A Review of the Nigerian Energy Industry

Constitution empowers NNPC to deduct operation – Kalu

nnpc04 March 2014, Abuja – A constitutional lawyer and former Attorney-General of Abia State, Chief Awa Kalu (SAN), has said that the Nigerian National Petroleum Corporation (NNPC) is empowered by the 1999 Constitution to deduct operation costs before paying the balance to the Federation Account, stressing that the revenue referred to in Section 162(1) of the Constitution means profit. In his contribution to the debate on whether NNPC has the power to defray its expenses before remitting revenue to the Federation Account, Kalu told THISDAY in an interview that the generation of revenue is a process whose end point is profit.

“It is my humble view that the revenue contemplated by section 162(1) of the Constitution is profit and nothing more. In the context of a commercial enterprise, section 162(1) would not make commercial sense if it’s not interpreted to exclude cost from profit,” he said.

He cited the decision of the Supreme Court in Attorney General of Ogun State versus Attorney General of the Federation, where the apex court agreed in 2002 that what the Bureau of Public Enterprises (BPE) should pay into the Federation Account was the net surplus. When asked further where the NNPC derived its powers to deduct operation cost in view of the clear provisions of Section 162(1) of the Constitution, Kalu said that theoretically the provision is clear, but added that in terms of implementation, it is not clear.

According to him, this section of the constitution stipulates that all revenues collected by the government of the federation shall be paid into the federation account.

“The crucial question is: what is all revenues? That is answered in subsection 10 of section 162 and is said to mean any income or return accruing to or derived by the government from any source. Of special interest is section 162(10) (C) by which revenue includes, “any return by way of interest on loan and dividends in respect of shares or interests held by the government of the federation in any company or statutory body.”

You have to bear in mind that the NNPC as a statutory body is therefore set up by a statute in which the general duties of the corporation are set out just as its powers,” he explained. He insisted that without a shred of doubt the NNPC Act also makes financial provision for the corporation, adding that “what this then means is that you have to marry section 162 of the Constitution with the financial provision in the NNPC Act in order to determine how water can enter into the Coconut”.

Kalu said this was a roundabout way of saying that the NNPC as a going concern, a business organisation would first generate the revenue that would be paid into the federation account. “The generation of revenue is a process whose end point is profit. It’s my humble view that the revenue contemplated by section 162(1) of the Constitution is profit and nothing more,” he added.

On the allegation that the NNPC flouted a presidential directive on kerosene, Kalu stated that the position of the NNPC was that the responsibility of removing subsidy on any product or pricing was that of the minister of petroleum.

He said petroleum pricing could only be adjusted by publication in a gazette, adding that if there is no such publication then no adjustments in pricing can take place.
“The NNPC says that the directive to which reference had been made contained a proviso namely that subsidy be removed from kerosene but no publication should be made. In that regard the directive could not be executed not being in line with section 6 of the Petroleum Act. That’s my understanding,” he added.


– Ejiofor Alike, This Day

In this article

Join the Conversation