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Sanusi says NNPCL, world’s most opaque oil company, calls for audit

Digging Nigeria out of her present economic problems: The Sanusi advisory

Sanusi Lamido Sanusi, former governor, Central Bank of Nigeria (CBN) on Thursday called out the Nigerian National Petroleum Company Limited (NNPCL) as the most opaque oil company globally and needs to be audited.

Sanusi has been vocal about his strong belief that the operations of the state-owned oil company lack transparency and is also opposed the President doubling as the petroleum minister, a position first adopted by former President Buhari – which he now says does not promote accountability to the citizens.

Sanusi who is also the 14th Emir of Kano and Khalifa of the Tijaniyyah Sufi order of Nigeria and the neighbouring countries spoke in Abuja at the 2023 bank directors summit which held in Abuja with the theme: “Emerging Issues: Navigating the complex balance between regulation and compliance”.

Speaking at the summit, he queried why NNPCL is not able to bring in the needed dollars at a time the country is batting with low revenues and foreign exchange crisis.

“This is the question that cost me my job. I will continue asking this question until I die. Where are the dollars? We need to shine light on NNPCL.

“The finance minister cannot tell you that today, this is how many barrels of oil that we produce and export because he doesn’t have a matrix system that reports to him, you can only rely on NNPCL. Those barrels are revenue, they belong to finance. We have been talking about this for 10 years. We need a metering system. The finance minister needs to know how much oil we are producing every day, how much oil we are selling, and where the money is going,” he noted.

And according to him, government must ensure transparency in the state-owned oil company because if the enormous leakages in that system is not fixed, the present revenue shortfall will worsen, with the continued adverse impact on the reserves and the persisting weakness of the naira.

Sanusi however, emphasized that although oil will not solely grow Nigeria’s economy and make it wealthy, but it is critical in raising the country’s working capital and providing lubrication to the import-dependent economy.

“We cannot afford to continue producing the oil and not seeing the revenue.

“We are no longer paying subsidies. So where are the dollars? Before, it was under recovery. Now we don’t have any recovery. Where is the money? It’s an issue that this country must address.

“NNPCL is the most opaque oil company in the world,” he further lamented and recalled how the state-owned oil company had not been audited for 15 years even when he was the Central Bank governor.

According to him, “The Central Bank is easy to attack, but it does not manufacture dollars. It is not an exporter, you’ve got to go back to those issues we raised in 2014. You need to follow the money, from production to exports, to return, this is the number one priority.”

Read also: Disband NNPC now, says Sanusi

He however acknowledged some progress in the the country’s oil sector Production Sharing Contract (PSC) agreement in Deep offshore production which has improved from 20 percent to 40 percent, but urged that the onshore production should be revisited.

“PSC agreements means we get only 40% of that. It was 20% of that. So, you produce a million barrels and deep offshore, you get only 400,000 barrels. We could increase the onshore production, but what have we done? The IOCs went out and we signed all these SAAs with our cronies and friends.

“We need to review those who are producing onshore oil. These are wells that have been in production for seven decades. They are mature fields. At this time, you need international oil companies. Not Shell, not Exxon. You’ve got medium-sized IOCs operating in places like Gabon, Latin America, Asia. Get them to come and maximize the output from those fields because that’s where the government has the highest revenue stake.

“We need to reform those things and give people who can bring in the technology and the skills because you need to have a long-term solution to this problem, including another structural change which is moving to alternative energy.”

Kicks against President doubling as petroleum minister

On how government should run the oil sector, the Emir stressed that the “the idea of the president nominating himself as a petroleum minister is not a good one. For him, “a minister has to be there — who Nigerians can easily hold accountable.”

On the theme of the summit which he noted as apt, he said that the banking sector needs continued effective regulations and called for a stress test which will not focus on punishment but to understand whether and where there are risks. He said this is critical inorder to protect the industry, avoid a contagion and sudden collapse of the industry, citing the American Silicon Valley bank which collapsed earlier in the year.

