• Sunday, December 03, 2023
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NNPC wrecked Nigeria’s economy, rewarded its managers with longer tenures

NNPC Ltd restores production of 275

It is common these days to walk into a raging debate around Nigeria about the culpability of the state-owned oil firm, NNPC, in the mismanagement that has led to the awful collapse of the country’s economy. And which is why it is so hard to understand what trigger President Bola Tinubu is watching out for before effecting a clean sweep of the leadership of the state-owned oil company. It is what the people who run NNPC deserve.

Read also: NNPC failing to meet equity payment for Dangote refinery

In other countries, when public officials fail to perform or meet their key performance indicators, KPIs, they are fired. But Tinubu is treating senior managers of the state oil company with kid gloves by keeping them in their job, despite the ignoble role the company played in crippling the country’s economy and bringing it to its knees. Oil production today is at a level it was at in 1992. Nigeria’s oil industry has never seen worse days.

Nigerians believe that decades of mismanagement of the oil and gas industry by NNPC and the failings of its senior management contributed significantly to stalling Nigeria’s economic growth and in particular, the recent woes both in foreign exchange terms and the country’s fiscal crisis.

NNPC’s new year present in 2022 was to announce to the world that it would no longer be able to make the usual remittances to the federation account, the primary mainstay of the three tiers of government in Nigeria.

In a presentation to the Federation Account Allocation Committee (FAAC) on Tuesday, March 21, 2022, NNPC indicated that it had at the time exceeded its subsidy budget by N356.3 billion, with the subsidy bill rising to N430.165 billion in January and February 2022.

For the entire 12 months of 2021, the NNPC disbursed just N542 billion to FAAC as against the budgeted N2.511 trillion, translating into a monthly contribution forecast of N209.3 billion.

In November last year, former Governor Nasir El-Rufai of Kaduna State said the inability of the Nigerian National Petroleum Company (NNPC) Limited to remit any revenue into the federation’s account since the beginning of the year had put many states into severe financial distress as they could not pay workers’ salaries.

Of all oil producing countries, Nigeria is reputed to have the longest time span for making final investment decisions because of NNPC’s ineptitude

According to him, the situation led to the inability of most states to pay salaries and fulfil their social contracts to citizens. The development underscored how a combination of factors, mismanagement that led to declining oil production, crude theft, rising subsidy payments have hobbled the organisation’s performance, despite the increasing oil prices which almost hit $140 per barrel in March of last year.

In truth, the woes NNPC has inflicted upon Nigeria predates the current defining crisis.

Read also: NNPC restores 275,000bpd output, resolves PENGASSAN/TotalEnergies rift

In the years past, only the best were employed into NNPC and those who got in were just as good as those employed by the IOCs. Not anymore. Over the years, NNPC has been destroyed by tribalism and ineptitude. Think of this – Nigeria has been fighting a debilitating crude oil theft for years, but the crisis never reached the defining level that it reached last year, with NNPC chiefs watching or offering an inept response to a crisis that has now become existential.

Despite having four main refineries under the watch of the Nigeria National Petroleum Company (NNPC), Nigeria’s import of PMS or refined petrol further highlights the shortcomings of the NNPC.

The lack of transparency at NNPC is one of its shortcomings. The NNPC in its 45 years of existence published its first audit in 2020. Additionally, discrepancies in the remittance report with the Auditor-General still raise clouds over NNPC’s operations

Despite being the major source of Nigeria’s exportation, the NNPC’s debt profile is another shortcoming. According to reports, the NNPC in April 2022 paid “a total of $3.68billion out of the $4.689billion cash call debt to five international oil companies that are its joint venture partners.”

Many years ago, NNPC proposed two liquefied natural gas projects in Brass and Olokola but like many other good ideas, they failed to materialise. Both projects should be fetching Nigeria more than $500 million a week if the gas projects had been built. Of all oil producing countries, Nigeria is reputed to have the longest time span for making final investment decisions because of NNPC’s ineptitude.

Corruption is another big problem at NNPC. The Corporation and scandal appear to be inextricably linked. One of the top corruption scandals that have rocked the NNPC was in 2011, when the Federal Government under Goodluck Jonathan, hired KPMG (a company specialised in tax, financial audit, and advisory) to audit the NNPC. The company found out that the NNPC got an excess of about N28.5 billion on subsidy-related claims and the amount was unaccounted for. A testament to the corruption at NNPC was the admittance by the NNPC Group Managing Director (GMD), Mela Kyari, after his appointment in 2019 that he will work with the EFCC to fight corruption in the NNPC.

In an article sometimes ago, Christina Katsouris, an associate fellow at the London based Chatham House said, “in the worst irony of all, Nigeria’s four state-owned refineries at Warri, Port Harcourt (where there are two) and Kaduna have worked at a fraction of their overall capacity of 445,000 barrels per day, forcing the government to barter crude production – up to 330,000 barrels per day – for gasoline refined elsewhere. This means losing revenues that could be invested in health, education and infrastructure. Compounding matters, a price cap at the pump – a de facto subsidy on petrol – continues to drain public coffers and muddy the finances of Nigerian National Petroleum Corporation (NNPC), the state oil company.

Read also: Naira rescue hangs on oil sector revamp but NNPC dancing at the edges

Katsouris further said that; many of these problems have been caused by mismanagement of the NNPC. Nigerian leaders and politicians have habitually regarded NNPC as a patronage tool to buy favours and reward supporters. This has often taken the form of hidden commissions on contracts for crude oil marketing or refinery upgrades, which were rarely carried out. Refineries remain unmodernized, poorly maintained and, in some cases, barely operating. This has also damaged inward investment. The NNPC owns majority stakes in all joint ventures operating assets in onshore and shallow waters. Yet it has rarely paid its way on time, forcing partners to choose between slowing expansion or lending to NNPC by carrying its costs.