·As fear grips Corrupt Officials
By Ohia Israel
Pundits believe that upon assumption of office, one of the first major places the incoming administration will look into is the Nigeria National Petroleum Corporation, NNPC. The nation’s gigantic oil house has for years become a cesspool of corruption and fraud, but all these are set to come to an end as the President-elect is set to take a clinical surgery on the corporation.
The newly elected Muhammadu Buhari administration will replace the top management of the Nigerian National Petroleum Corporation (NNPC). According to Reuters report, recently, it will also review the accounts of the oil company to restore credibility. It said the new government will submit a bill to break the NNPC into four entities, as already prescribed in the latest PIB draft.
A party source who pleaded anonymity disclosed that the Bill “will also, crucially remove the oil minister from the NNPC’s board of directors to curb political interference,” while others said more generally that the minister’s current powers would be heavily trimmed.
Oil and gas will have separate companies for upstream, with a third covering pipelines and refining, while a fourth will be an inspectorate.
The proposal could be submitted to parliament in the first quarter of next year, one parliamentary APC source said.
Buhari owes his March 28 victory against incumbent Goodluck Jonathan partly to a perception that Jonathan allowed corruption to get out of control (especially in the oil sector). A string of multibillion dollar oil corruption scandals tainted the NNPC and other bodies that handle energy.
The immediate implication of all these is that foreign oil firms keen to know how Nigeria’s president elect plans to tax them could be waiting a long time as he makes ending corruption and reforming the opaque national oil company his most urgent sector priorities.
Four party sources from Buhari’s All Progressives Congress (APC) told Reuters the issue of fiscal terms, seen as crucial by the industry, will have to wait on current thinking about oil and gas policies for Africa’s leading producer.
Crude output has stagnated close to 2 million barrels per day over the past few years, owing partly to underinvestment. “We need to address the structural issues and leave the fiscal for now,” Senator Bukola Saraki, whose APC controls both houses of parliament after a landslide win, told Reuters.
“A more transparent NNPC (Nigeria National Petroleum Corporation) is needed with reasonable accounting,” he said.
APC leader, Bola Tinubu, whose support was instrumental in Buhari’s victory and wields huge influence, told Reuters a transitional committee would be set up. “No way will we discuss that now,” he said.
Jonathan’s administration re-drafted a Petroleum Industry Bill (PIB) in 2012 that had been in the works for a decade. The PIB was meant to change everything from fiscal terms to overhauling the NNPC, environmental rules and revenue sharing, but its comprehensive nature caused disputes between lawmakers.
Yet the main thing the oil companies were worried about was tax. The bill proposes 20 percent tax on offshore projects and 50 percent for onshore. Shell, Exxon and other majors had all complained publicly that the terms are unfair, given the risk associated with operating in Nigeria.
Uncertainty over the fiscal terms of the bill have been holding back billions of dollars of investment, especially into capital-intensive deepwater offshore, leading some to propose the bill be broken up into several pieces debated separately.
“It doesn’t need to be an omnibus, you can take things piecemeal,” one APC source said.
Hope that doing so would resolve the fiscal issue quicker looks slim, since the voting public is much more concerned about cleaning up graft than making oil majors happy.
The average Nigerian benefits little from the country’s huge energy resources while politicians wear gold watches and build monster homes in the capital Abuja.
Also, says Control Risks’ Thomas Hansen, “The cabinet needs to strategise first and fiscal terms are likely to take longer and require discussions with the (international oil companies).”
Meanwhile, the World Bank recently threw its weight behind President-elect, Maj.-Gen. Muhammadu Buhari (retd.), to probe the Nigerian National Petroleum Corporation over allegations of missing funds.
Speaking in a video conference from Washington to journalists from across Africa on the release of the bank’s analysis of issues shaping the continent entitled, ‘Africa’s Pulse’, top officials of the bank commended President Goodluck Jonathan for exhibiting political maturity after the March 28 presidential election that would end the tenure of his administration on May 29.
According to the World Bank’s Chief Economist for Africa, Mr. Francisco Ferreira, looking into financial records of the country, especially allegation of corruption at the NNPC, would check impunity and build public institutions in the future.
He said, “One norm that has to change is the norm of impunity. I am from Brazil myself. So I am also used to a country where people could be corrupt and escape justice. That keeps the people to keep doing it.
“So, the current stand of the government-elect to look into what happened in the past hopefully will have consequences for the future. And those consequences will be that institutions will be stronger; norms will be cleaner and people will not have to steal millions of dollars from the Nigerian National Petroleum Corporation.
