25 February 2014, Sweetcrude, London – For a country that ranks 144 out of 175 in Transparency International’s 2013 Corruption Perception Index, CPI, and recently got scared by reports of inappropriate accounting practice, Nigeria could have a serious image crisis as a nation if she does not take cognizance of the effect of unfavourable news on the her ability to attract Foreign Direct Investment, FDI, and implement Nigerian Content.
After the Occupy Nigeria socio-political protests in January 2012, which was in response to the removal of fuel subsidy by the Federal Government of President Goodluck Jonathan, the Minister of Petroleum Resources setup three special Presidential task forces to tackle the problem. Almost two years after the set up to review and advise on issues that relate to funds misappropriation and fuel subsidy there has been little change in the modus operandi of the sale of crude oil and importation of finished products. Also, the recommendations from these committees are yet to be publicized and strategies for correcting the anomalies yet to be implemented.
Why is Nigeria not very transparent about her hydrocarbon resources, clandestine in her award of contracts, unprocedural about the execution of due process and uncommitted to creating and maximizing value? Besides the decoy of activities listed in the brief issued when committees are being set up, it is most infuriating when the members who are chosen to carry out function (e.g. design a template for key production/management, provide critical performance indicators to be tracked on a periodic basis for ministerial review, review all licenses issued for new refineries in Nigeria and assess their operational, technical, and financial readiness etc), conclude their activities, submit reports then discover that nothing transformational occurs after they have put in hard work.
The committee on verification and reconciliation of fuel subsidy payment was set up to investigate subsidy claims by oil marketers. They came out with mind boggling findings and discovered huge amounts of money fraudulently collected by oil marketers as subsidy since 2009. Years afterwards and five months after the Central Bank announced that $50 billion in revenues from oil exports from January 2012 to July 2013 had not been remitted to the federation account, the Finance Ministry is requesting for a forensic audit of Nigeria’s Federation account. To cap all these unclear processes there is now a further credibility issue because the Ministry of Petroleum, Finance and the Nigerian masses are uncertain about the true facts of how value is being created by Nigeria’s hydrocarbon resources.
If our generation is to avoid being labeled as wasteful and irresponsible by Nigerians yet unborn, we must empower watch dogs to monitor value created and utilized in the Nigerian hydrocarbon industry. Monitoring and reporting from bodies like the Nigerian Extractive Industries Transparency Initiative (NEITI), Facility for Oil Sector Transparency in Nigeria (FOSTER) and Transparency International (TI) is required. These are the bodies that should validate the forensic audit if and when one is produced.
With Nigerian Content being all about value creation, it is advisable that rather than award contracts to third-party companies, NNPC and the Federal Government of Nigeria (being accountable to the Central Bank of Nigeria and 170 million plus Nigerians) should trade products directly on the spot market. For NNPC to determine and apply a price (“NNPC’s Official Selling Price (OSP)”) to a barrel of Oil is sacrilegious!!!!. The need to pass the Petroleum Industry Bill into law, deregulate the downstream of the Nigerian economy and build our refining capacity rather than export crude cannot be overemphasized.
Nigeria has a huge image laundering assignment ahead of her in her centenary year. The NEITI report shows that subsidy disbursements spiraled from US $1.3 billion in 2009 to $5 billion in 2011 or 380% over three years. Several modular refineries or a couple of refineries could have been built at this cost if a single-digit loan guarantee was put up by government in support of ownership of commercially viable refineries and petrochemical plants. The current dispute about the practice of deducting subsidies from what NNPC should have paid to the government and the illegality of spending money that should have been budgeted, accounted for and processed through the Central bank is a major concern which has been raised, is yet to be tackled but must be addressed urgently.