The report of the Nuhu Ribadu-led Petroleum Revenue Special Task Force (PRSTF) is meant to change how the country's cash-cow is managed, but because of vested interests, it is being discredited. An insider account here gives meaning to the plot.
The Nigerian National Petroleum Corporation (NNPC) is the producer, seller and collector of proceeds from sales. Then, it keeps the money, pays itself whatever it wants and gives the remainder to government. This agency regulates International Oil Companies (IOCs), but at the same time it is operating in partnership with them, though it has no human and technical capacity to check the activities of the IOCs. For the sale of crude oil produced daily, put at about 2.7 million barrels, it uses about 40 traders, most of whom are associated with top government functionaries. Nigeria is the only Organisation of Petroleum Exporting Countries (OPEC) which uses such traders. Other oil producing countries sell their crude oil directly to buyers. Though the country's three refineries operate at 20 per cent of its capacity, NNPC receives 440,000 barrels of crude oil per day for refining. Because it cannot be done locally, this quantity is freighted to refineries in neighbouring countries. They are refined at a high cost and imported into the country.
Over the years the above scenario has played out in the oil industry - to the benefit of top officials in the industry, who, pretending to be helpless, feed fat on the drops from the loopholes. Government officials find the amoebic situation convenient because it makes the NNPC subservient as a slush fund from where unbudgeted expenditure can be taken care of. Government officials relish in the easy cash available. Then, enter the Ribadu-headed Petroleum Revenue Special Task Force. It calls for the NNPC to be unbundled; insists on raising the capacity of NNPC to supervise IOCs; wants oil traders (who are probably foot-soldiers of some top officials) to be sacked; calls for better collection of royalty and taxes from IOCs; recommends that NNPC should not make direct deductions from proceeds of oil sales; and calls for proper book-keeping and transparency in financial management in the petroleum sector. The natural response would be 'kill that report.' And that is what government will likely do when the White Paper on the Ribadu committee report is released.
CONTROVERSY OVER USE OF TRADERS
In the past some of the major international oil firms involved in the trading included Glencore, Trafigura, Arcadia and Addax. The local ones included Sahara Energy Ltd., Oando Plc, Aiteo Ontario Petroleum and Taleveras. However, under the current arrangement, three-quarters of the country's daily oil production, put at about 1.6 million barrels per day, will be given to some 40 traders to sell, among them 21 Nigerian firms. The increase in the number of buyers, though being done under the Nigeria Content Act of 2010, is viewed with suspicion. In 2008, there were 28 traders. In 2009, it was reduced to 24. In 2010, there were 38 of them, and in 2011, they increased to over 40. This increase is akin to what has been done in the downstream sector of the industry, a situation in which many companies that did not have the facilities to import refined petroleum products were given licenses, leading to massive fraud.
In an advertorial last week, NNPC didn't deny the increase of the number of middlemen in the sale of crude oil. Rather, it justified it thus: "The use of traders in the sale of crude oil is an internationally accepted practice which even the IOCs adopt. NNPC does not sell 100% of its crude oil through traders. Indeed, NNPC maintains a mixed-bag of trading companies to facilitate wider market circulation and penetration into new (captive-niche) markets. These companies include International Traders, Indigenous Traders, International Refining Companies and NNPC Subsidiary and International Trading Joint Ventures. All sales of Nigerian crude oil are based on the same general terms and conditions and all payments are made through Irrevocable Letters of Credit (ILCs) prior to liftings. It is pertinent to emphasise that the NNPC sells all crude oil under the general terms and conditions for sale of Nigerian crude oil."
The spirit of the Ribadu report suggested that even if this practice is legal, it should be halted because, as Ribadu told President Jonathan "Nigeria is the only country in the world that uses traders to sell its crude oil. The only other country that is doing so is Congo Brazzaville. We should not be comfortable in this neigbourhood. This practice is a rip off and therefore should be stopped."
HOW 'EXPLOSIVE' CAVEAT ENTERED THE REPORT
At the presentation of the report to President Goodluck Jonathan on Friday, November 2, 2012, Mr Steve Oronsaye claimed the committee's assignment was not concluded, hence the report could not be implemented. After that saga, Dr Doyin Okupe, one of President Jonathan's spokesmen, took the project further by claiming that the committee did a shoddy job. He made reference to a caveat, which said: "Due to time frame of the assignment, some of the data used could not be independently verified and the task force recommends that the government should conduct such necessary verifications and reconciliation."
Why didn't the task force complete its assignment? A member of the panel told our report that the caveat was included in the report 24 hours to its submission to the president in order to accommodate a suggestion by Mr Bernard Otti, a member of the committee, who had joined the NNPC as a Director (Finance). The insider explained it thus: "We completed our job on July 25, 2012 and each member was given the final draft to study and recommend changes. Oronsaye, who had not been attending the meetings regularly, asked for five working days to study the report. We gave him two weeks. We gave a copy to the Minister of Petroleum, who promised to study the report and revert to us for further discussions on the issues. Two months after, we didn't hear from her. There was no word from the Ministry, until the report was leaked to the press."
According to him, after newspapers began to run stories from the draft of the report, the NNPC wrote a letter to the task force members, saying the President wanted the report submitted on Friday, November 2, and that on Thursday, November 1, members should reconvene and put final touches to the report for presentation.
