Speaker Bankole’s NNPC Investigation: How far can he go?

No Comments » May 21st, 2008 posted by // Categories: Energy Development Project



Speaker Bankole’s NNPC Investigation: How far can he go?

Nigeria begins yet another difficult attempt or journey to establish appropriate measures to: promote transparency and accountability with respect to, inter alia, appropriate procedures for monitoring of timely reporting on revenues and expenditures, accounting and auditing standards and related oversight, effective and efficient systems of risk management and internal control of its oil and gas resources. The current attempt is been done through the instrumentality of the National Assembly, especially the House of Representatives. For instance, Rt. Hon. Speaker Dimeji Bankole recently established yet another Ad-hoc Committee, this time around, to investigate/probe the affairs of the Nigerian National Petroleum Corporation (NNPC) and the Department of Petroleum Resources (DPR) for the period of eight years covering 1999-2007 under the following ten (10) items terms of reference (TOR):

  1. Conduct public hearing and into the operation and activities of the NNPC and its subsidiaries from 1999- 2007, with a view to uncover the causes of the apparent rot, sharp practices and looting that have permeated all facets of the operations of the sector as well as to unmask the perpetrators of these economic crimes against the nation;
  2. Determine the actual allocation of domestic crude allocation to the NNPC as well as the quantity of refined petroleum products derived thereof for domestic consumption and revenue, if any, from May 1999-2007;
  3. Further determine the location of such accrued revenue, the process of lodgements or investment and all relevant particulars thereto;
  4. Ascertain the identities, particulars, status and the basis of the engagement of companies, enterprises and individuals by the NNPC for the importation and exportation of petroleum products, as well as those who have benefited from oil blocks allocation during the period under review;
  5. Establish the current tender policies, procedures, processes for the importation of refined petroleum products;
  6. Further establish the existence of a Tender Board at the NNPC, its procedures and processes;
  7. Examine the amount that has been expended on the rehabilitation of the four existing refineries, their storage facilities, and pipelines and their current functional status;
  8. Compute all the budgetary allocations extended to PPPRA for the purpose of importation of refined petroleum product, the use which these allocations were made, and all other financial transactions entered into by the Agency and the proceeds arising thereto from 1999- 2007;
  9. Further consider all other matters and material circumstances contingent to the operations and activities of NNPC and its subsidiaries from 1999-2007; and
  10. Make appropriate recommendations to the House within two months

Yet, this is another laudable initiative from the National Assembly that deserves the support and encouragement of all Nigerians, just as they overwhelmingly support all the other on-going probes of the highly questionable activities of the immediate past administration of former president Chief Olusegun Obasanjo (1999-2007).

However, I hasten to remind us that this will be the second attempt by the House of Representatives to undertake an investigation into the affairs of the NNPC during Obasanjo’s leadership of the country and his direct management and control of the affairs of the Ministry of Petroleum Resources and Energy and the NNPC during his two-term presidency.

The first exercise was carried out during the Rt. Hon. Speaker Ghali Na Abba’s House of Representatives leadership (1999-2003). Specifically, on September 5, 2000, by a motion moved by Hon. Nduka Irabor (Ika North-east and Ika South), Honourable members of the House of Representatives resolved under House Resolution No. HR 16 to set up an Ad-hoc Committee to investigate Federal Government of Nigeria’s crude oil exports and refined products imports amongst other oil and gas sectors and industries issues for the period May 1999-2000.

To facilitate this task, a 14-member Ad-hoc Committee with Hon. Ibrahim Ganyama Abubakar (from Jigawa) as Chairman, was constituted and inaugurated by the then Rt. Hon. Speaker Ghali Na’Abba. The Committee was given eighteen (18) items comprehensive terms of reference (TOR) covering all facets of the operations and management of the NNPC and the Nigerian oil industry. A close observation of the present Speaker Bankole’s ten items TOR shows that they are abridged version of the eighteen items TOR that guided the 2000 exercise.

