A director of the Nigerian National Petroleum Corporation has said that operatives of the Department of State Services have interrogated him 11 different times since May over crude oil swap deals with traders.
“The DSS has been harassing some of us,” the Group Executive Director, Refining and Petrochemicals, NNPC, Mr. Ian Udoh, was quoted as telling Reuters.
The investigation by the DSS and anti-graft agencies involves crude oil swap deals and offshore processing agreements in which the corporation gives certain volume of crude oil to traders in exchange for refined products.
Instead of ensuring that crude oil was made available to the nation’s four refineries for domestic consumption, the immediate past Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, in conjunction with the Pipelines and Products Marketing Company, increased the crude oil swaps and OPAs from 270,000 barrels per day to 445,000 bpd, thus starving the refineries of crude oil.
President Muhammadu Buhari has instructed the NNPC to review the crude for oil products swap contracts and offshore processing agreements with trading companies because of the belief that the deals might have cost the country millions of dollars in lost revenue and refined product supply.
“There is a siege mentality here at the moment,” Udoh, an NNPC veteran of 36 years, was quoted as saying.
He said Buhari’s initiative had given fresh legs to media coverage of the accounting holes worth over $20bn identified by two separate investigations, and that the public pressure was dominating management meetings.
The DSS operatives were said to be closely monitoring the headquarters of the corporation in Abuja, with soldiers guarding the building from raised platforms, while visitors were required to go through four separate security checks.
However, the NNPC has described the story as false.
The Group General Manager, Group Public Affairs Division, NNPC, Mr. Ohi Alegbe, wrote in a text message to one of our correspondents, “That the report is from a foreign news agency doesn’t make it credible, please.”
Buhari and his party, the All Progressives Congress, had promised sweeping reforms of the oil and gas industry, with the NNPC at the core, during the campaigns leading up to the March 28 presidential election.
To kick start the overhaul of the industry, the President had on June 26 dissolved the board of the NNPC, with more sackings expected.
The President’s advisers have recommended a total overhaul of Africa’s biggest oil industry
The oil sector provides the government with roughly 70 per cent of its revenue, and the slump in crude oil prices since last year has hit the economy hard.
Under the constitution, the NNPC is supposed to hand over its oil revenue to the Federal Government, which then pays back what the firm needs based on a budget approved by the National Assembly.
But in a legal contradiction that has never been resolved, the Act establishing the state oil company allows it to cover costs before remitting funds to the government; in effect, enabling it to do what it wants with the cash.
The former Central Bank of Nigeria Governor, Lamido Sanusi, had in 2013 alleged that the NNPC failed to pay $20bn in revenue to government accounts between January 2012 and July 2013.
But the company argued that the money was not lost at all. A subsequent audit by the PwC found that some funds were unaccounted for, bemoaning a lack of cooperation and issued an audit with extensive caveats.
Only last month, the National Economic Council said the NNPC had earned N8.1tn between 2012 and the end of May 2015, but paid only N4.3tn to the Federal Government.
The council is chaired by the vice president and includes all state governors and the central bank governor.
At the 7th Wole Soyinka Centre Media Lecture Series held in Abuja on Monday, the Kaduna State Governor, Mallam Nasir el-Rufai, lambasted the national oil firm for being run like a parallel government, adding that he was hopeful that the Buhari administration would “kill” the corporation.
“If you don’t kill the NNPC, you will kill Nigeria,” el-Rufai had said.
According to him, the oil firm is riddled with corruption and until it is destroyed completely and rebuilt from the scratch, there will be no headway for Nigeria.
“The fact that the NNPC has effectively become impossible to audit suits a lot of people,” said Antony Goldman of Nigeria-focused PM Consulting.
He said it was conceivable that not even insiders knew the real value of the various deals agreed on behalf of the company.
The greatest indictment of the NNPC may be that Nigeria’s four refineries have never reached full production, due to poor maintenance, leaving Africa’s biggest crude producer to rely on expensive imported fuel for 80 per cent of its energy needs.
President Muhammadu Buhari dissolved the board of the NNPC to pave way for full investigation of the corporation.
Mr. Oshiomhole said Monday’s meeting was the first time the NNPC and the office of the Accountant General of the Federation, briefed the National Economic Council, as directed by President Muhammadu Buhari.
The governor said Mr. Buhari “compelled” the NNPC to provide information in “black and white” on issues relating to the total sales of Nigeria’s crude oil from 2012 to May 2015.
