Between 1975 and 1978, NNPC was unable to collect 182,952,104 barrels of its programmed share of equity crude oil, expected to be produced by Shell, Mobil and Gulf. This is referred to as “deemed production” because from the operators’ viewpoint, the fault for not producing and collecting this quantity of crude was NNPC’s. Had the quantity been produced and sold, government would have earned an additional revenue of N2,503,791,264.8. This was in fact not produced or sold. During the period covered by the deemed production, the NNPC paid its full share of the cost of operation to Shell, Mobil and Gulf amounting to N495,539,417.49, whereas it never received its full share of the production while these operators received their full equity share.
The tribunal recommended that the International Oil Companies (IOCs) concerned should identify the crude oil wells to be assigned to NNPC for the recovery of its “deemed production” amounting to over 182 million barrels of crude oil and to refund the money paid for the production (cash call) for the aforesaid deemed production. If such a statement had been issued under Diezani Allison-Madueke’s tenure at NNPC, no one would have believed that something extraordinarily funny was not going on and that in fact she and her coterie of special interests had not stolen 182 million barrels of crude. What is the difference here and the accusation levelled against her that Atlantic Oil took 10 cargoes – unreported, uninvoiced – at a time oil was $100 per barrels per day, amounting to $1 billion for each one billion barrel per shipment taken by Atlantic Oil Company? How was Diezani Allison-Madueke’s agreement different from NNPC’s agreement with Ashland Oil?
Let’s back up a little. Justice Ayo Irikefe has revealed that it was possible for such a colossal amount of crude to be lost to Nigeria under whatever guise and for the IOCs to claim that it was the fault of NNPC for not collecting their share. Secondly, that the cash calls do not really have a correlation to work done and a consequent benefit for the share of what was paid for. Thirdly, there was no mechanism to have found this out within NNPC because had the tribunal not sat, there was no way this could have been found out. Fourthly, the tribunal is silent as to the origins of the system of “deemed production”. Fifthly, the tribunal does not call for the system to be abolished nor does it say that it no longer existed while it did its work. Sixthly, we do not know whether the IOCs complied with the directive to return 182 million barrels of oil.
Given the quirkiness and rickety nature of the accounts department, could this oil not be further diverted, if at all it was returned because the tribunal tells us that the accounts department only provided invoices when told to do so by the marketing department. Ergo, should the marketing department, which was found deficient, not ask accounts to produce the relevant invoices, this would not be done.
The sense one gets from reading the Irikefe Tribunal report, and the three reports into NNPC by PricewaterhouseCoopers and Lybrand and by Peat Marwick, is an organization deliberately operating to obfuscate procedure, to introduce unnecessary complexities and, thereby, opaqueness into what ultimately should be a straightforward buy-and-sell operation so far as marketing and accounts are concerned.
There was no independent system in existence: for collating the figures of the crude oil production anywhere; the NNPC’s corporate structure was weak, it had no management style and structure for efficiency and profitability, no effective coordination and control at the top. (Such a structure is perhaps impossible in a federal character regime.)
No comprehensive assessment of its operating strategy for accomplishing the general duties set out for it in the relevant laws setting up the corporation: NNPC was an ad hoc administration. NNPC had a glaring absence of supervisory staff at all levels.
Accounts department was, according to the managing director, in a “shambles”; it was “scrappy and in disarray”. Financial Management Information was not prepared by management for appraising the corporation’s state affairs, planning, controlling and directing the corporation; key financial positions were vacant; no corporate strategic planning; no monitoring; budgeting was a meaningless exercise as it was regularly ignored; no formalized accounting procedures; no basic integrated accounting system reflecting operational areas of responsibility. It had an unsatisfactory system in the accounts department, especially the preparation of invoices which could only be done at the behest of the Crude Oil Marketing Department. There were several instances of liftings without invoice or invoice prepared six or nine months after lifting.
The Irikefe panel dealt with the perennial problems of inability to give account of what is produced in Nigeria and what is exported. They found a discrepancy of over 160 million barrels. The error was said to have been traced to four liftings in Forcados and Pennington where they recorded 93,939,700 barrels against Inspectorate’s figure of 258,849,942. Normal production at Forcados and Pennington was 750,000 barrels per day, thus in a year it should be 274,500,000. The panel found that several tankers which collected oil had not been shown in the records. Similarly several tankers that called at Qua Ebeo and Escravos had also not been shown on their records. Wrong transcription in the Customs and Excise records only goes to confirm an inefficient and murky situation.
