Nigeria - The missing N300bn: Between revenue allocation commission and NNPC

www.vanguardngr.com MOHAMMED NASIRU Sunday, February 16, 2003

PERCEPTIVE watchers of public life and commentators on public affairs in Nigeria must be puzzled at the deepening controversy between the Nigerian National Petroleum Corporation, led by Dr. Jackson Gaius-Obaseki, and the Revenue Mobilization and Fiscal Allocation Commission, headed by Engr. Hamman Tukur, on the management of the nation’s petroleum resource. The NNPC was formed in 1977, to profitably operate in all sectors of the oil industry, while the Revenue Commission was set up to appropriate all revenues accruable to the nation, and allocate same to all tiers of government. Ordinarily, therefore, these two agencies should work together, in generating the revenue, while the other disburses same, for the good of all concerned. In the past few weeks, however, the public has been inundated in the public fora and in the media, by the commission, on how NNPC’s acts of commission and omission may have led to loss of revenue for government. NNPC, on its part, has continued to stridently defend its position, and the confused members of the public, now, really need to be navigated through the issues, so that they can come to judgement as to whether Engr. Tukur’s Commission is doing a honest or hatchet man’s job.

The issues

The issues are two fold. First, Engr. Hamman Tukur’s Commission claims that in 2002, the princely sum of N300 billion got missing from NNPC’s accounts. It arrived at this alarming figure using the following arithmetic: • 60 per cent (presumed government share of crude oil), multiplied by 1.8 million barrels per day (presumed OPEC quota for Nigeria), multiplied by the prevailing international crude oil price, multiplied by the Commission’s designed exchange rate and then compared with NNPC’s declared revenue for same period, yielded, according to it, a shortfall of 200 billion naira. • 445,000 barrels per day of crude oil allocated for domestic consumption, multiplied by prevailing market price, multiplied by the Commission’s articulated exchange rate and then compared with NNPC’s returns on the 445,000 bpd for the same period, yielded also, according to the commission, another shortfall of Nl00 billion, and a + b above, amounted to N300 billion. A cursorily look at this arithmetic by any one remotely familiar with the industry, will reveal the fallacy behind these figures. First, during the period, Nigeria’s OPEC quota was 1.7 million barrels per day, and not 1.8 million barrels. The Commission erroneously or deliberately added 100,000 bpd to Nigeria’s quota to confuse the uninformed. Secondly, (through the NNPC) the Federal government’s share is 53 per cent of Nigeria’s OPEC quota and not 60 per cent. The remaining seven per cent is for indigenous producers whose production also forms part of the OPEC quota. The indigenous producers pay Petroleum Profit Tax (PPT), royalties and other charges from that seven per cent and the balance goes to them as revenue.

Any individual remotely connected with the oil industry will understand these. The Revenue Commission is headed by an Engineer and former Permanent Secretary in the Federal Ministry of Petroleum Resources. The Commission, therefore, should know, but would seem to have chosen not to know. The Commission also goofed on the 445,000 barrels per day allocation which it assumes as independent of Nigeria’s OPEC quota. But it is not only part of OPEC quota (and therefore has to be subtracted from the 1.7 million barrels per day); some quantities are refined locally and it is only the balance that is sold abroad. Proceeds from these sales go to a special account managed by the CBN, for the sole purpose of funding imports of petroleum products. Now, to the second issue. The Commission says that NNPC’s account with the CBN is both illegal and unconstitutional.