“People have alleged in the past that there had been major corruption scandals there. If that stops, then that will have very high returns in terms of the money staying around to be spent on education, health, roads and power that the poor people across the country need.
“So, my sense is that it will be good to promote cleanliness in politics.”
Answering questions on some other African countries that have elections between 2015 and 2017, Ferreira said there was no need to be afraid, adding that the fear of elections would drive away investments from the region. He said the example that had been shown by Jonathan and Nigeria in the just concluded general elections showed that the continent could get it right in terms of transition to new governments. Ferreira praised Jonathan for political maturity that he exhibited during the elections, adding that if Nigeria could get it right; other countries in the region should also be able to get it right.
Answering a question from a South African journalist on the possibility of the country overtaking Nigeria as the largest economy on the continent given the fall of Nigeria’s main export, crude oil, Ferreira said it did not look plausible.
Also answering a question from an Angolan journalist on whom between Nigeria and his country was managing the fall in oil prices better, the World Bank expert said both countries were doing well in putting measures in place to check the decline.
He praised both countries for allowing their currencies to float according to market forces rather than living in denial of the crisis occasioned by the decline in crude oil exports.
Ferreira, however, added that Nigeria stood a better chance to recover faster from the decline because the structure of the country’s economy was more diversified than that of Angola.
The report, Africa’s Pulse, presented by the World Bank Lead Economist for Africa, Punan Chuhan-Pole, stated that sub-Saharan Africa’s growth would slow in 2015 to four per cent from 4.5 per cent in 2014.
The downturn largely reflects the fall in the prices of oil and other commodities, according to the twice-yearly analysis of the issues shaping Africa’s economic prospects.
The 2015 forecast is below the 4.4 per cent average annual growth rate of the past two decades, and well short of Africa’s peak growth rates of 6.4 per cent in 2002-08.
Excluding South Africa, the average growth for the rest of sub-Saharan Africa was forecast to be around 4.7 per cent.
The World Bank Vice- President for Africa, Mr. Makhtar Diop, said, “Despite strong headwinds and new challenges, sub-Saharan Africa is still experiencing growth. And with challenges come opportunities.
“The end of the commodity super-cycle has provided a window of opportunity to push ahead with the next wave of structural reforms and make Africa’s growth more effective at reducing poverty.”
Sub-Saharan Africa is a net exporter of primary commodities. Oil is the most important commodity traded in the region, followed by gold and natural gas, the report stated.
It added that over 90 per cent of the total exports of eight major oil-exporting countries came from the three biggest exports of each country, which represent nearly 30 per cent of their GDP.
Recent price declines are not confined to oil, the report said; adding that the prices of other commodities were now more closely correlated both with oil prices and with one another.
As a result, terms of trade are declining widely among most countries in the region, according to the report, which asserted that the 36 African countries with expected terms of trade deterioration were home to 80 per cent of the population and 70 per cent of the economic activities in the region.
Also joining the call for the probe, is the Senators, the All Progressives Congress (APC) senators have called for an immediate investigation into the activities of the Ministry of Petroleum Resources and its subsidiary parastatals, departments and agencies.
The senators, include Ibrahim Musa, who argued that President-elect, Muhammadu Buhari, should launch a thorough probe into the activities of the Nigerian National Petroleum Corporation (NNPC) and other parastatals as soon as he is sworn into office on May 29.
He was quoted as saying: “All the Nigerian people are eager and are calling on the president-elect to commence a thorough investigation of the finances of NNPC, because a lot of damage has been done to the account of the NNPC. Not only the APC senators, but [also] all the masses of this country are yearning for that investigation.”
Calling for the investigation to be expanded to include other government institutions so that the new administration can begin on a clean slate, Musa said: “Not only NNPC; there are a lot of other parastatals that are to be investigated. I know the damage is so much that nobody can ignore the damage. No incoming president can ignore the damage not even Gen Buhari. Any person that is elected apart from Jonathan would have to conduct that investigation.”
The Senator denied that the call for the investigation is geared towards the persecution of Petroleum Resources Minister, Mrs Diezani Alison-Madueke or any other ministers.
“No, it is never a witch-hunt but it must be done. Because the damage done to the Nigerian economy is too much to ignore,” he said.
“Even if it were to be another (president), he must have to conduct that investigation. The whole issue of governance during the administration of Jonathan is a total mess,” said Musa.
“We are not witch-hunting Diezani, no. Anybody saying that is misconceiving the issue. Not Diezani alone, the whole administration is a mess.”
Our source further quoted Musa as saying that those found guilty of embezzling state funds or committing financial malfeasance should be prosecuted to the full extent of the law.
