17 July 2012, Sweetcrude, ABUJA – AS Nigerians await full balance sheet of the Nigerian National Petroleum Corporation, NNPC, a partial audit report has indicated that the Federal Government owes the Corporation in excess of $246million for improper, informal loans used to cover a range of expenses, from a presidential helicopter to maritime security.
Reuters reported that the sum also includes outstanding debts owed by the Power Holding Company of Nigeria, PHCN, for the supply of gas to its power plants across the country.
The disclosure is coming on the heels of the constitution of a new Board for the NNPC by President Goodluck Jonathan on Monday.
The new Board is made up of the following members: Minister of Petroleum Resources, Mrs Diezani Alison Madueke as Chairman; while other members are the Permanent Secretary, Federal Ministry of Finance, and the Group Managing Director, NNPC.
Others are Alhaji Abdullahi Bukar, Mr. Steven Oronsaye, Prof Olusegun Okunnu, Arc. Daniel Wadzani, Mr. Bernard O.N. Otti (Group Executive Director, Finance & Accounts); Dr. Peter S. Nmadu (Group Executive Director, Corporate Services).
Although no reason was given for the sudden dissolution and reconstitution of the NNPC Board, but in a statement issued by the President’s spokesman Dr Reuben Abati, Jonathan charged members of the new Board to “discharge their duties efficiently and with integrity in order to enhance positive transformation of the petroleum sector.”
NNPC audit report
Meanwhile, the audit, prepared by an outside organisation given access to accounts of the NNPC as part of a government’s efforts to improve transparency at the firm, raises doubts over its independence.
According to sources involved in the external audit, it will show outstanding debts owed to the oil company by a number of ministries and state agencies. The company paid for a $14 million presidential helicopter, and is owed $106 million by the state power firm and $124 million by a maritime security agency.
State governors are threatening to take the federal government to court over illegal tapping of oil revenues that should be shared with local government.
Africa’s biggest oil producer and key supplier to the United States is pinning its future oil industry hopes on turning the debt-ridden NNPC into an independent profitable company emulating Brazil’s Petrobras or Malaysia’s Petronas.
NNPC has a budget agreed by parliament. Other revenue it collects from oil production is meant to be passed to the government accounts.
The finance ministry and NNPC declined to comment on the debts and the presidency and oil ministry did not respond to requests for reaction.
“We are aware of many of these debts, obviously it isn’t an ideal situation,” an NNPC source told Reuters on condition of anonymity.
State agencies in debt to NNPC should be funded through the budget, so such loans add to transparency concerns.
The NNPC needs its own funds to pay for joint ventures with foreign oil companies, some of which have lain dormant due to a lack of state investment.
“It does highlight the extent to which NNPC has been drawn into the more opaque areas of government – and will give ammunition to those critics who say it has operated at least partly as a slush fund for government,” Antony Goldman, Nigeria oil expert at PM Consulting said.
“It points to the huge difficulties in making independent a corporation with such a complex web of assets and liabilities, at least some of which appear not to have been contracted solely on a commercial basis.”
A National Assembly report in May uncovered a $6.8 billion fraud involving a government gasoline import subsidy, which is partly run by NNPC.
That report said NNPC was accountable to no one. It said the company owed oil traders, including privately-held Trafigura , $3.5 billion in unpaid bills.
Nigeria risks its two million barrel per day oil production declining in the next few years if it fails to reduce political uncertainty, corruption and criminality.
A long-awaited Petroleum Industry Bill (PIB), due to go to the National Assembly for debate within days, is supposed to spin off some assets and replace the NNPC with a new, independent and partially listed National Oil Company (NOC).
The draft PIB also states that the oil minister will oversee all institutions within the industry, raising question marks over how independent the NOC would be.
President Goodluck Jonathan replaced the managing director of the NNPC and three other senior directors last month in efforts to improve transparency and accountability.