21st February, 2014
Dr. Omar Farouk Ibrahim, Acting Group Group General Manager, Group Public Affairs Division of the Nigerian National Petroleum Corporation, NNPC, speaks on the alleged unremitted fund controversy in an interview with AYORINDE OLUOKUN in Abuja
What do you make of these seemingly unending controversies about NNPC and failure to remit revenue it earned on behalf of Nigeria to the national treasury?
We believe it is a very unfortunate development. Under normal circumstances, argumentation between various agencies, ministries and departments of government is good for democracy and transparency. But the dimension these controversies have taken is really worrisome.
One, we believe questions can be asked, answers gotten, issues resolved in ways better than what we are seeing today. In a situation where the credibility, the transparency, the accountability of an institution is called to question in the manner that the Central Bank of Nigeria, CBN, has done to the NNPC and then, coming back two weeks later to admit that the figure given is wrong is not helpful to Nigeria. And the earlier we did our homework very well before we make public statements on issues, the better for the good health of Nigeria. I want to tell you that issues like these have been happening, not just with NNPC, but even with other arms of government, but they have always been resolved within. The controversies about unremitted funds is not new to those who are players in that circle, namely, the CBN itself, Minister of Finance, DPR, FIRS, NNPC, all those who sit round the table to do the federation account allocation meeting every month. What was new was the fact that it was brought to the public, and secondly, that the figure was terribly inflated. NNPC has always asked for reimbursements. If the government pays the money the NNPC is asking for because it has legitimately incurred that expenditure, certainly we would not have been in the situation we are in today.
But it is not only the CBN that is saying so. You will find out that in the past three years, NNPC has been indicted by the various committees and probe panels over the same failure to remit appropriate amount of revenue to the national treasury. The Nuhu Ribadu Committee report is there, the KPMG report, the House of Representatives Ad hoc Committee on probe of fuel subsidy, the Senate Committee report on the same issue, Nigerian Extractive Industries Transparency Initiative, NEITI report…
I can tell you that all of these reports they are talking about are the same thing. It is not that there is one shortchanging that Ribadu found out or kind of exposed and another by NEITI, another by KPMG and so on. No. They all boil down to the same thing that we have been going through in the past 10 years and it will continue to be so because it is a continuous process. It will continue to be so because every day, there is subsidy. It will continue to be because every day, vandalism takes place, crude oil is stolen. If you want these controversies to stop, abolish subsidy completely. Deregulate the economy and provide the protection needed to secure our pipelines and national assets.
Like the latest accusation by the CBN Governor on the unremitted $20 billion which he said the NNPC allegedly spent the bulk of it on the importation of kerosene even though there is a presidential directive ordering you to stop payment of subsidy on the product. Why did NNPC insist on importation of kerosene and paying subsidy, even when it is clear that the product is not even getting to the end users at the subsidised price?
How do you mean we know? For all we know, kerosene sells for N50 at NNPC mega stations across Nigeria.
Nobody is buying at that price and when they do, the queues are long.
Fine, there could be queues in the mega stations, but certainly, nobody sells kerosene beyond N50 in NNPC mega stations. For other stations, you cannot hold NNPC responsible for their actions. It is not our job to police other participants in the industry. There are agencies of government whose job it is to ensure that regulated prices are adhered to by the participants because we sell to them at N40.90 ex-depot. They are required to sell at N50. If they go beyond that, then the appropriate authorities should be able to sanction them. That is on whether they are selling or not selling at the correct price. On the question of an order or directive, we have not till today received any instruction that we must stop kerosene subsidy. Granted, we saw the memo from the Villa, but it was not addressed to the NNPC. It was addressed to the Ministry of Petroleum Resources.
Now, as a subsidiary under that Ministry, the communication line is between the President, the Minister and then the parastatals under that Ministry. As a parastatal, you don’t communicate directly with the President. There is proper channel of communication. The Ministry did not communicate that directive down to us. If the Ministry had done what it was directed to do, NNPC dares not fail to comply with the instruction. Furthermore, there is a procedure, according to NNPC Act for effecting petroleum products price changes. Having decided on a price change, the minister is required to gazette that decision.
