The decision by President Muhammadu Buhari to retain his position as Minister of Petroleum Resources is causing too many political interferences in state behemoth Nigeria National Petroleum Corporation (NNPC).
According to the biennial Benchmarking Exercise Report (BER) of the Nigerian Natural Resource Charter (NNRC) released in February 2020, the current corporate governance structure of NNPC remains susceptible to excessive political interference and limits accountability through checks and balances.
“Under the current arrangement, the decision-making is vested in a strong single state actor –the President, which allows for coherent strategic choices. It, however, encourages undue political interference and limits checks and balances,” the report said.
The paper from NNRC, a non-profit policy institute on natural resource governance admits that NNPC continues the practice of disclosing selective unaudited operational and financial information in the review period, a development which is not good for accountability in the oil and gas sector.
“Lack of underlying legal instruments to ensure the sustainability of this practice and failure to enact the necessary legislation to kick start petroleum industry reform constraints transparency and accountability in Nigeria’s national oil company,” the paper argued.
The report noted that the minister, who is responsible for policy in the industry, being Chairperson of the board, maybe driven by policy considerations at best and political considerations at worse.
“While the current constitution of the does not violate the Act, NNPC corporate governance might improve if board members are largely independent and selected based on technical capacity and competence which can be done by recruiting board members from outside the government to bring the right skills needed for effective decision-making,” the report said.
The report noted that the lack of a culture of openness and disclosure within the system is partly responsible for the poor record-keeping, lack of check and balance, ineffective performance reviews and audits, as well as the absence of transparency and accountability in NNPC.
Although the report admitted that some things have changed, slightly for the better since the last benchmarking report (BER 2017).
In the past three years, the government had moved to ensure that the NNPC has a workable funding mechanism. The cash call budget previously approved along with the federal annual budget is no longer funded directly by the federal government.
Instead, NNPC relies on aggregate revenues from its subsidiaries and business units, deductions from oil revenue due to the Federation, and third-party financing for approved projects to finance its operations.
But there are still no clear rules governing the amount NNPC can withhold from production to cover production and operating costs and this still provides an avenue for creation of wastages and inefficiency in spending.
According to Tengi George-Ikoli, the Program coordinator at NNRC, “the release of the Report comes at an opportune time given the recent reforms instituted by the government and the omnibus reform in the form of the Petroleum Industry Bill (PIB) being championed by the Ministry of Petroleum Resources.
The biennial Benchmarking Exercise Report (BER) of the Nigerian Natural Resource Charter (NNRC) looks at the entire Nigerian petroleum sector and its linkages to the wider economy through a set of principles framed around how best the government and the citizenry have harnessed the opportunities created by the country’s petroleum endowment.
The charter identifies 12 broad precepts, covering the main decisions required to transform assets under the ground into development above ground.
The precept that focuses on NNPC examines the accountability of the corporation as a State-Owned Enterprise and explores the definition of its mandate as well as its commercial efficiency.