Meanwhile, an online news website has reported recently how Nigeria’s treasury is emptied, with oil cabal owing N450bn as mass retrenchment looms in the sector.
According to medium a disaffected insider within President Goodluck Jonathan’s administration as well as several banking executives have said that Nigeria faces a deep economic crisis and massive social gloom after the 2015 general elections. Speaking differently, the sources said President Jonathan had virtually vacuumed the Nigerian treasury to serve his re-election campaign, leaving Nigerian banks in dire straits and many states on the verge of failing to pay salaries this month.
“The truth is that Mr. President has almost emptied the treasury, and some of us close to him are even beginning to get worried about what will happen after the election,” said the political insider.
The bankers echoed the sentiment. “The reason the Naira has taken such a dramatic plunge over the last three or so months is that politicians moped up the hard currency for elections,” said one banker. “I have never seen anything on this scale, where politicians snatch up every hard currency in sight, whether dollar, Euro or pound sterling,” he added.
Asked who is responsible for the situation, the banker said he would not engage in partisanship. “All I know is that this country is now in a frightening economic position — and all these politicians running up and down to retain or take power have created the situation,” he asserted. But another banker was not shy in pointing a finger at Mr. Jonathan. “The president has been indifferent to the economic crisis caused by the ongoing campaigns. And the reason he is indifferent is that he is the major culprit,” said the executive. He added that the distribution of largesse by Mr. Jonathan had now become “one of the few lucrative businesses in Nigeria.”
The bankers said massive layoffs were inevitable in the banking and other sectors of the Nigerian economy. They said numerous companies that depended on imported machinery or other components sourced from abroad were bleeding cash. “Many Nigerian companies are experiencing severe cash flow
problems. Many of them are defaulting on long and short-term loan repayments. So the banks are suffering heavily as well,” one banker said.
Two of the bankers disclosed that the banking industry would have laid off thousands of workers, but that officials of the Jonathan administration pressured them to wait until after the elections. “It will take a long time before banks recover from the current shocks in the system. There’s no bank strong enough not to retrench staff,” one said.
The stress in the banking sector, with the prospective job losses, will be compounded by massive retrenchment in the civil service at the Federal and state levels, one source predicted. Our source inside the Presidency revealed that Mr. Jonathan plans to follow former President Olusegun Obasanjo’s style by removing fuel subsidies as one of his first economic acts. “The truth is that it’s a must that fuel subsidy has to go because the money is not there to continue [paying for] them,” he said.
As part of an arrangement to receive slush funds from oil marketers, Mr. Jonathan and Ms. Alison-Madueke allowed numerous marketers to make fraudulent claims and get paid for importation they never made. That criminal collusion has put Nigeria in a situation where the oil marketers are being owed N450 billion. “Nigeria will have to deal with this and other debts from fraudulently inflated invoices once the elections are over,” one banker said.
The scam also helped create a recent fuel scarcity in the country. As the fuel situation threatened to become a politically costly crisis, Mr. Jonathan asked the oil marketers to offload fuel they had been “round-tripping” in order to collect unearned subsidy payments.
Bankers agreed that the government would find it extremely difficult to pay that debt after the election without rolling back or eliminating subsidies altogether. In recent months, oil marketers as well as operators of the privatized power sector received massive financial handouts from the Jonathan administration. In turn, they donated billions of naira to Mr. Jonathan’s re-election campaign.
President Jonathan has gone on a dollar-spraying spree since the general elections were postponed by six weeks. Our sources disclosed that the president had doled out more than $200 million, using generous cash gifts to entice various traditional rulers, politicians and activists, especially those in the southwest and parts of the north, to endorse him.
Several sources said much of the president’s campaign cash is from shady oil deals brokered by Petroleum Minister Diezani Alison-Madueke. The massive theft of Nigeria’s crude oil remains an open scandal, and one of the richest sources of funds for the campaigns. Last September, Al Jazeera reported that the theft of Nigeria’s crude oil was at its highest rate in years, adding that several hundred thousand barrels of crude are stolen each day.
The continuing crisis of crude oil thefts has persisted despite the Jonathan administration’s security contract to Global West Specialist Agency, a company owned by Government Ekpemukpolo (popularly called Tompolo). The contract to Mr. Tompolo’s company was for the supply of 20 patrol vessels to enable Nigeria’s military authorities to better secure the coastline and stem oil theft. Mr. Tompolo’s firm was also engaged as a consultant to prevent crude oil heists.
The latest rating firm of Standard & Poors said that the Nigerian economy faced a clear and present danger. Nigeria’s external reserves have been significantly depleted in the past year, said a banker, adding that many state governments were already looking for loans to pay workers’ salaries.