Least we forget, the Ghali Na’Abba’s House of Representatives’ investigation of the Affairs of the NNPC did not receive the cooperation of the executive arm (i.e. Presidency) of the government of the day. Also, most of the executive agencies and departments that were approached by the Committee to provide relevant data and information to facilitate the Committee’s assignment were directed not to cooperate with the investigative Committee.

More importantly, the NNPC under Chief Jackson Gaius Obasaki’s leadership constituted serious stumbling block and directed all the corporation’s subsidiary companies not to divulge the required data and information requested from them by the investigation Committee without clearance from his office. Obasaki treated the Committee and by extension, Nigerians with contempt, just like his overall boss, President Obasanjo.

In a nutshell, former President Obasanjo did all within his presidential powers to frustrate the investigation. Nevertheless, the Committee went about its assignment diligently against all the executive grandstanding. It produced a report which was presented to the House at the end of the deadline given to it.

The findings of the Committee were very revealing despite the stonewalling the Committee faced from several government ministries, extra ministerial departments/agencies. Even the private corporate sector such as the multinational oil companies did not cooperate fully with the Committee. The Executive Summary of the Committee’s report was divided into two major parts as follows:

A: Crude oil export refining:

1)      NNPC has not been working cordially with the DPR who are authorised by law to monitor the activities of all and sundry in the petroleum sector. Hence Shoddy or Nil data from DPR in many areas of export.

2)      NNPC lost a lot of revenue as a result of not following the statutory empowerment of lifting 300, 000 barrels per day. This resulted in a total loss of over $80m for the period January 2000 – August 2000. This is likely to double for the period May 1999 – December 1999.

3)      Record keeping in NNPC is shoddy. Data from NNPC to the Office of the Accountant General (AGF) do not agree with final ones from NNPC itself. This suggests fraud.

4)      The conditionalities specified for the lifter of crude oil to engage in local investments were never enforced by NNPC.

5)      There is no evidence that tendering processes are carried out before lifters are selected.

B: Petroleum Products Sales and Distribution:

1)      Turn Around Maintenance (TAM) of the Refineries has been neglected completely.

2)      Products imports rose from May 1999 to over 70% by June 2000

3)      Illegal sale of petroleum products becomes a booming business as Petroleum Equalisation Fund (PEF) continues to pay equalisation claims while NNPC continues with endless bridging, and DPR went to sleep in the exercise of monitoring.

4)      No tendering existed in the selection of importers thus losing price advantage to the detriment of users.

5)      Influential and well-connected few have cornered the business of importation and are making huge profits.

6)      The accounting and reporting system of NNPC is faulty as seen in variance with the Office of the Accountant General of the federation (AGF).

7)      Refineries are used as mere charity organs which refine fuel and are paid simple refining fees, most of which never reached them nor is adequate for their upkeep.

8)      NNPC jetty and storage facilities are not designed for the crescendo of importation currently going on in the country

9)      Pipeline breakage due to old age and vandalisation require a critical attention, and also there is even greater need to bring in other means of land transportation like rail system in product distribution.

10) NNPC is too unwieldy to manage efficiently. It should be broken up into two (2) corporations for efficient operation. One to handle upstream issues and the other to handle downstream petroleum issues.

These and other numerous findings, suggestions and recommendations are contained in the final report of the Committee, which I believe, as usual, has been thrown into the dust bin since the completion of the exercise. The report was considered treacherous by the government of the day and the initiators of the laudable exercise had no option than to see it as an exercise in futility; after expending a lot of money and time to conduct it, unfortunately. Thus, this current laudable attempt by Speaker Bankole should be seen as a comprehensive rescue mission of the previous attempt.

The yearnings for a holistic investigation of the affairs of the NNPC and the oil and gas sectors respectively, were not just witch hunts of Obasanjo’s presidency. It would be recalled that, Obasanjo himself had to yield to some of these yearnings. Under international pressures, particularly coming from the group of eight most industrialised countries of the World – Group of Eight (G8), the then President Obasanjo succumbed to the demand for greater transparency and accountability in the operation and management of the Nigerian oil sector and industry.

