Accustomed to meeting most of their financial obligations from their monthly share-out of the Federation Account, Nigeria’s 36 state governors were recently confronted with less-than-expected offers from the pool. Under-remittances from the state oil company and some other agencies mean less revenue for states battling rising costs, high debts, deficits and an impending election cycle. The chickens the President Muhammadu Buhari-led Nigerian National Petroleum Corporation hatched are coming home to roost.
The alarm raised earlier this month by the states’ commissioners of finance that expected remittance to the Consolidated Revenue Fund of the Federation from the NNPC shifted to near-panic mode at state houses last week. Two consecutive meetings of the Federation Accounts Allocation Committee – a gathering of the Minister of Finance and the states finance commissioners – ended without agreement as delegates rejected alleged under-payment by the NNPC.
Fresh confirmation of our untidy national book-keeping practices has just come from an audit report prepared by KPMG and commissioned by the National Economic Council. The report found that 18 federal revenue federating agencies withheld the sums of N526 billion and $21 billion from the Federation Account between 2010 and June 2015. NEC, chaired by the Vice-President, includes the finance minister and the state governors who are understandably livid at the continuation of a system that allows the NNPC especially, to carry on as usual.
They woke late to the posers this newspaper has been raising over the oil company’s dangerous monopoly on refined petroleum products since September; its unverified claims on volumes imported and distributed; its self-regulation; its runaway self-imposed habit of subsidising petrol, and virtual autonomy under an inattentive President who has also made himself the petroleum minister.
Now, governors are finally waking up to the dangers. They should have spotted the booby trap when the NNPC gleefully announced that it was now the sole importer of petrol after independents left the field, citing losses arising from a landing price then of N171 per litre compared to the regulated price of N145 per litre ceiling. The alarm should have been louder when, first, the NNPC said it would absorb the losses and quaintly labelled it “under-recoveries,” and, next, claimed the improbable supply figure of 55 million litres per day. A healthy scepticism would have prompted independent checks much earlier than now to safeguard public funds. Now that landing cost is N191 per litre, NNPC is heartily subsidising on our behalf while we pick up the bills.
In between, Maikanti Baru, Group Managing Director, claimed the company incurred $5.8 billion in two months. In January this year, petrol imports cost N1.4 trillion.
Improbability has given way to incredulity: governors have now taken a cue from The PUNCH in questioning the new figure of 60 million litres supplied per day and Baru’s vow to bring in 100 million litres per day for two months.
Neither Buhari nor the lazy, distracted National Assembly can run away from providing answers to the governors’ posers. Who verifies the NNPC’s import and expenditure claims? There should be a thorough investigation of the company’s operations to ascertain how much petrol comes into the country and where they go. It stretches the imagination that the neighbouring markets of Benin Republic, Niger Republic, Togo, Cameroon, Chad and Ghana can absorb the excess over the 35 million litres per day claimed by the NNPC as our national demand.
More importantly, we should stop the national folly of continuing to allow vested interests to prevent the privatisation of the NNPC’s four loss-making refineries and liberalising the oil downstream. Buhari and Baru are driving the economy that shrank to 1.95 per cent in the last quarter aground. Rather than sell them post-haste, Baru, in accordance with the retrogressive presidential fiat to make them work “at any cost,” is on a forlorn, unworkable drive to attract investors who will provide funds but will not own. Such shallow thinking and convoluted rigmarole have ensured that the refineries cannot meet local demand and continue to accumulate operating losses over the last three decades (group losses of about N546 billion in the three years to 2017). The refineries lost N82.09 billion in 2015, N78.95 billion in 2016 and a report by Bloomberg puts recent losses at the NNPC HQ and the refineries at about $500 million.
Baru’s acrobatics of wooing the original builders and others to invest in refurbishing them are not viable. As long as the NNPC remains a major player in the downstream, operators will continue to flee the local market as Chevron, Texaco, Mobil have done, leaving only the bold and influential Dangote on whose upcoming 650,000 bpd Lekki refinery lies the country’s sole hope of breaking the NNPC stranglehold.
Opaque, self-regulating and over-politicised, the NNPC’s losses pale in contrast to the strong showing of other SOEs like Norway’s Equinox (formerly Statoil), Brazil’s Petrobas and Gulf oil majors that all posted rebounds in 2017 as oil prices rallied. The world eagerly awaits the flotation of Saudi Aramco whose owner, Saudi Arabia, is reforming its economy away from oil dependency and opening up to global investors. Nigeria must follow suit.
Buhari should relinquish the petroleum resources portfolio and reconstitute the NNPC board to allow for reformers from outside the rotten NNPC system. In line with his electoral promise, Buhari should follow the advice of Governor Nasir el-Rufai of Kaduna to “kill the NNPC” to make way for a new entity to emerge and meet national aspirations. A recent report that depots and pipelines that are not even fully utilised drained N174 billion reinforces why the NNPC should exit the downstream sector completely and concentrate on its core function as a holding company.
In the meantime, the parliament should launch an all-out probe into the fuel import system and the refineries. Governors should not stop at insisting on full remittance of all funds due to the CRF, they should go to court to demand their rights.