Once you gazette something, it is no more secret, it is public knowledge. Now, we understand that the directive from the President to the Minister clearly stated that the removal of this subsidy must be done quietly. This may explain why the then minister could not implement the directive. Now the President says, ‘deregulate, remove the subsidy, but don’t announce it.’ Now, how can you produce a gazette that you cannot circulate? The whole idea of a gazette is to say it is now officially on record. This is government position. But he was asked not to do that. I can assure you that if the GMD of NNPC had received instructions from the Minister either in the form of gazette or written directive, he would have complied. To the best of our knowledge, subsidy is a government policy. And if you look at the documentation of NNPC, right from the last 10 years, we have been canvassing for deregulation because we believe regulating downstream has a serious bottleneck to NNPC growth. All our position papers is let’s deregulate.’ We have sponsored campaigns for deregulation. If we don’t believe in it, why should we be doing that?
But why should NNPC be embarking on the impunity of paying itself subsidy straight from the funds it generated from the sale of crude oil?
Again, this comes with the legal question. The Act establishing NNPC clearly said it could recoup money for its operations from the proceeds of its operations. We are not doing anything illegal.
In his presentation, the Governor of CBN said the NNPC agreed that it will no longer pay itself subsidy and that it will submit its claims to the PPPRA just like other importers for payment of subsidy, at least as from 2012, so why the change ?
No, we didn’t change. We still make our claims to the PPPRA. If they don’t pay, we would still not stop importing. The reason is that if for any reason, not just kerosene, but even PMS, if there is a shortage people will blame NNPC even though we are just one out of dozens of players. So, the responsibility of NNPC as a national oil company is different from that of other players who are there purely to make profit. As NNPC, our duties include those things that will help the national economy as a whole. It therefore means that we have to lubricate the economy in order to allow for mobility of goods and services so that the national economy will grow. We don’t look at Nigeria from a myopic point of view. If we are making profit and the nation is losing, then we will lose as a nation.
The argument is that if you had gone through PPPRA or through demands by appropriation in the national budget, the controversies over the payments of subsidies, funds you claimed to have spent on repairs of broken pipelines, etc , would have been avoided
Now, let’s face it. The question is, how can we make demands on the National Assembly for money to repair pipelines when we don’t know how many points are going to be broken in a year? Two, the process of getting money even after it has been approved is such that the NNPC would collapse if we follow it. Oil, whether crude oil, refined product or gas, is being pumped from point A to point B and somebody hacked into it, what kind of bureaucracy are you going to wait for before you clamp and repair it? You have to move very, very fast in order not to kill the economy. If we are to say we don’t want to take our money and do these operations because we need National Assembly approval, then if pipelines are vandalised, I can guarantee you that oil will be flowing for one month and there will be nobody to stop it because we are waiting for money to come. So, the oil industry cannot accommodate the kind of bureaucracy that our legislation on financing or production is talking about. We have to trust this organisation to do what needs to be done in order to operate efficiently. But many Nigerians don’t trust NNPC; in fact, many described it as a tower of corruption…
But many Nigerians don’t trust NNPC; in fact, many described it as a tower of corruption…
It is not that many Nigerians don’t trust NNPC; many Nigerians don’t trust authority, people in government, people in public office. Even if you are considered a saint in Nigeria, the day you become a political leader or somebody in a management position that you can allocate or decide on resources, people will begin to suspect you. There is this feeling that once you are in public office, you are no more patriotic. But I want to assure you that seriously, there are very many dedicated patriots working for the good of Nigeria, even more patriotic than people who are criticising those inside government.
There are also the controversies about the use of traders by the NNPC to sell its own share of crude oil. Why has NNPC insisted on the use of traders, in spite of the findings in some reports that the Corporation is shortchanging the country by doing so?
What percentage of this oil are you really talking about? There is no country in the world that produces oil and doesn’t sell it through traders. The key thing is to ensure that there is enough of these people to compete for this product. Nigeria has a policy on how it sells its crude oil. It is not NNPC policy, it is Nigerian government policy. We abide by every decision government has taken. Every country has its own policy on crude oil sale. Ours allows direct sale to the refineries, to traders- the point is you can’t limit yourself to just one like the sale to the refineries. When you have a glut, what do you do? I believe government, in taking that decision, was looking at the long term interest of this country. And it is not true that we are selling to selected people. Our records are there. When we go to the National Assembly, these things will be presented.
The CBN Governor also criticised the Strategic Alliance entered into by the NNPC with some companies allegedly close to the top shots of the Ministry of Petroleum. He said those companies are not paying Nigeria what is due to the country as the NNPC has been busy writing off what they should pay as operating or capital expenses?
