By Olusegun Adeniyi
Following the revelation of the withdrawal of $2.1 billion ‘security money’ from Nigeria National Petroleum Corporation (NNPC) accounts more than a decade ago, I wrote a column titled, ‘NNPC: The ATM for Dirty Money’. The scandal occurred amid the drama in the National Assembly over the Petroleum Industry (PIB) at the time. And my piece dwelt more on the gaps in the PIB, especially regarding how NNPC operations might be impacted once the legislation was enacted. A report in Reuters had quoted Aaron Sayne, an American lawyer who focuses on the Nigerian energy sector, as saying “The bill leaves open lots of questions around what roles the new national oil companies will play in the sector, and how they will receive and manage money.”
I concluded my 10th December 2015 column this way: “While the proposed PIB is no doubt a positive move for which, I hasten to add again, President Buhari must be commended, I will also urge that it should be weaned of all the things that have combined to turn both the upstream and downstream operations of our oil and gas industry into no more than an ATM for people in political authority. If that is not done, then there may be no real change in the sector.” Unfortunately, what eventually became the Petroleum Industry Act (PIA) ignored these critical issues in establishing the NNPCL that, for all practical purposes, merely added L (Limited) to its name.
In its October 2024 Policy Paper, ‘Urgent Need to Amend the PIA to Boost Federation’s Petroleum Revenue’, the Waziri Adio-led Agora Policy–a think tank focused on development and governance–raised posers on the NNPCL opaque revenue streams that were not different from (or even worse than) the pre-PIA enactment. “After two years of implementing the PIA, evidence shows that the Federation has received significantly lower revenues from the petroleum sector, compared to the period before the law,” Agora Policy wrote more than a year ago. “Again, similar to JV dividends, there were many months when the NNPCL did not remit the 40% balance. It is also questionable why the owner of an asset, the Federation, will receive only 40% of the profits from such (PSC) assets, and sometimes receive nothing.”
Considering that I never imagined transparency and accountability to be high on his list of priorities, it is pleasantly surprising that Tinubu would sign the Executive Order 9 (EO9) that strips the oil and gas sector of operational opacity and aligns it with provisions of the 1999 Constitution. That he has done it in an election year makes it even more commendable. Incidentally, I made allusions to some of the issues being addressed in my 9th January 2014 column, ‘Sanusi’s Letter, Jonathan’s Burden’ as a response to the letter by then Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi, to President Goodluck Jonathan. In the letter, dated 25th September 2013, Sanusi (now the Emir of Kano) had made serious allegations about remittances by NNPC to the Federation Account. While I enjoin readers to go through the whole column (https://www.thisdaylive.com/2014/01/09/sanusis-letter-jonathans-burden/), let me take some excerpts from it before I conclude:
“…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 (RMAFC) 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 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. If there is crisis in any state of the federation and there is need to mobilise 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 jointly owned by the federal government, states and local governments) balance?
“On 19 February 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 Multinational companies (3); Organised Private Sector (4); National Assembly (2) and State’s (Regional) Houses of Assembly (2). While Mrs. Obiageli Ezekwesilli was appointed the Chairperson, 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 his government.
“While our assignment lasted, we met at least once 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 sector. 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 industry. 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…’
“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 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.
“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 specialised 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 patronise own country businesses in rigs construction and servicing, and even ship building. The day the NNPC becomes a national oil company with equities floated both at home and in leading world exchanges, then it would begin to operate as a business rather than a pot of cheap cash for a succession of political leaders…”
ENDNOTE: The foregoing is from my column of 12 years ago and it doesn’t appear as if much has changed, despite the PIA. Now to the presidential EO9. While Section 5 of the Constitution empowers the president to implement and enforce laws, substantive changes to statutory fiscal frameworks like the PIA may require legislative amendments to ensure constitutional alignment and institutional certainty. Besides, concerns have been raised in certain quarters, especially about funding the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), though arguments can also be made that no quango should be allowed to sidetrack accountability which the current regime encourages. Therefore, all factors considered, not only should we commend Tinubu for the EO9, we must also strengthen his hands so he could go further in opening up our oil and gas industry and make it fit for purpose.