“Excess focus on the banks is important,” he further noted, and urged the directors to ensure they are good ambassadors of the banks they represent.

He also kicked against the proposed amendment of the CBN Act and BOFIA, noting that the independence of the banking regulator – which must be allowed to retain its supervisory roles – is paramount and must be respected and protected.

For him, the Asset Management Corporation of Nigeria (AMCON) – which he championed as the CBN chief – and the Nigeria Deposit Insurance Corporation (NDIC) must be allowed to remain until what the banks owe the system is recovered.

Speaking at the summit, Vice President Kashim Shettima noted that Nigerian banks’ performance has been solid and that their stability is greatly assured.

Quoting CBN numbers, he noted that the ratio of the banks’ non performing loans, dropped to 4.4% at the end of May 2023 Compared to 15.01 % recorded in 2017.

Read also: Choose leader with integrity, capacity to govern – Sanusi, GoNigeria advocate

Their total credit to the private sector also increased by 88.64% in seven years to N41.54 trillion as of May 2023, compared to N22.02 trillion in May 2017.

As at november 2023, the banks recorded a capital adequacy ratio of 14.2%, above the minimum requirements of 10% with asset quality as measured by Non Performing Loans (NPL) increasing marginally to 4.5%, Slightly below the 5.0% prudential benchmark.

Liquidity ratio in the industry increased to 73.8% well above the 30% regulatory requirement, indicating strong capacity of the banks to manage short term liabilities.

He said that despite the industry’s strong position, the CBN’s recent idea of recapitalization is in order. This will further strengthen the industry, and prepare the banks for a more catalytic role in the achievement of the $1 trillion dollar economy proposed by President Tinubu in the immediate term.

“ We believe our banks have what it takes and that these ambitions are achievable,” the Vice President, who was represented by Tope Fasua, Special Adviser to the president on Economic Affairs stated.

He further noted that the recent exit of some conglomerates, including GSK and P&G provides opportunities for local intervention by the banks to support local players who can fill the spaces being created by these exits.

Wale Edun, finance minister and coordinating minister for the economy assured that the present issues around short term liquidity, foreign exchange market, long term structural changes are being dealt with in the policies of the current administration – though time is needed for those actions to crystallize.

According to him, the summit was coming at a critical time of inherent risks and uncertainties, which the Financial sector has an official role in helping the country navigate.

“It is imperative that we collectively address them together balancing the complexities of regulation and compliance in order to build the type of resilient system that will underpin the eventual move to rapid sustained and inclusive economic growth.

“So as we celebrate the strides we’ve made, we must upgrade to face the emerging challenges that threaten the stability and integrity of rapid technological changes the growing sophistication of financial crimes, increased trade, these dynamics introduce new and complex risks, which is the duty of you as bank directors to manage.”

The finance miniter, however, recognised that some of over- regulation can be counter-productive, stifling innovation, and there needs to be a balance, driven by regulators partnering with the industry to promote innovation that drive financial access.

“Bankers have a duty to embed integrity and transparency into our culture and technology systems. Lawmakers need to pass dynamic policies which compel accountability, while enabling sector wide agility and growth. The role of legislators is critical. As we strive towards this balance, we must also invest in developing human capital and capabilities. Building a high integrity system requires instilling values from top to bottom while also empowering people at all levels to take responsibility,” he stressed.

“All efforts are being made to bring in funds that will shore up the liquidity of the financial system, of the foreign exchange system and there’s no reason at this stage to feel the indications that were made earlier have changed.

Read also: NNPC moves again to break petrol import jinx
Mustapha Chike-Obi, Chairman, Bank Directors Association of Nigeria (BDAN) assured that the banks will be willing to partner with the government on this agenda of growth and reforms.

He however, pleaded with the CBN to consult with the bankers on the issues of regulations in order to forge a partnership that would yield positive economic results.

“This end, I call on the CBN, to institute twice a year meetings with the chairman of banks,” he stated.