THE recent intervention launched by the Nigerian National Petroleum Company Limited to help rescue the naira pleased the government but also raised some eyebrows. While the Federal Government welcomed the NNPC’s announcement that it had secured a $3 billion emergency crude oil repayment loan from the African Export-Import Bank to help “stabilise the naira” and help in reducing petrol prices, analysts fret that the national oil company still operates like a government department despite its recent supposed transition to a fully commercial, profit-oriented firm.
President Bola Tinubu should elevate long-term national interest above temporary relief and immediately initiate sweeping reforms in the company.
Fiscal recklessness and lack of accountability have for long reigned at the NNPC, as detailed in multiple reports by domestic and international agencies and via revelations at numerous parliamentary hearings. Its outward makeover last year in line with the provisions of the Petroleum Industry Act mandating its transition from a state corporation to a limited liability enterprise is seen by many analysts to be largely cosmetic. Its long history as a state appendage tied to the whims of the government in power has calcified its state-centric habits.
Nigeria’s economy is truly in crisis: the naira tumbled again on Wednesday to exchange for N900 to US$1.Two weeks earlier, it had traded at N950-N960 to $1, spreading panic in official and business circles and distress among Nigerians. Its earlier rally to N850 to $1 proved short-lived. Similarly, petrol prices had in the last three weeks risen to N590-N620 per litre before receding to N570-N600/litre last week.
Poverty is spreading, so is hunger, and businesses are under daunting stress. Amid vanishing revenues, depleted foreign reserves, huge debt and servicing obligations, the government is understandably, pleased with the NNPC intervention. Help is urgently required to salvage the precarious situation.
For many analysts and this newspaper, however, the deal raises questions. As explained by the Presidency, the loan is a cash loan against proceeds from a limited amount of future crude oil production. It insists that the risk is very low, both for the NNPC and the treasury, and comes with no encumbering sovereign guarantees.
All well and good; but it raises the question whether the government still regards NNPC as a ready Automated Teller Machine as Tinubu once alleged while he was an opposition figure. Some financial sector experts also suggest that such a loan should have been contracted by the Central Bank of Nigeria, the recognised monetary authority, not the NNPC.
Beyond this, Tinubu should not ignore the rot at the NOC, but should wield a big broom. The company is long overdue for transformational overhaul, his coziness with Mele Kyari, the Group CEO, notwithstanding.
There are many things to be uncovered. One is to establish the actual quantity of petrol Nigeria has been importing and for which the NNPC had been unilaterally paying itself subsidy over the years and denying the Federation Account of revenues. In 2022, it made zero remittances, claiming that the government owed it N2.8 trillion. But the Revenue Mobilisation Allocation and Fiscal Commission said the NNPC withheld N8.4 trillion from the treasury.
A 2016 audit report said NNPC failed to properly account for crude it lifted worth N102.6 billion. The Nigerian Extractive Industries Transparency Initiative 2020 report found that N106.9 billion subsidy payments paid by the NNPC in 2020 reflected a huge deficit in accountability.
In 2021, an audit firm, KPMG, indicted NNPC and other revenue generating agencies for underpaying the Federation Account the sum of N526 billion and $21 billion. Another audit by PwC in 2015 discovered that accounting and reconciliation systems for oil revenues by government agencies, including the NNPC, were moribund, inaccurate, and weak. PwC also discovered that $1.48 billion was used for unsubstantiated cost, duplicated subsidy payments and computational errors.
NNPC’s management of its four refineries is scandalous: perpetually making losses, producing nothing, yet, gulping billions for failed Turn Around Maintenance contracts.
Tinubu’s reserving the petroleum ministry portfolio to himself is ill-advised. His predecessors who did the same – Olusegun Obasanjo, and Muhammadu Buhari – left with the industry and their reputations worse off. He should instead appoint a competent, incorruptible technocrat, sweep the current management aside, initiate multiple probes and audits, and begin the radical reform of the wayward NOC.
