BEVERLY HILLS, March 15, (THEWILL) – The public outcry over unbridled spending habit of the Nigerian National Petroleum Corporation (NNPC) which characterises its operations resonated on Wednesday March 3, 2021, when the Senate Public Accounts Committee engaged top management of the nation’s oil firm over enormous financial irregularities levelled against it.
Presided over by the chairman, Senator Mathew Urhoghide, the committee had summoned the management of the NNPC to explain the expenditure it made without budgetary provision amounting to over N443 billion. The committee took the decision based on the 2016 report of the Auditor-General for the Federation (AuGF), being scrutinized by the lawmakers as part of its oversight functions. The report contained audit query against the abuse of due process by NNPC in the managing of public funds.
The AuGF’s query to the NNPC read, “During the examination of subsidy records provided by the Federation Accounts and Allocation Committee, it was observed that the total subsidy paid during the year 2016 was N443,940,559,974.80. They included the 2014 arrears paid to oil marketers in 2015 and the payments made in 2016 without interest is N403,321,449,046.76.
“Interest and forex differential is 40,619,110,928.04 totalling N443,940,559,974.80 which was termed subsidy deducted at source by the NNPC. This reflects continuing weaknesses in the budgeting process adopted by the Federal Government.”
The Accountant General of Federation, Ahmed Idris, reportedly told the committee that the NNPC would be in a better position to explain the extra-budgetary spending query raised by the AuGF. That was the end.
A similar scenario played out in June 2020, when the Senate took a swipe at NNPC for over 210 per cent subsidy expenditure rise in two months – March to May 2018 – which skyrocketed from N774 million to N2.4 billion daily during the period.
Chairman of its Committee on Petroleum Resources (Downstream and Upstream), Senator Sabo Muhammad Nakudu, regretted that the sole importer of petroleum products claimed N843.12 billion and over N1 trillion as “under-recoveries” for 2018 and 2019 as against the average N511 billion yearly in a decade-long subsidy regime.
The chairman said the arbitrary and unsupervised deductions in the name of under-recovery from the country’s crude account without recourse to any enabling law was at variance with Section 80 (1, 2, 3, and 4) of the 1999 Constitution (as amended).
Nakudu stated: “The NNPC Act which empowers the corporation to submit to the National Council of Ministers not later than three months before the end of each financial year, estimates of its expenditure and income relating to the next financial year does not negate the supremacy of the constitution on appropriation matters.
“The constitution is very clear on the role of the National Assembly in appropriating funds belonging to the federation, and did not exempt anyone.” He cautioned that the non-audit of the NNPC budget by the National Assembly makes its oversight role on the national oil company very difficult, if not nearly impossible, urging immediate redress.
In June 2018, a deadlock occurred during the monthly Federation Accounts and Allocation Committee (FAAC) meeting when state governors queried the figures NNPC remitted to the Federation Account. The NNPC had remitted N147 billion into the federation account in May but the governors faulted that amount, saying it did not reflect the current economic realities and prices of oil in the international market. The governors also queried the amount that the NNPC said it paid for petroleum subsidies.
Briefing journalists on the matter, Abdulaziz Yari, then chairman of the Nigerian Governors’ Forum and Zamfara state governor, said the governors still disagreed with the figures presented by the oil corporation.
“NNPC said it paid N88 billion for subsidy; in the month of June it said it paid N31 billion but it claimed N57 billion is for payment of subsidy in 2017. That is not acceptable and we won’t give the approval. You can’t just deep your hand into the public purse and take the money; you have to seek approval from the NEC or Mr. President.
“And NNPC said they have N15 billion for miscellaneous, N9 billion for pipeline maintenance, N3 billion for crude loss, all those things were not approved by anyone.
“NNPC is owned by the federal, states and local government. The states get 48 per cent while the local government and federal government get 52 percent. We have to agree whatever we get the federal government is getting 52 percent. We are saying this money should be brought to the public for sharing,” Yari said.
The Trend
The NNPC has been struggling to pronounce the words it invented to justify the decision to manage public fund its own way – “under-recovery”. Following reports of undisclosed and tardy financial dealings by the NNPC, the Senate, stepped into the corporation’s cloudy “under-recovery” room to uncover what had triggered great concern among Nigerians.
At its sitting of October 16, 2018, the Senate resolved to probe the NNPC over unaccounted whooping sum of $3.8 billion allegedly shrouded in secrecy in the implementation of the petroleum subsidy/”under-recovery”. The issues contained in the point of order raised by Senator Biodun Olujimi (Ekiti South) which triggered the resolution for the probe are instructive.
