely as a business venture, having invested huge public capital into the organisation.

Therefore, good return on investment is expected. But, that has not been the case. Statistics show the Finance Minister has genuine reason to be angry the way the

corporation is handling Nigeria’s revenues and the remittance of same to the Federation Account as the Constitution mandates it to do. The figures NNPC had proposed for FAAC were “unacceptable”, she said. She explained that some of the costs the corporation had put forward to defend its under remittance could not be justified. As a result, the government has decided that, rather than approve the amount proposed by the corporation “we will go back and do further work”. But not much work seems to have been done since last week, as the controversy continues, back and forth.

Last week, the Chairman of Finance Commissioners Forum, the umbrella of the 36 states’ commissioners, Mr. Mahmoud Yunusa, said that the N127bn declared by NNPC as May earnings was far from the revenue received by NNPC from crude oil sale. He explained that at the inconclusive FAAC meeting in Abuja, the corporation said it spent N3.5bn on product leakages and pipeline vandalism and other operational costs. However, the Department of Petroleum Resources (DPR), the agency that keeps such records of expenditure, has a different story to tell. The management of DPR has claimed ignorance of the N3.5bn.

As expected in such a back and forth argument, the management of NNPC has given its own account of the revenues it remitted for the month of May. It insists the amount it has remitted is in line with the terms of agreement it had with the 36 state governors of the federation. According to a statement its spokesman, Mr. Ndu Ughamadu, NNPC has alleged that the state governors were making requests on it to “transfer an extra N40bn” for them to share in the FAAC, despite remittance of N147bn for last month(June) for sharing among the the three-tiers of government. This is serious allegation, if it turns out to be true. Ughamadu also claimed that, contrary to the what was in the public domain, the corporation surpassed the terms of agreement with the governors, by a hefty amount of N35bn.

This is not the first time we have had such argument. Indeed, it is the third time this year. More will likely come in the months ahead where NNPC will financially hold the country to a standstill because it refuses to render actual amount from oil receipts. It raises some pertinent questions . What is the best way to hold NNPC to account for all public revenues accruing to the Federation Account in line with Section 162(1) of the Constitution without defaulting?

For what is public knowledge, as revealed by numerous audits into the financial records and operations of the corporation, the opaque nature of the organisation seems to permit all shadowy accounting formula that makes openness and transparency a tough call. But that is unacceptable. As equal shareholders in the NNPC, the corporation owes it a duty to Nigerians to render full disclosure in all remittances to the Federation Account. Indeed, the Act that established the corporation is clear that its account book should be conducted in the spirit of accountability and transparency. But the corporation is not adhering to that. Instead, it has repeatedly ignored past audit reports.

For instance, the Report of the Investigative forensic Audit of revenues and remittances by NNPC from January 2012 – July 2013, carried out by PriceWaterhouseCoopers (pwC) recommended, among other things that in view of the NNPC Act which appears to grant the corporation a “blank” cheque to spend money without limit or control, be “reviewed and structured as a matter of urgency”. The audit report also recommended that NNPC should be required to disclose its consolidated (group and subsidiaries) position with regard to costs, expenses and profits for the purpose of deductions from crude oil revenues, if any.

The report further urged that henceforth, proceeds from crude oil sales should be remitted fully to the Federation Account without deductions. And, you ask: Why has NNPC failed to implement these recommendations? There are other sundry matters dealt with in the forensic audit report, with advice and recommendations for both NNPC and the Federal Government that have been ignored.