The Nigerian National Petroleum Corporation (NNPC), often criticised for being opaque, has begun taking steps to shine the light on its activities by publishing its audited accounts and opening its data for quicker audit review. Two weeks ago, in an unprecedented step, the state-owned oil company published its audited accounts for the first time in 43 years.
Though the published accounts, signed by Mele Kyari, the 19th group managing director (GMD) of NNPC, revealed the rot n the state-owned company, it demonstrated the GMD’s commitment to transparency, after four decades of secrecy that would have made Mafia groups proud.
In its 43-year history, the stench of malfeasance has followed the NNPC like a moth to bright light. Yet, the organisation has done little to redeem its image despite each new GMD claiming that transparency would be a cornerstone of their tenure.
The accounts, published on the company’s website, reveal staggering losses by the refineries in Port Harcourt, Warri and Kaduna. For the year 2017, the three refineries had operating losses of N252 billion, while in 2018 the figure stood at N154.54 billion. The audited financial statement showed that Warri Refining Company earned N1.98 billion as revenue while it made operational loss of N45.39 billion. The situation is also the same for the Port Harcourt Refining Company which recorded total revenue of N1.45 billion in 2018 with processing expenses of N24.04 billion, resulting in a gross loss of N22.58 billion. Kaduna refinery spent N24 billion in direct costs to produce zero revenue, recording an operating loss of N64 billion for 2018.
Despite recording zero revenue, another striking takeaway from the Kaduna refinery is training expenses of N447.7 million, security expenses of N230.5 million, communication expenses of N37.3 million, and consultancy fees of N843 million.
However, the knowledge of this rot in the state-owned oil company is only possible since Mele Kyari became GMD in July 2019. For instance, in 2014, the then Central Bank (CBN) governor, Lamido Sanusi, told a Senate committee that the NNPC had received US$67 billion and handed over only US$47 billion to government coffers. In response, then President Goodluck Jonathan ordered a forensic audit in 2015 conducted by PwC Nigeria which found that the NNPC actually overpaid by US$0.74 billion in the period from January 2012 to July 2013, after remitting $50.81 billion to federation accounts of the $69.34 billion it had received. But in an atmosphere of pattern of secrecy, many Nigerians believed Sanusi.
Indeed, much of that controversy would have been avoided if the corporation published its accounts. So, the auditors recommended an overhaul of how NNPC is run.
“The NNPC model of operation must be urgently reviewed and restructured, as the current model which has been in operation since the creation of the corporation cannot be sustained,” the auditors said in the 200-page document. Notwithstanding the controversy and the public outrage on which the Muhammadu Buhari government rode to power, many Nigerians were disappointed when the administration continued the pattern of secrecy.
In its 43-year history, the stench of malfeasance has followed the NNPC like a moth to bright light. Yet, the organisation has done little to redeem its image despite each new GMD claiming that transparency would be a cornerstone of their tenure. The 2017 Resource Governance Index, compiled by the Natural Resource Governance Institute (NRGI), found that value is lost particularly in licensing and in NNPC’s sales of government oil, as well as when revenues from oil and gas are shared and saved.
According to the NRGI, the Nigerian government does not regularly publicly disclose government officials’ financial interests in the extractive sector or the identities of beneficial owners of extractive companies. This enables widespread corruption. By 2017, the government was feeling the pressure. Successive governments have allowed NNPC’s opaque operations because it is a conduit pipe to pilfer public funds by corrupt government officials and finance fraudulent elections. The Buhari administration, before now, despite its pretense of fighting corruption, made a mockery of its claim at piety by allowing the NNPC to continue operating without accountability.
Though the NNPC is not a publicly quoted company, it is required by the Act setting it up to publish its audited financial statements, for about the same reasons that publicly quoted companies are compelled to publish their returns – accountability. Unlike public companies that answer to shareholders, the NNPC is answerable to the nation, a fact that makes public disclosures a moral obligation.
In response to public scrutiny of its activities, the NNPC began publishing its monthly financial and operations report in August 2015. Yet, for this opaque behemoth, it was seen as a big deal.
Waziri Adio, executive secretary of the Nigerian Extractive Industries Transparency
But these financial and operations reports are not subjected to the rigour of an audit. This means that records and transactions including those of oil sales are not supported by relevant documentation that back claims of crude oil lifting. It does not disclose key transactions including information on royalty payments, taxes, expenditure, and other big-ticket transactions. Worse still, the corporation does not publish its petroleum contracts, a critical requirement to make the oil and gas sector transparent and end corruption in the sector.
By 2018, the NNPC announced that it has completed the outstanding audit on its financial statements from the years 2011 to 2016. It said the audited statements for 2017 would be ready by June 20, 2018. But the organisation continued to keep these audited accounts away from public scrutiny until June this year and under the leadership of Mele Kyari.Z
Besides publishing the financial accounts, under Kyari, the Nigerian Extractive Industry Transparency Initiative (NEITI) achieved a key milestone: publishing its oil and gas report for 2018 in March 2020, nine months ahead of the EITI’s reporting deadline. This is a first for Nigeria and an improvement in the effectiveness of its reporting under the EITI. Now NEITI seeks to publish its 2019 EITI Report even sooner, and this is largely due to cooperation with the NNPC, which produces much of the data required for EITI reporting.
Upon his inauguration in 2018, Kyari said that for the NNPC to maintain a positive image, there must be transparency, shared values of integrity, and professionalism among its members of staff. By publishing these audited accounts publicly, Kyari seems to be making good on his word.
