After the Niger Delta Development Commission (NDDC) probe saga, there are now insinuations by every Tom, Dick, and Harry over the level of corruption and mismanagement that might be going on in the Nigerian National Petroleum Company (NNPC). With the recent probe of contracts in the NDDC, attention, and of course, the focus of the Nigerian political commentators especially on social media is now on other parastatals with NNPC in the eye of the public.
The reason for these assertions might not be far-fetched because there have surely been many allegations of gross mismanagement of public funds in NNPC. In 2011, an audit report by KPMG revealed the agency couldn’t account for about 28.5 Billion dollars over deducted funds in subsidy claims.
In 2013, a controversial letter by Sanusi Lamido to Goodluck Jonathan, he claimed that NNPC had not remitted $49billion from crude oil sales.
International companies like Willbros and ABB Vetco Gray have repeatedly admitted to paying bribes in millions of dollars to NNPC officials in the past.
Nigeria is currently using the 1969 Petroleum Act, which vested the entire ownership and control of all petroleum in, under, or upon all land or Nigerian territorial waters in the Nigerian government.
Under the current law, NNPC controls a majority in the Nigerian oil sector. The body, which manages the oil assets owned by the government, negotiates terms with operators, controls the importation of petrol into the country, handles the nationwide distribution of these products, issues licenses, and permits, and also set policies and regulations.
NNPC’s responsibilities are not only massive for an agency; there is a conflict of interest because NNPC, serving as a referee who is also a player on the pitch, has an unfair advantage over other operators, and it also contributes to systemic corruption, to wastefulness and even allegations of theft.
The Nigeria Natural Resource Charter (NNRC) in 2019 carried out another Benchmarking exercise report assessing NNPC, using these criteria; Role and Funding, Corporate governance, Transparency, and accountability, the result for NNPC was poor, and that was a repeat of what happened in 2017 with a slight difference.
This has shown that NNPC’s lapses have been consistent; hence, there has to be a reform that will transform NNPC and shape Nigeria’s petroleum industry as the industry’s success relies heavily upon NNPC.
Another interesting finding by the NNRC was that Petrobras with lower reserves generate more revenues and 26 times more profits than NNPC while subject to the biggest corruption investigation in its history and paying fines or making provisions above US$10 billion on its balance sheet and still make a profit.
In July, the Nigerian National Petroleum Company (NNPC) released its audited financial statements its subsidiaries for 2018, noting that its refineries recorded losses of N154 billion. Yet, no concrete steps have been taken to offload the refineries from NNPC’s books.
NNRC noted that Petronas still makes profit despite the high level of corruption because it’s commercially driven even though the failure of governance and failure of accountability and transparency impacted its management and operational efficiency.
NNRC concluded that commercial efficiency is key to the health and sustainability of a National Oil Company.
This means that corruption is not the only problem NNPC is facing. A good Petroleum Industry Bill (PIB) should be able to tackle this problem with the creation of commercial institutions that will be tasked with holding and managing the assets and interests of the government.
The need to enact a decent Petroleum Industry Bill can never be overemphasized, and increasing the performance of NNPC should be a leading objective. A good PIB should restructure the Nigerian National Petroleum Corporation (NNPC) and provide a clear path to the more effective management of Nigeria’s state-owned oil enterprises.