There is no truth in the statement that those operators are not paying royalties or petroleum profit tax. They pay the same royalties and petroleum profit tax as was being paid before by the oil majors. Two, there is nowhere in the world where oil companies do everything by themselves. They outsource, it is natural in the industry.
The argument is that the terms are very unfavourable to Nigeria
It is a matter of perception. Perhaps, if you are the one on the spot, looking at the circumstances on the ground, you may tend to believe that under the circumstances, you have the best for the country. But in a situation in which the Nigerian Petroleum Development Company, NPDC, takes 80 per cent and they take 20 per cent of the profit, I don’t understand how else you would want a more favourable agreement.
The argument is that the country was even shortchanged in the transfer of the oil mining licences to Atlantic Energy and co ?
Those blocs were taken and given to NNPC. To me, that is the most patriotic thing to do. NPDC does not belong to any individual. In fact, it is wrong to say that theses strategic partners are operators. No, NPDC still operates those blocs. What the partners did was sink money into that project with a view to looking for more oil and bringing out more oil. And this was for a certain period; they will recoup within five years because they invested so much in order to help raise the reserve and also increase the production. During that five years, 80 per cent of the profit will go to NPDC and 20 per cent will go to them. After they have recouped their money, then we will go back to a new formula. Now, if you don’t invest and bring that oil out, for as long as it is in the ground it is still a potential. But if you invest and bring it out, Nigeria is making money. Our target really is to get NPDC producing at least a quarter of a million barrels by 2020. And since neither NNPC nor federal government will give them money to invest in order to grow, we have to go out looking for money wherever we can find it.
What was the situation before the Strategic Alliance entered into with these companies?
NPDC will be 25 years this year. For the first 21 years of NPDC, it was struggling to produce 50,000 barrels per day. As a result of this strategic thinking and new direction, in four years, NPDC has jumped from 50,000 barrels per day to 130,000 barrels per day. And like I said, we are targeting 250,000 barrels by 2020. There is no way NPDC would have gotten this far without injecting money. What is happening is that everyone here has their mandate. For Ministry of Finance, the focus is to ensure that there is enough money to give to local, states and federal governments anytime they sit at the federation accounts allocation committee. The Central Bank, the focus is to amass as much foreign exchange in reserve as possible in order to boost the national currency and stabilize the economy. Our objective at the NNPC is to increase our reserve and our production. But sometimes, these objectives are conflicting. For the Central Bank and the Ministry of Finance, if we are to plough back our resources in order to grow, they see it as an opportunity cost- they are losing revenue that they will declare or put to grow the reserves. But if we put everything on the table to be consumed, you will be killing the golden goose. As far as we are concerned, by re-investing in NPDC, we are investing for the rainy day.
But instead of just dipping your hands into the national purse or seizing funds that you are supposed to remit to the national purse to do it, why can’t the NNPC list out its plans and demands for funding through budgetary provision after it has remitted the funds?
Let me tell you, by the time that money goes into the system, the kinds of demands that will come, you will not believe it. A politician is interested in what will keep him in office today and if it means he has to bring all the resources of the nation to distribute in order to retain his office, he will do it. Seriously speaking, NNPC believes that what it is doing is in the long-term interest of Nigeria because we don’t have today any company that we will say is the upstream arm of the NNPC or the government in the oil industry and we are trying to build one. Look, even this JV Cash Call, how many times have we had problems with them? If monies owed foreigners are not being paid as and when due, you can imagine what will happen here – they will say they don’t need N50 million, they need N5 million, or they will say, ‘This is what we have.’ What do we do?
And secondly, NPDC is essentially a limited liability company. What I think people don’t understand is that when NNPC took those blocs, they did not just hand them over to NPDC. NPDC paid for it. So, if they have paid for it as a limited liability company, they have a right to reinvest their money in order to grow. If NNPC had taken what belonged to federal government and handed over to NPDC, then we will say when they produced the oil, it belonged to the government. Of course, at the end of the day, NPDC also belongs to the government. I think we are going to come out with a new communication strategy so that people will get to know what we are doing in NNPC.
For too long, public perception about us has not really been positive. But like I said, it is not just NNPC; public perception about public officers in Nigeria has always been like this and I think we need to change for the better. There is no nation of saints anywhere in the world, but it is important that we have trust in our leadership and in that way, we can give them the benefit of doubt.
.Interview published in TheNEWS magazine