“Right now, the fund is being managed quietly without appropriation of any known law. Nobody is talking about us – Nigeria, paying subsidy. But we know that subsidy is being paid in one form or another but being covered in recovery rather than subsidy.
“It was also gathered that this slush fund has long been in the custody of the NNPC management without being couched well before the public. So, the NNPC management should come to explain what the money has been used for and whether or not it has been used in paying subsidy”.
Olujimi further affirmed that, “What happened is that rather than the Executive talking about subsidy, they talk about subsidy recovery. That means that they were going to end subsidy and pay people to stop subsidy. But the fund is not appropriated. It’s just a lump sum within the management of NNPC. And we believe that it is not good for it to be shrouded in this kind of secrecy.”
She stressed the need for the Senate to invite all those involved, “so that we can sit down together and ask questions – How are you managing this fund, what have you been using this fund for, have you being subsidising? This is because reports say that we have been subsidising. And right now the subsidy level is so high that if it is added to what we had, pump price will be N210 per litre. And this is being done behind the scenes. It shouldn’t be so. This is because it is money belonging to Nigerians and, it must be appropriated”.
Confusion, contradictions
Olujimi had alleged there was a $3.5 billion “Subsidy Recovery Fund” being managed only by the GMD and Executive Director, Finance, of the NNPC. Proceedings of the Senate ad hoc Committee probing the alleged $3.5 billion “under-recovery” fund managed by the NNPC created a chimney of emitting confusion as the Permanent Secretary, Ministry of Finance, Mahmoud Isa-Dutse, denied knowledge of the “slush fund”. His claim which corroborated then NNPC GMD, Makanti Baru’s submission that no such fund existed in its custody, worried the concerned lawmakers.
Leaked media reports which revealed that the Federal Government, through the NNPC, illegally and clandestinely diverted the government’s NLNG dividend into fuel subsidy compounded the situation. It also increased the doubts among Nigerians over NNPC’s claim of transparency in the “under-recovery” narrative. The dividend represents income from Federal Government’s investment in the Nigerian Liquefied Natural Gas project at Bonny, Rivers State, on behalf of the citizens. The proceeds therefore ought to have been transferred to the FAAC to be shared by the three tiers of government.
The then NNPC spokesman, Ndu Ughamadu, initially said the $1.05 billion was sourced from an “international agency” to fund the fuel subsidy. But this was to be countered by Baru who later admitted that the $1.05 billion was proceeds of the NLNG dividend. The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, also confirmed that N378 billion (equivalent of $1.05 billion at N360 to a dollar) was withdrawn from proceeds of the NLNG proceed domiciled with the apex bank.
Augean Stables
Disclosures at the Senate’s Joint Committee on Finance and Planning showed outright abuse of the TSA process by many revenue-generating agencies who behave like they are immune from the rule. Among them is the Department of Petroleum Resources, a parastatal under the NNPC. The DPR was among the agencies accused of failing to remit the expected level of revenue to the Federation Account while swimming in its revenue pool as it likes. The Senate queried the agency’s remittance of a meagre N44.5 billion into the Consolidated Revenue Fund out of the N2.4 trillion it generated in 2019, a situation the lawmakers considered mind-boggling.
For instance, the DPR management deducted N88 billion from the N2.4 trillion generated in 2019 as 4 per cent approved collection fee. According to reports, the DPR could not convincingly account for the remaining unremitted collections which it simply classified as “overhead and operational costs” without specific figures tied to them.
A report by Premium Times showed that the DPR paid over N8 billion as salary upfront in January 2020 to its staff quoting daily payment data published on the open treasury portal:
“The review of salary payments between January and April 2020 showed two descriptions. The first description is January 2020 DPR Staff Salary. This has only five beneficiaries and sums to ₦29.6 million. The second description, which is 2020 DPR Staff Upfront Payment, had 605 beneficiaries and summed to ₦8 billion.
“Twenty-nine (29) top officials received between ₦50 million and ₦71.7 million as upfront salary payment. Another 30 received between ₦30 million and ₦49.9 million. 51 staff members received between ₦20 million and ₦29.9 million. One hundred and nineteen (119) others received between ₦10 million and ₦19.9 million. The remaining 375 staff members received between ₦5 million and ₦9.9 million.
