The NNPC inquiries (1)

A recent inquiry into NNPC made the following findings:

(a)   The corporation as structured is extensive, and its control far beyond the normal span of management control that would be expected from the existing management staff.

(b)  The NNPC suffers from absence of supervisory staff at all levels, i.e. people who know the job through experience and have the ability to guide and control other people at their work.

(c)    The Finance and Accounts Department has not been able to keep pace with the sudden expansion in its expected support services as a result of the added responsibilities is a major integrated oil company. It lacked a planned base of proper accounting systems and procedures and its staff was short in quality and quantity.

(d)  Shell Petroleum Development Company, Mobil and other companies have not signed the agreements for their participation arrangement with the NNPC.

(e)   In several cases the financial consideration for NNPC participation in Joint Ventures Interests with producing companies, was paid before the staff of the NNPC were sent in to evaluate the assets which were the substance of the considerations and payments.

(f)    The NNPC does not have stipulated accounting policies and reporting methods for the use of the Joint Venture partners in order to ensure uniformity of treatment of items and transactions and standardized reporting format which should facilitate comparison of the activities of the various operating parties.

(g)   The Account Department only prepares invoices for the sales of crude oil as and when advised by the Crude Oil marketing section of the Commercial Department. With the system as it is now, the accounts department cannot be in possession of any sales information that the Commercial Department may not wish to pass to it.

(h)  The 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 Exxon, because from the Operators’ viewpoint the fault for not producing this quantity was NNPC’s.

(i)     There is no independent system in existence at the present time for corroborating the figures of Crude Oil produced neither at the NNPC nor at the Federal Ministry of Finance, nor anywhere else.

The report recommended that the NNPC should as a matter of urgency develop a uniform format for collecting information from all operators producing Crude Oil for it. A petroleum Advisory Board should be established to create a forum where matters affecting the industry could be aired and considered in full and the right answers crystallized. Government should address itself urgently to the impending depression in the Crude Oil market. Government should direct all concerned to work intensively to determine the life of the Nigerian Crude Oil reserves.

The report noted the several weaknesses in the structure and management of the Nigerian Petroleum Corporation which became glaringly evident from the welter of evidence presented before the Tribunal during its public hearing, its own on the spot investigations at the various locations, and the examinations available in the Corporation. The bulk of these weaknesses relate specifically to the management of the procurement and disposal of crude oil and the rest would apply generally to the Corporation.

There is no evidence to show that serious attempts have been made to evolve a management style and structure that would run all the arms of the Corporation efficiently and profitably with an effective co-ordination and control at the top.

The NNPC has no detailed comprehensive assessment of its operating strategy for accomplishing the general duties set out for it in the Decree No. 33 of 1977. The day-to day running of the Corporation has thus been directed and controlled at the top on an ad hoc basis.

The quality and quantity of staff in the various departments in the Corporation leave much to be desired.

In addition the Management has become so politicized that the cordiality and mutual respect that should exist among the incumbents in top management of such a vital organization are either completely absent or have worn terribly thin.

Further, the management, as now constituted, does not appear fully alive to the functional contributions of a department like the Finance and Accounts Division could make to the Corporation’s existence. Certainty until the department is fully revamped in all aspects it cannot satisfy fully the requirements for auditability and general accountability as provided in Decree No.33 of 1977. Financial management information is not prepared for management, for use in appraising the state affairs of the Corporation from time to time, planning, controlling and directing the corporation. Perhaps, this is deliberate to enhance the opaqueness of an endemically corrupt system.

There is complete absence of corporate strategic planning in the Corporation. Like the other Joint Venture arrangements, the Management of the NNPC has not addressed itself to plans and procedures for controlling and ensuring full protection of its interests in the Ventures. Even simple Total Accounts for controlling these arrangements do not exist in the NNPC. Such accounts will give Management ideas of how well the operators are progressing. In the case of the participation agreement with Ashland in 1973, it took the NNPC years before a team from the NNPC was sent to look at the records and accounts in the company. This is typical.    

The Tribunal compared NNPC Commercial Department’s records and those of the Inspectorate Department- the production figures maintained by the Inspectorate Department with those kept and utilized in the Commercial Department of the NNPC and noted discrepancies as hereunder: for 4 years

It will seem impossible to corroborate the Production Figures.  With the present agreements, there are no built-in methods for corroborating production figures either at the NNPC or at the ministry of Finance or any where else. The only way would be to check the Inspectorate Department’s figures with independent production figures kept by the producing companies. The tribunal was not aware that this was done even though the Inspectorate Department’s figures were used for computation of Royalties payable to the Government by these companies.

The Tribunal concluded that there was absence of any independent self-controlling system for agreeing Crude Oil production at the NNPC or the Federal Ministry of Finance.

For a sensitive organisation like the NNPC the Tribunal was of the view that holding board meetings once in an each quarter is inadequate.

With regard to Crude Oil Joint Venture Accounts, the NNPC should, as a matter of urgency, develop a uniform format for collecting information from all operators producing Crude Oil with which it is associated. Such uniform information will facilitate comparison between the various operators’ returns. In additions, it should establish standard accounting policies which will guide the treatment of specific items (assets and other expenditures) in the returns and expenditure budgets prepared by the Operators. The NNPC should also consider a Joint Venture Accounts Inspectorate or Internal Audit Unit which will be solely responsible for checking on a regular basis all the records and activities of the Joint Venture Operators.

The Accounts Department should perform a controlling function over the activities of the Crude Marketing Unit in the Commercial Department with regard to invoicing for crude oil sales. Such control function will be performed when the accounts department receives independently all the information regarding the shipment of oil from the nomination of vessel upwards. It should in the process of checking receipts into account No. 3096 in the Central Bank confirm customers who have been invoiced and those who have not. If such form of control existed the omission of the 4 lifting’s by Pan Ocean would have been picked up in good time and not after the Company had written to request for invoices nearly 10 months after the first lifting.

The Tribunal therefore recommends that Inspectorate Division, in consultation with representatives of the Federal Ministry of Finance and the NNPC should design statements which should account for the last drop of crude oil raised from Nigerian soil. This means that the differences between any of the figures should be easy to explain. In fact the Tribunal felt that because of the rather very important role that the oil industry plays today in the lives of Nigerian generally, the figures for total productions by each operator and the share of NNPC together with the export sales figures of the NNPC for every quarter should be released at the end of each quarter for publication in the Federal and State Gazettes and all the news media. It should be treated like the Foreign Exchange rates published weekly by the Central Bank or the Stock Exchange listings published by the Nigerian Stock Exchange.

Please, forgive that I have quoted large portion of the report. I have given this report to several knowledgeable people about NNPC who concluded that it reflects their view of what NNPC is today in 2015.

In reality this is a report on NNPC in 1980. There is little change in the concepts and appraisals of NNPC for the past 35 years.

Patrick Dele Cole