NIGERIANS are regularly reminded of the opacity in the oil sector. This was in evidence recently when the Group Managing Director of the Nigerian National Petroleum Company, Mele Kyari, appeared before the House of Representatives Ad hoc Committee on Refineries and failed to provide details on critical aspects of the oil swap deals. He should be compelled to supply the details for the perusal of the legislature and the taxpayers to cleanse the system and block revenue haemorrhage.
The committee should overcome the obfuscation and delaying tactics of the NNPC. Kyari’s memory lapse is curious. When asked by committee members, he could not provide details of the company’s controversial Direct Sale-Direct Purchase (oil swap) contract. This speaks dark volumes of the lack of transparency in Nigeria’s oil industry. Among other things, the GMD reportedly failed to disclose the quantity of crude being shipped from Nigeria and the volume of refined petroleum products delivered to the country daily under the DSDP deal with some firms. This is concerning.
As GMD, he ought to have had the figures ready. Besides, the Reps summons was not sudden. On the contrary, its task and mission were known, namely to unravel the very details NNPC could not provide. He had ample time to put the information together ahead of his appearance.
The House should insist on having the information to instil accountability and to break down the thick walls of secrecy that have enabled so much waste, graft and incompetence in the industry.
Nigerians have the right to know details of the oil swap deals. With Nigerian refineries not producing to meet local demand, the NNPC had opted for the DSDP alternative, ostensibly to enshrine transparency and eliminate the activities of middlemen in the crude oil-exchange-for-product matrix. Though the firm claims the DSDP as being more efficient and transparent than the Offshore Processing Arrangement, the secrecy surrounding its management has raised more questions. Curiously, the NNPC had always been reticent about the details.
Reports say it puts out as much as 445,000 barrels per day under the deal. A diligent inquiry by lawmakers would shine the light on the programme. They must not fail.
From 2016 when the DSDP began, the NNPC had engaged various local and international firms, many of which are alleged to have short-changed the country. In 2017, the DSDP deals with 10 firms were estimated at $6 billion. The Nigeria Extractive Industries Transparency Initiative in 2015 estimated that Nigeria lost $966 million to fraudulent oil swap deals between 2009 and 2012. It lost billions of naira more in subsequent years until the OPA was discontinued in April 2016. NEITI stated in 2019 that Nigeria lost at least $16 billion over a 10-year period, from 2008 to 2017, due to non-review of the 1993 Production Sharing Contracts with oil companies.
When added to the cost of subsidising petrol imports put at N4 trillion this year, the negative impact of the country’s inability to refine crude for domestic consumption is excessive. Everything necessary should therefore be done to reverse this and end the need for the controversial oil swap deals. This requires comprehensive and far-reaching surgical reforms. Promises by the President, Major General Muhammadu Buhari (retd.), to undertake the necessary cleansing have gone unfulfilled. This makes it imperative for the National Assembly to compel action through effective oversight.
Indicative of the NNPC’s wayward ways, Swiss oil firm, Trafigura Beheer BV, and its Nigerian counterpart, Trafigura PTE, which are on trial for alleged involvement in money laundering before Mojisola Dada, a judge of the Special Offences Court, Lagos, are beneficiaries of the current oil swap contracts which commenced last June. The Swiss oil trader is part of 16 consortia executing the contracts, with each consortium receiving 20,000 bpd of crude oil in exchange for refined products, making a combined total of 320,000 bpd of Nigeria’s output. Instructively, the Federal Inland Revenue Service had accused the firms of tax evasion to the tune of $1.6 billion.
Despite mentioning some companies and Duke Oil, a wholly owned NNPC subsidiary in a probe into allegations of $24 billion worth of crude lifted without formal contracts in 2016, the NASS has failed to take further action. Such dereliction of duty should not continue.
The NNPC must also provide full details of the $1.5 billion PH Refinery complex contract it signed with Italy’s Maire Tecnimont SPA in April 2021. Despite zero production, the NNPC claimed to have spent N100 billion on refineries’ rehabilitation in 2021. Similarly, the refineries reportedly gulped N276 billion between 2015 and 2018 without producing a litre of petrol. The World Bank blamed Nigeria’s oil production decline in 2021 on the lack of maintenance and the loss of infrastructure efficiency.
But while the country was grappling with oil sector corruption, crude oil theft, infrastructure vandalism, and the lack of political will to sort out the mess, Saudi Arabia’s Saudi Aramco posted an 82 percent jump in its first quarter 2022 profits. Enhanced by a global surge in oil prices, it has overtaken America’s Apple Inc as the world’s most valuable company. Aramco’s net income of $39.5 billion was up from $21.7 billion compared with the same period in 2021.
To rid the NNPC of opacity and poor governance, it should undergo thorough fiscal, administrative and operational reforms. Above all, it should be made accountable. Among nine key recommendations for reforming national oil companies proffered by the Natural Resource Governance Institute, a New York-based NGO, three concentrate on the prerequisite of accountability, openness and legislative oversight. Instead of permanently funnelling resources down the drain, the government should remodel it strictly as a holding investment company and withdraw it from direct production, distribution and retail to attract investors.
This will in turn end the shady oil swap deals and the subsidy payments. In the meantime, the full details of the deals should be unravelled, corruption exposed and punished; all diverted public funds recovered and culprits prosecuted.
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