“The treasury database also indicated that five DPR staff received double payment in the same period. The first payment was with the description January 2020 Salary while the second payment had the description – 2020 DPR Staff Upfront Payment.
“An example of a recipient of the double payment is Abubakar Attahiru Saleh who received a sum of ₦22,755,745.91 twice the same day. While he received ₦6,318,167.93 as January Salary, he also received a second payment of ₦16,437,577.98 as Salary Upfront,” the online newspaper published in its May 20, 2020 edition.
Comfort In Losses
The NNPC announced in January 2021 that the nation’s refineries lost a total of N152.08bn in 15 consecutive months of being idle as all the refineries did not refine crude oil from July 2019 to September 2020. The refineries, located in Port Harcourt, Kaduna and Warri, have a combined installed capacity of 445,000 barrels per day but have continued to operate far below the installed capacity.
In 2019, Kaduna Refining and Petrochemical Company only processed crude in one month, June; Port Harcourt Refining Company in two months (February and March); and Warri Refining and Petrochemical Company in four months (January, February, March and May).
The Kaduna refinery incurred an operating deficit of N57.99bn from July 2019 to September 2020, according to the NNPC data. Port Harcourt refinery lost N48.99bn in the period under review while the Warri refinery lost N45.10bn.
The NNPC said that the declining operational performance of the refineries ‘is attributable to the ongoing revamping of the refineries, which is expected to further enhance capacity utilization once completed’. The Group Managing Director, NNPC, Mallam Mele Kyari, had reiterated its plan to revamp the refineries and end fuel importation by 2023.
Bloomberg reported on January 15 2021 that a year after shutting down all of its dilapidated refineries to figure out how to fix them, Nigeria still could not say how much it would cost to do the work or where the money would come from. According to the report, the NNPC said it had finished the appraisal of its largest facility but hadn’t completed the process at two others.
The international news agency quoted refining experts as saying that the extended halt meant the plants were at risk of rotting away and unlikely to restart on time. It noted that the NNPC had totally shut all three plants down by January 2020 to do a comprehensive appraisal, and set the ambitious target of having them all back up and running at 90 per cent of capacity by 2023.
A similar report by the nation’s oil firm had revealed that the three refineries lost a total of N111.27 billion from January to September 2019. It noted that the refineries posted a loss of N96.31 billion in the same period in 2018. Analysis of the 2019 report showed that the refineries lost N8.36 billion in January, N10.26 billion in February and N16.04 billion in March 2019. The figures for April, May and June were N11.44 billion, N13.63 billion and N17.42 billion respectively.
The plants recorded a loss of N13.84 billion, N13.21 billion and N7.07 billion in July, August and September 2019 respectively. Kaduna refinery which did not process any crude in eight months lost N44.06 billion. Warri recorded a loss of N33.88 billion as it did not process any crude oil in April, June, July, August and September, 2019.
The report further disclosed that Port Harcourt refinery posted a loss of N33.31 billion as it was idle in January, April, May – September, 2019.
The NNPC Group General Manager, Public Affairs, Dr Kennie Obaeru, did not respond to enquiry sent to him via WhatsApp; phone calls to his cellphone were not answered.
Dr. Ibilola Amao, Principal Consultant at Lonadek Global Services, foremost oil and gas services firm, condemned the move by NNPC to undertake the extensive repair of the idle and out-dated refineries. She sees the project as one aimed at pooling resources for the 2023 elections in an indirect manner. “This is another plot to gather money for 2023 (elections). NNPC should be unbundled and handed over to private hands”, Amao said in a note to THEWILL.
Managing Director/CEO of a popular indigenous oil and gas services firm headquartered in Lagos with branches in Port Harcourt, Warri, Eket and Kaduna, who would not want his name published because of his relationship with the authorities, told THEWILL that NNPC has become a consolidated, amalgamated channel for wasteful spending, massive looting of the nation’s commonwealth and enrichment of privileged few in the corridor of power.
“When it is not subsidy, it is under-recovery or projects that are over-inflated in cost, sometimes three times what obtains in other environments. Can you imagine keeping idle refineries and pumping money into them without any conscience; yet one is bold enough to tell the world that we posted billion Naira losses on such facilities? In parts of the Asian world, this will attract public execution. Simple,” the oil and gas expert told THEWILL in a phone chat.
Nigeria is experiencing severe revenue challenge, yet the little generated is frittered away through mindless waste and questionable investments in idle refineries in addition to deceitful subsidy payments, the expert said
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
