*As el-Rufai calls for disintegration, replacement of Corporation
14 July 2015, Sweetcrude, Abuja – President Muhammadu Buhari has ordered the review of crude swap deals initiated by the Nigerian National Petroleum Corporation, NNPC, with several companies for refined products.
Meanwhile, The governor of Kaduna State, Nasir el Rufai, has said Nigeria must do away with its “corrupt” oil company, the Nigerian National Petroleum Corporation, NNPC, or stand the risk of itself being destroyed.
“If you don’t kill the NNPC, it will kill Nigeria,” Mr. el-Rufai said at the 7th Wole Soyinka Centre Media Lecture Series in Abuja, where he was a guest speaker.
Mr. El-Rufai said the NNPC has become so entrenched in corruption that the only way out for Nigeria is not to attempt to salvage the corporation, but to destroy it and create a new oil company.
He said he hoped President Muhammadu Buhari will implement that proposal.
Nigeria’s anti-corruption agency and intelligence service began an investigation in May into whether the government was losing money through opaque contracts in which crude oil worth billions of dollars is given to traders in the exchanges.
That probe was set up by the administration led by Buhari’s predecessor, Goodluck Jonathan. Buhari was inaugurated as president of Africa’s top crude producer and most populous nation on May 29 after winning an election on an anti-corruption platform.
“If the president says we must tidy up, then we must tidy up,” said a spokesman for the Ministry of Petroleum Resources and the NNPC.
The Nigerian Extractive Industries Transparency Initiative (NEITI) has said there was a loss of at least $600 million in revenue due to a discrepancy between the value of the crude and the products delivered. The figure was taken from its 2009-2011 and 2012 audits of the oil and gas industry.
Buhari’s advisors have recommended a comprehensive overhaul of Africa’s biggest oil industry and increased borrowing to help pay off $20 billion of government arrears.
He has been advised to end a programme that heavily subsidises gasoline and relies on imports for the bulk of Nigeria’s domestic demand due to an underperforming refining system.
The subsidy, which was revealed to have paid out more than $6 billion in fraudulent claims in 2012, is proving to be increasingly costly.
El-Rufai said as a former director general of the Bureau of Public Enterprises, he was confident a messy organisation could be disbanded and turned into a useful one.
He said NNPC has become so corrupt and arrogant that it runs a parallel government and unilaterally decides what it remits to a nation of 170 million people, while its hundreds of employees feed fat on Nigeria’s resources.
In the last three years, Mr. el-Rufai said the NNPC retained 42 per cent of Nigeria’s money, and remitted only 58 per cent.
“About N971bn was budgeted for subsidy payments in 2014 alone (more than twice that was eventually paid). You all recall how trillions of naira were paid out as oil subsidy in 2011, when only N254bn was appropriated. No one has been successfully prosecuted for this scam. Huge deficits in gas supply have ensured that the country’s thermal plants cannot produce power at optimal levels,” he said.
“The long and short of the situation of our oil industry is best exemplified by the parallel government called the NNPC. In 2012, it sold N2.77tn of ‘domestic’ crude oil but paid only N1.66tn to the Federation Account. In 2013, it earned N2.66tn but paid N1.56tn to FAAC; in 2014, (it earned) N2.64tn, but remitted N1.44tn; while between January and May 2015, it earned N733.36bn and remitted only N473.2bn.
“That means that the NNPC only remitted about 58 per cent of the monies earned between 2012 and the first half of 2015. A company with the audacity to retain 42 per cent of a country’s money has become a veritable parallel republic!”
He said the examples he gave were only with respect to domestic crude oil sale. “Similar leakages exist in the NPDC, NAPIMS procurement and subsidiary budgets,” he said.
“The NNPC feels entitled to consume more resources than the 36 states, the FCT and the Federal Government combined. How could a country so dependent on oil revenues have been so lax about the proper governance, efficiency and security of its oil industry?” he lamented.
He identified the need to remove the undue premium on public ownership and control of every major oil asset, while checking the impact of corruption and distortion of oil subsidy on the country’s economy, and restructuring of the NNPC in the national interest.
To realise the potentials of the oil industry, he said the government must not only define exactly what the country wants the oil industry to be and to achieve, but also the structure that would best deliver it.
“An efficient and productive oil sector, able to create jobs, spur industrialization and earn more revenues requires that we tackle the monster that the NNPC has become,” he said. “We should replace the NNPC with brand new organizations that are fit for purpose – a commercialized and corporatized national oil company and new industry regulators.
He said the new national oil company should be capitalized once and for all, and then freed to fend for itself like other national oil companies, by seeking its financing independently from the financial markets and paying due taxes and royalties.
“An efficient and productive oil sector, able to create jobs, spur industrialisation and earn more revenues, requires that we tackle the monster that the NNPC has become. 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,” he said.
“We should replace the NNPC with brand new organisations that are fit for purpose, among others, a commercialised and corporatised
national oil company, and new industry regulators. This new national oil company should be capitalised once and for all, and then freed to fend for itself like other national oil companies do, seeking its financing independently from the financial markets and paying due taxes and royalties.
He said no one qualified more to appreciate the rot in the NNPC, and to deal with the menace, than President Buhari who was the pioneer head of the NNPC in 1977.
“No one can appreciate the gap between the vision of the NNPC’s founding fathers, the beautiful baby of 1977 and the 38 year-old monster it has become better than President Buhari. The NNPC of today must make Chief Sunday Awoniyi of blessed memory squirm in his grave. Something fundamentally decisive must be done to tame this monster,” Mr. el-Rufai said.
Mr. el-Rufai lamented the irony of about 70 million, or 40% of Nigeria’s total population, currently living below the poverty line, despite the country’s earning of at least $1trillion from oil in the last 50 years.
“For our vast masses, oil is no fortune,” Mr. El Rufai said. “It is more of a mirage, but a more insidious kind, because the fortune is visible in the lifestyles of a few thousands of the privileged elite, but is stubbornly inaccessible to tens of millions of ordinary people.
“Our rich enjoy the lifestyles of the richest in the world, while our poor are truly the wretched of the earth. This inequality is most unfortunate.”
To avoid sinking deeper into poverty, Mr. El-Rufai said the country must resolve to spend wiser, and do more with less by changing its big appetite to consume rather than save; import, rather than produce domestically, or neglect to prioritize capital investments.
The major responsibility of a democratic government, he said, was to ensure that people were moved away from pain of extreme poverty, by managing the country’s resources in a way that would sustain building the people, through diligent revenue collection and cost-effective and resulted –oriented application.