Failure by the
President Muhammadu Buhari-led administration to reform the oil and gas sector
has pushed the Nigerian National Petroleum Corporation (NNPC)’s revenue loss to
over N546 billion.
The trend does not
only represent the loss of potential revenue for government but also
constitutes a major challenge for the 2018 budget expectations and
implementation.
In 2015, the
corporation lost N267.14billion. The following year, it was set back by N197
billion. And in 2017, data from its financial statements showed N82 billion in
operational losses.
Also, while the
corporation earned N2.046 trillion in revenue in 2015, it spent N2.313
trillion, leaving a loss of N267.138 billion. Its corporate headquarters
recorded the highest loss of N162.736 billion, while its product supply and
distribution arm, the Pipelines and Products Marketing Company (PPMC) came
second with N162.06 billion loss, followed by a combined loss of N82.09 billion
from its three refineries.
Its financial and
operational report in 2016 showed that the corporation earned N1.726 trillion,
but recorded an expenditure of N1.923 trillion. Losses from its
refineries alone totalled N78.95 billion. In a review by Bloomberg, the latest
account, showed that losses from refineries and corporate headquarters alone
stood at $500 million.
Industry experts told
The Guardian that besides the absence of reform, NNPC’s
self-regulatory and above-the-law modes were partly to blame. They also
expressed concern over the leadership tussle between the Minister of State for
Petroleum Resources, Ibe Kachikwu, and the NNPC Group Managing Director (GMD),
Maikanti Baru.
They noted that the
inability of the National Assembly and the Presidency to address the alleged
bypass of due process in the signing of about $25billion contracts indicates
transparency and accountability are lacking in the sector.
Though the current
administration once blamed NNPC’s involvement in commercial, operational and
regulatory roles for woes plaguing the sector, the stakeholders expressed
surprise the situation has remained unchanged.
They added that
unless NNPC becomes more like a private entity through a major reform
that would abolish the extant law that created it, especially as outlined in
the Petroleum Industry Bill, the company might not be able to make profit.
At a 2015 election eve
debate organised by the Nigeria Political Parties Discussion Series (NPPDS),
Lai Mohammed, the then National Publicity Secretary of the All Progressives
Congress (APC), now Minister of Information and Culture, had said the APC
government would not only unbundle the NNPC, it would ensure it publishes
its balance sheets periodically for public scrutiny.
“The NNPC is too
powerful and self-regulatory. There is no way the NNPC can regulate itself. It
should concentrate on operations,” he said.
With the rising crude
oil prices and the absence of functioning refineries, the analysts
said things could worsen in 2018 as the cost of products, especially petrol
that is largely imported, has been pegged at N145 per litre.
The larger part of the
losses made by the company in the past three years came from the corporate
headquarters, refineries, and mounting under-recovery from the import of
petroleum products.
The President and
Chairman of Council, Chartered Institute of Bankers of Nigeria, Prof. Segun
Ajibola, is unsure the company will make profits anytime soon,
because government is backing revenue that falls below cost.
“If they continue like
that, the deficits will continue to grow. But if the reverse happens,
then surplus will be generated to take away the deficits,” he said.
He was, however,
optimistic that the signing of the Petroleum Industry Governance Bill into law
would address key issues, stressing that the government needs time to tackle
the challenges.
Though the losses made
by the company in 2017 showed signs of hope above the deficits made in 2015 and
2016, the operating income it budgeted in the three years was not met.
In April, the
under-recovery or subsidy paid on petrol reportedly hit N1.4 trillion. Losses
on refineries, which have a combined capacity of 445,000 bpd but turned out
small quantity of refined product, stood at about $100 million in 2017 alone.
Sources close to the
ministry said the face-off between Kachikwu and Baru has even prevented the
ministry from holding board meetings. They said the vacuum created by the
tussle has been delaying reforms promised by the current administration.
NNPC’s Group General
Manager, Public Affairs Division, Ndu Ughamadu, however, denied this, saying
board meetings were still being held. He insisted the corporation is working
towards profitability with necessary mechanisms but did not outline what these
mechanisms were.
The Spokesperson for
the Ministry of Petroleum Resources, Idang Alibi, had not responded to request
for comments before this report was filed.
“How many times have
you heard about the board meetings of the NNPC? When was its full account ever
published or audited? We do not hear about the quarrel between the
minister and GMD. But the two people remain there, and everything is buried
under the carpet,” said one of the sources.
The Senate had set up
a committee headed by former Sokoto State Governor, Aliyu Wamakko, to
investigate claims by Kachikwu over lack of due diligence in the award of
contracts. Nothing, however, has been heard from the committee since the matter
broke last year.
The absence of
properly outlined roles and accountability mechanism, and the failure by the
president to relinquish the office of Minister of Petroleum Resources are
holding the country’s economy to ransom, said Auwal Ibrahim Musa, Executive
Director of the Civil Society Legislative Advocacy Centre (CISLAC).
“The tension is not
over because the issues that have been raised are not addressed. There is
mistrust between the GMD and the minister. What we are seeing is window
dressing. If they are working together collaboratively, and if the whole
process is transparent, there won’t be these issues,” Musa said.
Nothing new has
happened in the sector under Buhari’s administration, particularly in terms of
accountability, transparency and openness, said Idayat Hassan, Executive
Director, Centre for Democracy and Development (CDD).
“Subsidy is a good
example. This is a government that told us it is not paying subsidy. Then all
of a sudden, it introduced subsidy through the back door. The opaque
system has remained as it was in previous years. The promises of unbundling the
NNPC have not come to pass,” said Hassan.
She denounced ongoing
leakage, adding that unless there is accountability, funds from the sector
could be used to finance 2019 election campaigns.
Professor of Petroleum
Economics and Policy Research, Centre for Petroleum Energy Economics and Law,
University of Port Harcourt, Wumi Iledare, linked the poor performance of the
NNPC to the delay in the passage of the PIB. He stressed that the eventual
passage would remove government control and drive the company towards profit
making.
He regretted that
the absence of core reforms has resulted in decline in revenues, oil
and gas production, national reserves and investments. Also, uncertainty in
legal, regulatory, fiscal and commercial frameworks has led to declining
competitiveness and infrastructure deficits.
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