Last week was eventful for the Nigerian oil and gas sector. The NNPC got a new GMD with superb professional credentials and will be the first outsider GMD after a succession of seven career NNPC men (Kupolokun, Yar’adua, Barkindo, Ladan, Oniwon, Yakubu & Dawha). Timed perfectly, maybe with insider knowledge, the Natural Resource Governance Institute (NRGI) released a 163-page report titled ‘Inside NNPC’s Oil Sales’. The publication confirms what Nigerians know or suspect about the historic mis-management of the oil and gas sector and makes recommendations to ‘stop the bleeding’ and ‘cure the patient’.
The current state of Nigeria’s finances, dependent on oil sector revenue and NNPC’s efficiency, means that in line with APC’s anti corruption promise there are great expectations for a deep spring-cleaning and fundamental structural changes to NNPC’s operations. It is not clear though that a technocrat at the helm of affairs is, on it’s own, enough because the NNPC has not lacked technical expertise. Since Marinho in 1977 through to Dawha in 2014, engineers, geologists, physicists and one lawyer have served as head of the corporation, some with masters and doctorate degrees and stints in some of the best international oil companies.
The issue is: what is the brief for this new broom at NNPC ?
The question is pertinent because self-centered provisions aside, in the struggle to pass a petroleum industry bill, Allison-Madueke faced criticism from some quarters for working surreptitiously to uphold her ‘mother board’ Shell. It is clear that there are certain provisions that the international oil companies would rather operate without. With clear terms of reference for the new GMD it should be easier to deal with such insinuations and put stakeholders on notice on how Nigeria intends to progress on the issue of transparency in the oil and gas sector.
In addition, Nigeria has witnessed people coming in from the outside, presumably to make the needed changes in policy and governance, but who get in and want to keep the ‘too-good-to-be-true’ structures that they have found. When he was the head of the Presidential Task Force on Power, Prof. Bart Nnaji was allegedly a firm proponent of dismantling the power ministry as part of the privatization of the power sector. When he became minster of power, he suddenly saw things differently.
The NRGI report repeats a few well-known solutions such as “eliminate fuel subsidy; tackle crude oil theft; and develop and implement a road map for restructuring and commercializing NNPC” and ties 5 key recommendations to some of the most egregious malpractices of the NNPC.
The outcome of these recommendations will be painful. For instance, NNPC will have to budget for its operating expenses and live within the approved limits with no recourse to the discretionary spending which allowed the NNPC to spend funds meant for the federation account on jets and non existent kerosene subsidies. If the practice of using middlemen to sell Nigerian crude to non-refining buyers and other unqualified companies ends, this will have deep implications for the political patronage system which presidents and ruling political parties have relied on for years.
Transparency about what the new management of NNPC is expected to deliver will strengthen the supervisory capacity of the legislature and executive and boost the monitoring capacity of civil society and NEITI. However, the Presidency must ensure the right incentives are in place for the new management to perform the surgery required. One such incentive is to move the NNPC to the general civil service salary scale. It is unconscionable to retain the generous pay and benefit packages which were originally intended to be an incentive for professional performance. If NNPC has been running at a loss for years and cheating the nation of revenue, it is time for the employees to take ownership of the failure. When NNPC starts running like a proper corporation and making profits then benefits may be revisited. It is also not enough to retire or transfer NNPC employees implicated in mismanagement. Starting with the recent revelations which have resulted in billions of dollars in revenue lost, those implicated must be publicly prosecuted and when found guilty, imprisoned.
Despite what is already in the public domain about the rot in the NNPC and the oil sector, reading the report leaves one dazed not for the complexity of the content, but for the sheer thievery that has taken place for years. It is a shame that after 38 years of existence, “the corporation has neither developed its own commercial or operational capacities, nor facilitated the growth of the sector through external investment”.
Accompanying the applause for meritocracy should be hard questions to ensure that it is not business as usual at the NNPC. Only with clear and public deliverables for the new management, including the amendment or enactment of laws regulating the sector will the necessary changes come to pass.