5 July 2012

Nigeria: NNPC - the Huddles Before Yakubu

Last week, there was change of guard at the Nigerian National Petroleum Corporation (NNPC) where Andrew Yakubu took over from Austen Oniwon as Group Managing Director while some other top executives also gave way for new ones.

Just as he assumed office with his team, Engr. Yakubu is bound to confront many impurities that pose great challenges for him in his tenure.

Among the glaring obstacles for Yakubu is the financial crunch that faces the corporation. Sources said even the salaries of June this year were delayed and proposal to upgrade the remuneration of workers could not scale through due poor finances.

The company, over the last four years, was not finding it easy to meet its financial obligations with its stakeholders, even though its past leaders pretended that everything was well.

Two years ago, former minister of state for finance, Remi Babalola exposed the insolvency of the corporation to the extent that it couldn't meet its obligations.

Babalola said: "NNPC is insolvent as (it's) current liabilities exceed current assets, ...NNPC is incapable of repaying the N450 billion owed to the Federation Account unless it is reimbursed the N1.156 trillion (in subsidies) it has requested from the Federal Ministry of Finance."

The corporation and the federal government through the Minister of Information, Labaran Maku, vehemently disowned Babalola's statement. In fact, that statement cost him his seat as minister of finance.

After Babalola's revelations, the NNPC committed itself to settling the Federation Account Allocation Committee (FAAC) with about N8 billion monthly, Few months after, the truth began to emerge from the mouth of the just retired GMD, Oniwon. "We have to suspend increase in remuneration. The account of the organisation is in the negative; corporate failure is imminent unless urgent transformation is carried out," Oniwon told a gathering in Abuja.

There will be no smoke without fire. The tight measures of financial prudence by the Finance Minister and Coordinating Minister of the Economy, Ngozi Okonjo-Iweala, have really compounded NNPC's festering wound. NNPC is no longer manipulating with figures to the federation account as every kobo counts.

Also, several audit reports conducted by Nigerian Extractive Industry Transparency Initiative (NEITI), the KPMG and finance ministry on the payment of subsidy have, together with the National Assembly's probes, blocked some of the leakages where NNPC used to finance unexpected expenditures.

Another challenge Yakubu will face is that the corporation has found it difficult to increase its traditional 80,000 barrels per day (bpd) crude oil production through the Nigerian Petroleum Development Corporation. The corporation projected to hit 250,000 bpd benchmark by 2015, but almost two years now the projection still remain on the papers. Thanks to government for adding some oil wells to the corporation recently. The NPDC is now the cash cow of NNPC but with enormous burden on it, the crude oil revenue will not take Yakubu's NNPC far, if the oil production continues to be where it is today.

Also a challenge that will make Yakubu's seat hotter is the crude oil theft which mostly affected that the domestic crude allocations to NNPC. In recent times, the oil thieves have increased their activities along the Delta creeks, siphoning crude oil meant for the refineries. Former GMDs have made several efforts and contacts to end the menace but to no avail. Oil theft renders NNPC's refineries useless for years and eat deeply into its budgets. Yakubu, a former oil refiner, will not find it funny, if the trend continues under his regime.

At the moment, NNPC doesn't have enough capital to fund its joint venture operations with the international oil companies, the corporation is just serving as 'gateman' in the operations rather than a partner. Unless the new Petroleum Industry Bill (PIB) is passed into law and NNPC declared autonomous, it will be difficult for Yakubu's transformation agenda to scale through.

Another big challenge for Yakubu is what has now became a norm in the industry, the changes in management. It is now a reoccurring event at the NNPC. Within the last six years, the corporation has witnessed six GMDs. Yakubu may not have the courage to step on toes to implement whatever his plans are that will change the corporation for better because of the fear of losing his seat, but Mr. Fidel Pepple, spokesperson of NNPC while speaking for Engr. Yakubu, said that under his watch as GMD the NNPC will assiduously seek to reinforce the tenets of accountability and transparency in line with the transformation agenda of the Federal Government.

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