"At that meeting on that Thursday, the draft was re-arranged, and Bernard Otti told the panel that the report was too hard on the NNPC and that it should be toned-down. He then suggested that we include that clause that says the data was not independently verified, and that government could verify them. What data did we refer to? They were documents from the NNPC, the CBN, the Federal Ministry of Finance and the Federal Inland Revenue Service (FIRS). These agencies had representatives on the task force, so we didn't need to go back to them to cross-check every item. To do so would take over one year. We didn't know why he demanded for that clause to be included, but because we felt the agencies cannot dispute the figures they provided, we agreed to include it. We didn't foresee how it could compromise our report. Now, it's being misused."
The task force member dismissed insinuations that the committee didn't have the expertise to do a thorough job, arguing that "We had experts from the KPMG, the Accountant General of the Federation's office, retired directors of the Central Bank of Nigeria, Senior Advocates of Nigeria (SAN), among 26 members of the task force. What other expertise did we lack? I think government was shocked at what we discovered and the far-reaching recommendations, hence it sought a caveat which some persons have capitalised upon to discredit the report."
As it were, in its advertorial, the NNPC repeatedly referred to this caveat to fault the Ribadu Report. For instance, faulting the committee's observation that NNPC made direct subsidy deductions before making payments to government, NNPC said, "It is indeed unfortunate that a Task Force saddled with an investigative responsibility did not take the pains to ascertain the correct process for determining NNPC subsidy payments. For purposes of clarity we hereby state that the disbursement of subsidy payments and Joint Venture cash calls from the Federation Account is provided for under the Appropriation Act. In practice, subsidy payments due to NNPC are not based on cash remittances but by way of credit notes to NNPC against domestic crude oil purchases by NNPC. The values of the subsidy payment certificates issued to NNPC by PPPRA are deducted from the cost of domestic crude oil purchases by NNPC. NNPC is therefore within its rights to claim the credits due to it for the said subsidy payments..."
ORONSAYE ON THE TASK FORCE
Our reporter gathered that Chief Oronsaye was not actively involved in the business of the panel, but he was tolerated because of his involvement in other government committees. But his challenge to the panel before President Jonathan came as a shock to members of the committee. The insider revealed to Sunday Trust that: "Oronsaye was not available until towards the end of the task force's work. He was not there during the inauguration; he was not there when we designed our rule of engagement; he was not there during the hearing from stakeholders. We invited the NNPC, CBN, Ministry of Finance, FIRS, International Oil Companies (IOCs) to give us data and explain issues raised. All of them came, except the NLNG, which refused to come after three invitations. He was not available most of the time. But he was given the treatment which all committee members received. The only task force member who refused to take any allowance throughout the sitting was Nuhu Ribadu. He didn't take a kobo. We were shocked that Oronsaye came up to discredit our report."
In spite of this allegation, there were reports at the weekend that Oronsaye attended four meetings. A self-acclaimed associate of Oronsaye, Mr Ademola Ogunkunle, last Thursday appeared on Channels Television to claim that he was privy to the minutes of the 26-man committee and that Mr Oronsaye's name appeared on the attendance register on four of the panel's meeting. Though other online publications have carried a similar report from minutes of the task force's meetings, Mr Oronsaye has not come out to challenge the impression that he was not always available.
Malam Ribadu, while presenting the report to President Jonathan, raised seven recommendations. He said, even without the passage of the Petroleum Industry Bill (PIB) by the National Assembly, the adoption of the recommendations would help the industry: They include the following:
1) "To increase government revenue from the industry, the Federal Government needs to put in place a coherent financing solution that allows government fund its obligations under the JV contracts. Funding government obligations will unlock additional capital from its JV partners, which will over time increase government's revenue from the proportionate additional barrels of crude oil produced, royalties on the entire production and taxes on taxable income.
2) "The FGN should take action and enforce collections of outstanding royalties amounting to billions of dollars from some of the oil companies operating in Nigeria. Mr President, we want these companies to do business in our country but we also want them to give us our entitlements. They make a lot of profit here and they go and Invest in other countries. The least they can do is to pay us the royalties, petroleum tax and penalties they owe.
3) "Nigeria is the only country in the world that uses traders to sell its crude oil. The only other country that is doing so is Congo Brazzaville. We should not be comfortable in this neigbourhood. This practise is a rip off and therefore should be stopped.
4) "Increasing crude oil theft is a national tragedy with grave consequences and there is need for urgent action. That and general insecurity in the Niger Delta is denying us Foreign Direct Investment (FDI) in the industry. We have given some recommendations including Finger printing of Nigeria's crude oil for us to be able to track stolen products.
5) "DPR needs to be appropriately positioned to regulate the petroleum industry and collect government revenue due from royalties for oil and gas production, gas flare penalties. DPR should be empowered to ensure the commencement of the fiscalisation of govt revenue from production and not sales as is the current practice
6) "The Task force has recommended a comprehensive framework for automation of the industry for transparency and accountability and also fighting corruption at all levels in the industry. With corruption, nothing can be achieved. From my own experience, I want to tell you that if you are embarking on reforms, it must be with integrity otherwise it will fail.
7) "We also recommend the establishment of an independent office for the transformation of the industry for a fixed term with a specific mandate to implement the reforms accepted by the govt based on the work of the various committees and task forces looking at the sector as well as other earlier reform initiatives in varying stages of implementation."
Can the report be implemented? As Professor Chinue Achebe would put it, government is the one holding the yam and the knife. It can decide to do what pleases it.