Nigeria would have been buoyant enough to finance its 2015 budget of N4.36 trillion and still pay off its external debts of N2.03 trillion if it had not lost more than that amount — $32 billion (N6.4 trillion at N200/$1) — to massive corruption that characterized oil sales by the Nigerian National Petroleum Corporation during the last administration, a new report has said.
An independent investigative analysis by the Natural Resource Governance Institute (NRGI) has revealed that over $32 billion oil revenue was lost to NNPC’s mismanagement of Domestic Crude Allocation (DCA), opaque revenue retention practices and corruption-ridden oil-for-product swap agreements.
The report offered a deep, independent analysis of how NNPC sells its oil, and found that the national oil company’s discretionary spending from domestic crude oil sale revenues has skyrocketed, exceeding $6 billion a year for the 2011 to 2013 period (i.e. over $18 billion in three years).
Also, the in-depth research found no evidence that NNPC, between 2004 and 2014, forwarded to the treasury any revenues from sales of Okono crude with volumes of over 100 million barrels, with an estimated value of $12.3 billion.
In other words, the corporation has provided no public accounting of how it used a decade’s worth of revenues from an entire stream of the country’s oil production.
In the same manner, losses from three provisions in a single, offshore processing agreements (OPAs) contract, estimated at $381 million in one year (or over $1.9 billion between 2010 till date), were identified.
This is aside the fact that NNPC channeled Nigeria’s precious crude — worth $35 billion –to swap deals between 2010 and 2014, the recent offshore processing agreements (OPAs) containing unbalanced terms that did not efficiently serve Nigeria’s needs and interest.
The report, whose executive summary was exclusively made available to PREMIUM TIMES ahead of its public release Tuesday or Wednesday, provided additional insight regarding the monumental corruption characterizing NNPC operations and those of its subsidiaries.
The document argued that NNPC’s approach to oil sales has remained riddled with corruption largely because of its inability to either develop its own commercial or operational capacities, or facilitate the growth of the sector through external investment.
Corroborating the NEITI, PwC and Reconciliation Committee’s assertions about NNPC’s legacy of inefficiency and mismanagement, NRGI researchers submitted that NNPC’s mismanagement of public revenues and its performance failures has persisted due to lack of political will by successive governments to reform the corporation.
The report pointed at the degenerating management of NNPC’s oil sales in recent years—and particularly since 2010.
The problems, it said, stemmed from the rising number of ad hoc, makeshift practices the corporation has introduced to work around its deeper structural problems.
For instance, the corporation entered into a poorly designed oil-for-product swap deals when it could no longer meet the country’s fuel needs.
Similarly, it began unilaterally spending billions of dollars in crude oil revenues each year, rather than transferring them to the treasury, because its actual budgets consistently fail to cover operating expenses.
Some of these makeshift practices began with credible goals, the report said. But over time, their operation became overly discretionary and complex, as political and patronage agendas surpassed the importance of maximizing returns.
The report identified five key areas bordering on the most pressing problems enveloping NNPC oil sales.
Researchers said they arrived at their findings after reviewing published and unpublished official records, together with data from trade publications and secondary literature, and conducted dozens of interviews between 2010 and 2015.
The report made valuable recommendations, which somehow buttressed a recent statement by Kaduna Governor, Nasir El-Rufai, about the need to either scrap the NNPC or reform the oil and gas sector as a whole.
Source: Premium Times