As the most notorious symbol of public inefficiency and corruption, it is a trite fact that the Nigerian National Petroleum Corporation (NNPC) is a national disgrace. That the NNPC operates like a parallel government, capitalizing on the nation’s dependence on oil to wantonly dictate the pulse of the federation, is a blunder in development that Nigerians have been saddled with for several decades. Nothing indicates this faux pas better than the allegations of fiscal impropriety, irreconcilable accounting system, misappropriation and unauthorized diversion of public funds that characterizes the crude oil swap contracts. To which end, the refusal by Dr. Ibe Kachikwu, Minister of State for Petroleum and NNPC Group Managing Director, to provide specific responses to questions regarding the execution of the oil swap program amounted to refusal to put a fitting end to a certain national shame. This obviously cannot be in the public interest.
Appearing Tuesday, before the House Committee investigating the offshore processing agreements (OPAs) and crude oil swaps between NNPC, its subsidiary, the Petroleum and Pipelines Marketing Company, (PPMC) and oil traders, Kachikwu was evasive when asked whether the companies which participated in the swaps were selected through a bidding process, and whether the program was in Nigeria’s best interest. He claimed ignorance, saying he was neither the minister nor GMD at the time the swap contracts were awarded. Members of the committee headed by Zakari Mohammed (APC-Kwara) were visibly angry and frustrated with Kachikwu’s ostrich posturing. The Minister declined to provide any information on how the contracts were awarded, insisting that he preferred to focus on the future, rather than dwell on the past.
Kachikwu tried to console the committee by telling them that when Nigeria starts operating its new Direct-Sale-Direct-Purchase (DSDP) crude oil arrangement next month, it will be able to net up to $1 billion through cost cutting measures. In a statement through NNPC spokesman, Kachikwu explained that the DSDP model was adopted to replace the crude oil swaps and OPAs, as well as introduce and embed transparency in the crude oil-for-product transactions by NNPC in line with standard practices. Kachikwu said under the old order, crude oil was exchanged for petroleum products through third party traders at a pre-determined yield pattern. He however noted that the DSDP option eliminates all the cost elements of middlemen and reduces gaps in the OPAs and the losses the NNPC incurred from it. The DSDP, he noted, would give other government agencies such as the Bureau of Public Procurement (BPP) and Nigeria Extractive Industry and Transparency Initiative (NEITI) the opportunity to be a part of the bid process for transparency.
What Kachikwu did not tell lawmakers was that the NNPC has launched a new kind of short-term swap contract, offering staggered allocations of crude to oil companies in return for immediate deliveries of refined products. Only now, the swaps involve oil majors, notably ExxonMobil, Total and BP. These oil majors have large quantities of gasoline and diesel unsold in Europe because of falling demand from the glut in prices. As a result, they prefer to dump it in Nigeria instead of paying for storage to stock it. Although Kachikwu claims that the DSDP would help NNPC grow indigenous capacity, as well as generate employment opportunities for local companies, oil companies who received swap contracts under former president Jonathan and his oil minister, Alison-Madueke remain blacklisted. They include Aiteo (Benedict Peters), Ontario Oil & Gas (Walter Wagbatsoma), Taleveras (Igho Sanomi) and Sahara Energy (Tonye Cole). They are yet to receive any swap contracts from the Buhari government.
Just for the records, the OPA deals pre-date the Jonathan administration. Like many other transactions in the oil sector, the OPA is a multi-billion dollar racket involving corruption that includes market fraud, price manipulation, and suboptimal returns on the part of NNPC officials and their collaborators have, in proportion, gone beyond the unconscionable to the outrageous. The swap regime is not just one of the terrible features of the corruption in Nigeria’s oil industry but also one that makes Nigeria and its people look stupid. But most Nigerians are not to blame; indeed they are, in terms of the economic and social costs, victims of a parasitic and deeply unpatriotic ruling elite determined to conduct public business only for self-interest. The new swap with the oil majors is the same sad, old story of mind-searing plundering perpetrated by scavengers, who in concert with International Oil Companies control NNPC activities by proxy, and turn the corporation into a honey-pot through which Nigeria is milked dry.
An audit by the Nigeria Extractive Industries Transparency Initiative (NEITI) stated that, from 2009-2012, the nation lost $8 billion owing to incompatibility in the value of domestic crude allocation (DCA) swapped and the refined product delivered. Lawmakers could not get Kachikwu to clarify the NEITI audit report. It is worth-recalling that the joint Senate committee investigating the fuel subsidy regime also indicted the NNPC of operating an illegal account in the United States, where it kept proceeds from the sale of crude oil before transferring same to the Federation Account. These reports corroborate findings by Pricewaterhouse Cooper, which identified structural irregularities bordering on outright fraud in its audit of the NNPC. Irregularities include double payment on petrol and kerosene subsidies, undervaluing of crude oil lifted, computation errors, subsidy over-claims, amongst others.
The implementation of the OPA has always been dubious. All right-thinking Nigerians wonder just why, unlike every other oil-producing country under the sun, Nigeria cannot, or chooses not to process and add value to the raw product in order to maximize its earnings. By vacillating and refusing to answer the questions of lawmakers investigating the swap contracts, Kachikwu opened himself up to charges that he has just substituted the former indigenous companies involved in the fraudulent swap with his erstwhile employers at Exxon Mobile where he was executive vice-chairman/general counsel for Africa. The onus of proving doubters and cynics wrong lies on him. Nigerians want to see transparency in the oil and gas sector. And this transparency comes with a two-fold burden: one of ensuring professional best practices and due diligence in dealing with IOCs as typified by his former employers, ExxonMobil; and the other of allegiance and patriotism toward the national cause.
In this regard, local content, in the true sense of the term, must be deepened. Certainly, the economic and social costs of oil sector corruption are holding Nigeria down. If Nigeria must extricate itself from the strangulation of the exploitative cabals that have held the country prostrate, Kachikwu must help lawmakers end this crude for refined product deals between the NNPC and selected trading companies. There will never be transparency in the oil sector and no prosperity for Nigeria until these corruption networks are dismantled to remove the anti-Nigerian, counter-productive primordial patronages. Then, and only then, will the NNPC serve Nigeria and its citizens.