There is probably a misguided opinion that the private sector of the oil industry is more efficient than NNPC. This has yet to be proved: there are many people from the IOCs who have been engaged in NNPC without improving the NNPC because of their incompetence. The most glaring example is, of course, Diezani Allison-Madueke. Others may include Dr. Daukoru, Aret Adams, and Mr. Amu, etc. Moreover, some NNPC staff had gone to the private sector and did brilliantly; for example, Mr. Grant. Without much quibble NNPC has remained unreformable regardless of where its top management comes from. As my friends often point out, the malaise, like that of the Customs and the Police, is systematic. They say it as if that word defines reality – that these institutions are beyond repair, are not fit for purpose.
What the tribunal said about the accuracy of production and liftings is very instructive. Basically, the minister cannot know how much oil is produced and sold; the NNPC cannot know because there was no reconciliation possible between the Crude Oil Marketing Department, the Accounts Department, the Inspectorate, the Custom and Excise and, in theory, crude oil could be shipped without invoice, or invoiced late, stolen without invoice; that the IOCs, as usual, did not give the minister the figures; that there was a systemic failure in accounting for what was produced, what was sold, etc. I seem to remember that this was just the same point that Lamido Sanusi raised – the inability to be sure that all oil reportedly shipped or produced was actually paid for and that from his figures there was a discrepancy of several billion US dollars. Sanusi’s disclosure made him into some rascally monster, almost a dedicated pariah, and the hand of Esau wheeling the knife meant to kill Jonathan, and that he (Sanusi) was out to bring down the government. The explanation of the ministers of finance and petroleum resources were inadequate because there was no mechanism to actually vet production, lifting, sales and payment, nor was there one to state accurately what NNPC spent. In 1976 this was the position and it did not change in 2014 and has not changed till now. It cannot. Deziani Allison-Madueke promised inquiries none of which saw the light of day except the PwC report which, frustrated as it was, asked NNPC to refund some money to the government.
The Irikefe Tribunal report is unequivocal about its main terms of reference: was $2.8 billion missing from NNPC? They conclude that no such amount was missing, nor was any money paid illegally to Midland Bank account held by NNPC. They further concluded that every drop of oil exported from 1977 to September 1979 was accounted for and paid for; that the hullabaloo of a missing $2.8 billion was a “hoax”, a “storm in a teapot … Nigerians, as a people, should resist their penchant for branding people guilty on mere rumour before production of evidence. How many an innocent man has lost his life needlessly, through public lynching, as a result of a hue and cry carelessly raised as a lark by someone who immediately thereafter melts into the crowd and then to oblivion”.
Nevertheless, the Irikefe report is the main source about the incompetence of the crude oil marketing section, the accounts department, the Inspectorate Division, the Department of Petroleum Resources in the Ministry of Finance, Custom and Excise. Not only are those units incompetent, in their record keeping there is inbuilt conflict of interest. That report further bemoans the impossibility of having a collaborative system where each of the above checks the other; it concludes that at no point can Nigeria be sure of what crude was produced (especially without co-operation of the IOCs); it raised the spectre of oil liftings with no record in some key departments or indeed of late invoicing which was fortuitously or fortunately discovered; it describes the accounts department as in a shambles and lacking the personnel to adequately control market sales and other accounting functions; in short, the accounts department is not fit for purpose as it has no adequate personnel to carry out its functions. NNPC, according to the report, is top heavy, too few lower and intermediate staff with experience to do their duties. The report has a table of unaccounted shortfalls in NNPC between 1976 and 1979 between the Commercial Department and the Inspectorate.
If all this is true, what responsibility, if any, should be attached to the minister? If this report had been issued under Diezani Allison-Madueke, what would be the response? If Diezani Allison-Madueke incompetently ran NNPC, then blame must be attached to her.
It is now fashionable to use the word “forensic” when dealing with audits and account of NNPC. I have never understood why an audit in a company is not enough explanation for inflows and outflows of moneys in any enterprise but once the inquiry is called “forensic”, the auditors charge five to ten times what they should and in the end no one is any wiser. But since it is fashionable and I am a devotee of fashion, I have done a forensic examination of the Irikefe Tribunal report which dealt with the alleged $2.8 billion that was declared missing sometime between 1977 and 1979. In criminal investigation, forensic deals with fingerprints, bloods splatter, DNA, CCTV, pictures of culprits, and other incontrovertible evidence to nail the culprit. But when we apply “forensic investigation” to the Irikefe Tribunal, matters are not so clear. I have quoted in extensio the report and then applied forensic investigation.
Who was in charge of this appalling inefficient organization? How did the problems which existed in the 1970’s gain such permanence? Why has the organization remained unreformable? Whoever presides over an inefficient and corrupt organization cannot claim immunity from blame.
Patrick Dele Cole
Dr. Cole served as Nigerian Ambassador to Brazil from 1987 to 1990, and special adviser on international relations to the president from 1999 to 2001. He currently sits on the board of a number of companies in Nigeria.
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