“This has never happened before and for us this is profound. We are talking about transparency, we are talking about change. And what we saw from those numbers I believe that Nigerians are entitled to know, is that whereas the NNPC claimed to have earned N8.1 trillion, what NNPC paid into the federation account from 2012 to May 2015 was N4.3trillion.
“What it means is that NNPC withheld and spent N3.8 trillion.
“The major revelation here is that for the entire federation — that is the federal government, the states and all the 774 local governments — the amount the NNPC paid into the federation account for distribution to this three tiers of government came to N4.3 trillion and NNPC alone took and spent N3.8 trillion. Which means the cost of running NNPC is much more than the cost of running the Federal Government. That tells you how much is missing, what is mismanaged, what is stolen, they are huge figures.”
He said it had become clear that the NNPC had not respected the Constitution on how government money should be spent.
“If NNPC needs to spend money, it is obliged to prepare its budget like every other business
enterprise. That budget will be scrutinized by the executive and forwarded to the National Assembly and the National Assembly will accordingly appropriate it.
“If the federal government cannot spend without appropriation, why should any agency spend without appropriation?”
Mr. Oshiomhole said President Buhari promised that henceforth, all monies must go to the federation account.
Mr. Oshiomhole said President Buhari promised that henceforth, all monies must go to the federation account.
“What you need you budget for, Nigeria cannot continue with you earn the money and spend it. Where is transparency? Where is the role of the National Assembly? So if you were doing that you won’t have a situation where the NNPC alone will spend N3.8 trillion and remit to the federal, states and local governments N4.3 trillion which means NNPC is taking about 47 per cent and that explains all the leakages you are talking about.”
He said parastatals must return to spending on a budget.
“We are not reinventing the wheel, that is the way it used to be and that is the way the constitution says it should”
EXCESS CRUDE ACCOUNT
The Edo governor also disclosed $2.1 billion was withdrawn from $4.1 billion reported to be in the excess crude account as at November 2014 without the approval of the National Economic Council (NEC). The account now has $2.0bilion.
“We looked at the numbers for the Excess crude account, the last time the Minister of Finance and Coordinating Minister of the Economy reported to the Council and it is in the minute, she reported by November 2014, that we had $4.1 billion.
“But today the Accountant General Office reported we have $2.0 billion. Which means the Honourable Minister spent $2.1billion without authority of the NEC. And that money was not distributed to states, it was not paid to the three tiers of government. This is why the NEC has set up a panel to look at what accrued, what it was spent for, when and by whom. So that Nigerians will have the full picture of all the transactions as regards the much talked about Excess crude,” Mr. Oshiomhole said.
The four-member committee, which consists of the governors of Edo, Gombe, Kaduna and Akwa Ibom states.
Explaining further, Kaduna State Governor, Mr. El-Rufai, noted that the Federal Government had in the last year been unilaterally withdrawing from the excess crude account without consulting the other owners.
According to him “The Excess Crude account was started by President Olusegun Obasanjo around
2004-2005.
2004-2005.
“It was an administrative arrangement to save for a rainy day. And it was meant to have very clear accountability such that every state and local government, in a particular state knows their balance in the Excess Crude Account, though you can’t spend it but you know how much of it is yours.
“That was the arrangement. And in those days, before we spend any money from the Excess Crude Account, the federal and states governments will meet and agree. That is how we agreed to build the seven power stations which is NIPP today, it was from Excess Crude Account. And we also met and agreed to build the Lagos – Kano Standard Gauge Rail Line from the Excess Crude Account.
“But what we have seen, in the last few months or years is that the Excess Crude Account was operated unilaterally by the federal government, drawings were made unilaterally without consulting those that actually own the money because the Excess Crude Account is 52 percent owned by the federal government and 48 by the states and LGA.
“So the decision of the NEC is to set up this committee of four to look at the operations of the Excess Crude Account and make recommendations to council on its future.
“The other thing the committee will do is to look at the operations of the federation accounts particularly the shortfall and again come back to council with very clear recommendations as to what to do.
“We have not been given a time frame but as you can imagine states government are under pressure, many of our state governments are unable to pay salaries on time without recourse to borrowing, so this is very important to us. This is an all governors committee, we wear the shoes we know where it pinches. So we are going to do this as quickly as possible,” he said.
The Council’s next meeting of the council is on July 23rd, and Mr. El- Rufai said he hopes the committee will complete its work and be in position to report to council on that day.
Zamfara governor, Abdulazeez Yari, said the council also agreed that the Federal Government in conjunction with the Central Bank, will see how to support financially ailing states.
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