$26bn Contract Scam: A Further Reason To Pass PIB, Privatise NNPC BudgIT, OSIWA

$26bn Contract Scam: A Further Reason To Pass PIB, Privatise NNPC BudgIT, OSIWA

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While the nation awaits the outcome of Friday’s meeting between President Muhammadu Buhari and Minister of State for Petroleum, Dr. Ibe Kachikwu on one hand and Vice President Yemi Osinbajo and Maikanti Baru, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) over allegations of $26bn contracts awarded by the nation’s oil behemoth, Nigeria’s civic tech organisation, raising the standards of transparency, citizen engagement & accountability most especially in public finance, BudgIT Nigeria, restated an earlier call for the National Assembly to speed up the passage of the Petroleum Industry Bill (PIB).
The bill initiated in the administration of former President Olusegun Obasanjo and continued to gather dust on the shelves of the legislators, just as there have been several version, with sometimes conflicting provisions.
The review by Budgit in conjection with the Open Society Initiative for West Africa (OSIWA) in their submission on the contracts, which Kachikwu alleged did not follow due process, is another reason why the NNPC should be privatized and therefore cease to be a parastatal under a ministry, thereby competing with its contemporaries like Petrbas of Brazil, among others.
While the Minister said all NNPC contracts above $20m by law requires board approval, the Bureau of Public Procurement (BPP) stated that such contracts also needs the nod of the Federal Executive Council.
The contracts were listed as including: the $10bn crude lifting contracts; $5bn fuel imports deal through Direct Sales Direct Purchase (DSDP); financing contracts with NNPC partners to the tune of $3bn; the Nigerian Petroleum Development Company (NNPC subsidiary) service contracts to other oil companies valued at between $3bn and $4bn; and the Ajaokuta-Kaduna-Kano contract worth $3bn.
“Under the current arrangement, the NNPC still acts like a parastatal of the Ministry of Petroleum. Crude oil contracts have already been with 32,000 barrels per day allocation given to 39 companies,” BudgIT noted, recalling that contract for the Ajaokuta-Kaduna-Kano has already been awarded to a Chinese firm.
BudgIT and OSIWA further noted the plan by NASS to investigate allegations such as the allocation of 90,000 barrels per day to Duke Oil, a wholly owned subsidiary of the NNPC founded in 1989, which is based in Panama and engaged in direct oil trading activities in the spot.
With all of these revelations and given the recent history of the corporation, BudgIT wonders when the PIB would come into full effect and the NNPC stops being an appendage of government and whether its perception as a corrupt entity ever go away till it is privatized.
A joint report published in December 2016, by Nigeria Extractive Industry Transparency Initiative (NEITI) and BudgIT reiterated the need for the NNPC to intensify work on production of its 2015 audited annual report, 12 months already into another year.
The report titled: Review of NNPC’s monthly financial and operation reports reminded that this is a requirement of the corporation’s enabling Act.
“We also observe that as at November, this Annual Report is yet to be published,”
In the Draft National Oil Policy 2016, released alongside the Draft National Policy on Gas, three sectors in Nigeria’s economy – power, transportation, and industries – will be the key drivers of its new policy on gas.
According to the draft oil policy, a newly formed corporation could sell stakes so long as the government shareholder retains effective control and ownership, just as the NNPC becomes more as a private entity with less of official bureaucracies.
The draft oil policy says: “The NNPC will be made autonomous from the state, it will relinquish all its policy making and regulatory activities, and it will be treated on an equal basis with private sector operators for projects.
“NNPC will also be restructured into five autonomous profit centre subsidiaries so that the value of separate activities can be realised and operational efficiencies can be introduced,” it added.
The NEITI-BudgIT report once more also challenged the NNPC to collaborate with International Oil Companies to undertake “Value–For-Money Audit on all the Federation’s Joint Ventures with a view to (ensure) business process improvement on projects execution.

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