Commission's public posturing

Again, we must examine this, and put the Commission’s public posturing on the balance. Hitherto, government, as sole shareholder, was funding NNPC from first line charge, i.e., from the Federation Account before disbursing revenue to the three tiers of government. But the Supreme Court judgment of April 2002 declared this inappropriate. So, NNPC now went back to the act setting it up as a commercial, profit- oriented enterprise determined to earn profit on the seed money invested by government; and opened an account with the CBN. For, in any normal business, it is impossible to talk of profit, without accounting for the cost of that business; in this case, cash calls to Joint Venture partners for exploitation and production activities. The Commission says the operating cost account is illegal, and, to buttress this, regularly compares NNPC’s operations with agencies like Customs and Immigration Services which collect revenue and pay it to government. But it deliberately fails to realize that these agencies do not generate revenue. They only collect revenue; unlike the NNPC, which engages in international business with joint ventures, and must pay cash calls to partners before it can lay claim to its share of the crude oil. The analogy is rather simple. If Engr. Tukur and Dr. Jackson Gaius-Obaseki for instance, form a joint venture to sink a borehole and sell the water from it to the public, Engr. Tukur cannot legally lay claim to the proceeds from the sale of water, if he refuses to contribute to the drilling of the water well or servicing of the equipment used in pumping out the water.

Efforts: As a detached observer, one would probably have ignored the Commission’s antics as arising from lack of adequate information on the workings of the industry, were it not for some rather curious co-incidences and hard headed rejection of efforts by agencies, of government to reconcile differences between the Commission and the NNPC. The issues of account with CBN and ‘missing’ 300 billion naira broke, shortly after the NNPC said it had no budget to meet the demands of the Commission for sponsorship to Qatar, Indonesia, Malaysia and Venezuela on first class tickets and two months estacode, to go and study the management of oil operations. But even at that, the NNPC, in furtherance of the openness in its business dealings, (I have gained a lot from it’s transparent quarterly publishing of it’s operations account for public consumption), made detailed replies to the Commission’s requests for information on both the crude oil sales and the opening of the account.

The Attorney General of the Federation, Mr Kanu Agabi also wrote to Engr. Tukur’s Commission, saying NNPC’s account with the CBN was both legal and constitutional, but the Commission would not accept, electing in the process, to establish and follow its own laws. The Group Managing Director of NNPC, ever so concerned with the right of public institutions to know, led a powerful delegation to the Commission and for almost a whole day, briefed all members on the Corporation’s activities. Most of the members were convinced, and accepted NNPC’s explanations, but not Engr. Hamman Tukur. The Secretary to the Government of the Federation Chief Ufot Ekaette, led a powerful Federal delegation, made up of the Attorney General and Minister of Justice, the Minister of Solid Minerals, the Minister of the FCT and the Group Managing Director of NNPC, to convince the Commission that NNPC is on the right path, yet Engr. Tukur, as an individual, has taken up his anti NNPC stand as a crusade.

In his new posturing, Engr. Tukur pretends to be on the side of the people, by recommending that NNPC should go on massive campaign to lobby all levels and all tiers of government so that they could give part of their allocation back to NNPC as cash call after they collect the allocation from the Federation Account. But, even Engr. Tukur knows that this suggestion is pedestrian as is unworkable. Pray, which local government chairman, State Governor or Ministry will release money to NNPC for its operations after collecting same from the Federation? Is this not such policy that was pursued in the past (during Engr. Tukur’s tenure) which led to over one billion US Dollars in area of cash calls, which the present NNPC Management has cleared, is with interest of over 30 billion naira? Also, since NNPC’s cash call budget is diligently scrutinized by the National Assembly before being passed, what is the fear about NNPC being enabled to pay its cash call commitments through the new account.

The more one ponders on the commission’s position, the more incredible it becomes, that a campaign can be engineered and continued, so effortlessly, and without scruples, against the NNPC, an institution that is a trail blazer and a dividend of our new democracy. Is this campaign against NNPC really for altruistic reasons? The facts on ground certainly do not support this thought. Or is it driven by a personal hidden agenda? Maybe. For, word has it that Engr. Tukur has a 2007 presidential ambition and that rubbishing NNPC, which is the flagship of this administration, will work against a perceived contender for the presidency in 2007 who is a powerful member of this administration. If this theory is true, it is sure to fall flat; for you can never build castles on lies.

•Mallam Nassiru, a Petroleum Economist, resides in 32A, Sofolahan Street, Palm Grove, Lagos.