While praising the president for what he termed a courageous decision, former Nigerian Bar Association (NBA) President, Olisa Agbakoba (SAN), said EO9 does not even go far enough to correct the lapses in the PIA. “NNPC Limited remains an amorphous entity whose precise role and legal character are still undefined,” Agbakoba said, while adding that the oil company has historically absorbed substantial public oil and gas revenues through various structural mechanisms that undermine Section 162 of the 1999 constitution. “Nigeria’s most critical economic sector must be governed by a legal and regulatory framework that fully serves the national interest and protects the constitutional revenue entitlements of all three tiers of government.”
In her capacity as Chair of the Federation Account Allocation Committee (FAAC), the Minister of State for Finance, Dr. Doris Uzoka-Anite, met with the commissioners of finance from the 36 states last week. As she told her audience, the EO9 “is a structural fiscal correction” designed to enhance distributable revenues and restore constitutional clarity. The Minister highlighted the concerns the EO9 addresses to include off-budget deductions by the NNPCL, retained management fees, diversion of gas flare penalties and fragmented remittance structures. Specifically, EO9 suspends the 30% allocation to the Frontier Exploration Fund (FEF) and the 30% management fee on profit oil and profit gas payable to NNPCL while directing that gas flare penalties be paid into the Federation Account with full remittance of petroleum revenues now mandated.
All these will result in higher monthly gross inflows into the Federation Account and increased allocations to the constituent units: federal government, 36 states and 774 local government areas as well as higher 13% derivation transfers to oil-producing states. But this is where the problem lies. The reform efforts of the current administration have ensured more money to the states. Yet indications are that these funds are not being judiciously applied in many of them, which perhaps explains why Uzoka-Anite also admonished: “An increase in distributable income must be managed responsibly. Sudden liquidity injections across all tiers of government—if not carefully handled—can generate excess aggregate demand, exchange rate pressure, asset price distortions, and inflationary risks.”
Uzoka-Anite then proposed to the states what she called ‘safeguards’ which include staggered FAAC distribution rather than a single bulk injection, reducing debt burden, clearing arrears and temporarily warehousing some of these allocations in a stabilisation buffer. She made other proposals before concluding on the need to “resist the temptation to treat incremental inflows as permanent windfalls.”
I hope the governors will heed that counsel.
When God is Not to Blame…
The recent deaths in Yauri local government of Kebbi State of no fewer than 14 wedding guests, after the boat carrying them capsized, have added to the growing number of tragedies on our waterways. In a story that has become all-too-familiar, the boat was said to be carrying more than 100 passengers before overturning mid-journey, throwing occupants into the river. “I appeal to you to accept this incident in good faith, bearing in mind that nothing happens without the knowledge of our Creator,” Governor Nasir Idris said at the funeral prayers for the victims. “God does what He wants at the time He wants, and nobody has the right to question Him.”
I beg to differ with the governor. Yes, accidents do happen. But I don’t think the cheap and mostly preventable accidents on our waterways are acts of God. That sort of thinking merely absolves authorities of taking responsibility for the increasing numbers of people who perish on our waterways. In 2023, a ‘Leadership’ newspaper report put the number of fatalities between January and November that year at 911. With the highest number of deaths (285) recorded in Niger State, others include Kebbi (144), Kwara (125), Sokoto (117), Lagos (92), Anambra (80), Bauchi (76), Adamawa (60), Taraba (50), Kano (45), Bayelsa (40) Benue (34) and Ondo (34). Considering that many accidents go unreported, casualty figures for that year were likely higher.
For instance, within a period of 20 days in 2014, there were three such mishaps which claimed about 150 lives. First, a commercial boat capsized on a canal at FESTAC Town in Lagos, claiming the lives of 18 passengers. Within the same month, a passenger boat capsized in the waters around Cross River State, killing about a hundred people. And then in Majidun River, Ikorodu in Lagos, a passenger boat hit a solid object, upturning and throwing all its 28 commuters into the open sea. The victims included pregnant women and a young man and woman whose wedding was just a few days away.
That hardly a week passes without news of an accident on our waterways is why we should all be concerned. But not much attention is being paid to these avoidable tragedies because the victims are the poor of our society. That perhaps explains why we invoke the name of God as a convenient excuse for their fate.
You can follow me on my X (formerlyTwitter) handle, @Olusegunverdict and on www.olusegunadeniyi.com