Thus, Obasanjo albeit deceptively, accepted to commit Nigeria to yet another external initiative that goes by the name Extractive Industries Transparency Initiative (EITI). International concerns regarding the racketeering going on in Nigeria’s extractive sectors led to the birth of the EITI. This was at the instance of the then British Prime Minister Mr. Tony Blair. This action by Obasanjo was a vindication of the findings of the Speaker Ghali Na’ Abba’s Ad-hoc Committee that was earlier despised by Obasanjo’s administration.

It would be further recalled that, as a counterweight to the despised report of the House of Representatives Ad-Hoc Committee, the then President Obasanjo’s administration, again, under external pressures from Nigeria’s creditors and G8 nations, had to organise his own version of the audit of the NNPC (President Obasanjo also served as the Minister of Petroleum Resources and Energy during the 8 years of his administration).

The contrived audit was arranged and conducted under the newly formed Nigerian Extractive Industries Transparency Initiative (NEITI). A foreign firm [UK based Hart Group] that lacked any Nigerian presence and experience in oil industry accounting and auditing was engaged by the administration to conduct an audit of the NNPC. The administration ended up replicating the same exercise that was earlier done by the House of Representatives, using very large sums of money.

Ironically and to the utter disappointment of Chief Obasanjo, the reports, suggestions and recommendations produced and presented to the administration by the hired foreign firm, did not differ much from the despised one produced and presented by the House of Representatives earlier on. This was another major vindication of the House of Representatives against the administration disdain towards it

It was also a serious indictment of the administration’s holier-than-thou pretensions on accountability and transparency in handling the affairs of the NNPC and the oil sector. No wonder therefore, the Hart Group’s reports were similarly ignored and dumped after doctoring them by the sponsors.

Therefore, If and only if the suggestions and recommendation contained in the House of Representative’s Report were accepted and implemented by the executive branch, probably there wouldn’t have been the need to waste so much money in the adventure of hiring Hart Group (and a local Nigerian Accounting firm) to duplicate an earlier effort and producing similar findings and recommendations.

Paradoxically also, had it been that these two separate and independent reports were not ignored, probably there wouldn’t have been the need to establish three other separate and independent oil and gas sectors reform and implementation committees respectively by the same Obasanjo’ administration to provide solutions and frameworks for restructuring the NNPC and the oil and gas sectors respectively.

These exercises also consumed so much resource and ended up duplicating what had already been done earlier. For example, the House of Representatives’ Ad-hoc Committee’s report recommended unbundling of the NNPC amongst it’s several other recommendations, which can also be found in both the later three oil and gas sector reform and implementation committees’ reports respectively.

Ironically again, President Obasanjo failed to implement all the recommendations contained in the reports submitted to him by the three Oil and Gas Sector Reform Committees (including the Oil and Gas Implementation Committee (OGIC)) that he established between 2002 and 2004. Obasanjo didn’t want to loose the grip of the Ministry of Petroleum Resources and Energy and the NNPC – that’s probably explains why he dodged implementing all these reports he instituted. It was only when he left the scene that the reports were dusted up by President Yar Adua when he inaugurated the National Energy Council (NEC) to review the recommendations contained in these reports. That is exactly what the various committees established by the National Energy Council are still doing at present.

Characteristically, Obasanjo adopted similar delay tactics in submitting his administration to the so-called African Peer Review Mechanism (APRM); which he made so much noise about and so much money wasted. He left the scene without been peer-reviewed! This time around there are hopes that probably a good job will be done and the NNPC and the oil and gas sectors will be properly restructured and put to public interest rather than used for personal primordial and diabolical interests.

Finally, what are the lessons that this latest initiative can learn from these previous failed exercises? Are there any? The answer to this question is the subject of my next piece on this matter.

Abubakar Atiku Nuhu-Koko

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