For three consecutive days, the federal government and the 36 states have been in a most unlikely collaboration in their stand off with the Nigerian National Petroleum Corporation (NNPC) over underpayments to the Federal Accounts Allocation Committee (FAAC).
Finance minister, Mrs. Kemi Adeosun, led her ministry and the 36 state commissioners of finance in querying the NNPC in what the managers of government finances said is a serial breach of the templates for determining the revenue due to the federation account.
Having sought the intervention of President Muhammadu Buhari to rein in NNPC when she brought the specifics of the case to him and his vice, industry experts are urging the president to back the minister in ensuring that NNPC is held accountable and transparent in its remittances to the federation account.
The stand off was precipitated by the unilateral change in the template and cost components for the extraction, processing and sale of Nigeria’s highly valued low-Sulphur North Sea Brent premium blend.
With oil price averaging $77.85 per barrel in June and daily production of 1.95 million barrels, Nigeria’s outlook in revenue had improved significantly given that the country has one of the lowest production costs at $20 per barrel among members of the Organisation of Petroleum Exporting countries (OPEC).
The main grouse of the Ministry of Finance and the states is the drastic change in the cost templates effected by NNPC without any “logical explanation”, according to an official of the ministry.
“Everybody is aware that there is no logic in the overnight increase in the volume of refined products imported and distributed by the NNPC. Up to February this year, just about 30 million litres of petrol was consumed daily . Almost overnight, it rose to over 60 million litres. Even the NNPC itself acknowledged that the increase is indefensible. The expectation was that this anomaly should have been addressed by now. Unfortunately, NNPC continues to increase the figures in fuel importation, at least on paper,” an official of the Federal Ministry of Finance told Business and Maritime West Africa.
In June, NNPC escalated its figures on the quantity of petrol imported and distributed in the country. Invariably, the figure also correspondingly affected the “under recoveries” as NNPC and the federal government prefers to call the subsidy paid on imported petrol.
While the subsidy claim has continued to rise, it was also gathered that NNPC has been putting up some claims which the states had warned were “spurious” and would not be acceptable again. The fluctuating claims were justified by the poor state of the four refineries which best production level has not exceeded 18 percent of installed capacity in 2018.
“It is like every month, NNPC comes with different headings of expenditure which significantly whittled down the revenue handed over to FAAC for sharing. FAAC had previously objected to the introduction of unknown expenditures and had made good their promise to set up a parallel accounting process to determine the revenue accruable to the tree tiers of government,” Business and Maritime West Africa was told.
Without going into specifics, Adeosun had alluded to the discrepancies in NNPC’s submission to FAAC, noting that “we operate the NNPC as a business. We have invested public capital in that business; and we have expectations of return. And when that return falls lower than our expectations, then the owners of this business, which in this case are the Federal Government and states, need to act.
“So, that was what caused the deadlock yesterday (Wednesday) and we really felt the figures the NNPC was proposing for FAAC were unacceptable. We felt that some of the costs couldn’t be justified, and so we have decided that rather than approve the accounts, we will go back and do further work,” Adeosun told journalists on Thursday after state governors joined their finance commissioners to examine the discrepancies in NNPC’s figures.
It is being suggested that the face off between NNPC and the government is an illustration of the failed bid by Dr. Ibe Kachikwu, the Minister of State for Petroleum Resources, to rein in the group managing director of NNPC, Dr. Maikanti Baru, over the award of $25 billion oil contracts without due process or recourse to the ministry.
Unlike the decision of President Muhammadu Buhari to back Baru in his snubbing of Kachikwu, experts insisted that Adeosun should be allowed to critically evaluate the presentations by NNPC. “The fact that the finance minister is on the same page with the states in querying the integrity of NNPC’s books is enough for President Buhari to let this stand off end in verifying the contentious areas,” a top executive of one of the indigenous oil cmpanies who did not wish to be named said.
“This is the point where the president has to demonstrate his commitment to transparency in the management of our oil resources by backing Adeosun to take NNPC to task. There is a lot of transactions NNPC is engaged in that are questionable. That Baru succeeded to shutting out Kachikwu in the running of the corporation and award of contracts in order to deal directly with Buhari could not have been informed by the desire to take the best decisions for the country,” the official stated.