The Nigerian National Petroleum Corporation inquiries (1)

A RECENT inquiry into NNPC made the following findings: The corporation as structured is extensive, and its control far beyond the normal span of management control that would be expected from the existing management staff.

The NNPC suffers from the absence of supervisory staff at all levels, i.e. people who know the job through experience and have the ability to guide and control other people at their work.

The Finance and Accounts Department has not been able to keep pace with the sudden expansion in its expected support services as a result of the added responsibilities as a major integrated oil company. It lacked a planned base of proper accounting systems and procedures and its staff were short in quality and quantity.

Shell Petroleum Development Company, Mobil and other companies have not signed the agreements for their participation arrangement with the NNPC.

In several cases, the financial consideration for NNPC’s participation in Joint Venture interests with producing companies, was paid before the staff of the NNPC were sent in to evaluate the assets which were the substance of the considerations and payments.

The NNPC does not have stipulated accounting policies and reporting methods for the use of Joint Venture partners in order to ensure uniformity of treatment of items and transactions and standardised reporting format which should facilitate comparison of the activities of the various operating parties.

The Accounts Department only prepares invoices for the sales of crude oil as and when advised by the Crude Oil marketing section of the Commercial Department. With the system as it is now, the accounts department cannot be in possession of any sales information that the Commercial Department may not wish to pass to it.

The NNPC was unable to collect 182,952,104 barrels of its programmed share of equity crude oil expected to be produced by Shell, Mobil and Exxon, because from the operators’ viewpoint, the fault for not producing this quantity was NNPC’s.

There is no independent system in existence at present for collaborating the figures of crude oil produced; neither at the NNPC nor at the Federal Ministry of Finance, or anywhere else.

The report recommended that the NNPC should as a matter of urgency develop a uniform format for collecting information from all operators producing crude oil for it. A petroleum Advisory Board should be established to create a forum where matters affecting the industry could be aired and considered in full and the right answers crystallised. Government should address itself urgently to the impending depression in the crude oil market. Government should direct all concerned to work intensively to determine the life of the Nigerian crude oil reserves.

The report noted the several weaknesses in the structure and management of the NNPC which became glaringly evident from the welter of evidence presented before the tribunal during its public hearing, its own on the spot investigations at the various locations, and the examinations available in the corporation. The bulk of these weaknesses relates specifically to the management of the procurement and disposal of crude oil and the rest would apply generally to the corporation.

There is no evidence to show that serious attempts have been made to evolve a management style and structure that would run all the arms of the corporation efficiently and profitably with an effective co-ordination and control at the top.
The NNPC has no detailed comprehensive assessment of its operating strategy for accomplishing the general duties set out for it in the Decree No. 33 of 1977. The day-to-day running of the corporation has thus been directed and controlled at the top on an ad hoc basis.

The quality and quantity of staff in the various departments in the corporation leave much to be desired.

In addition, the management has become so politicised that the cordiality and mutual respect that should exist among the incumbents in top management of such a vital organisation are either completely absent or have worn terribly thin.
Further, the management as now constituted, does not appear fully alive to the functional contributions of a department like the Finance and Accounts Division could make to the corporation’s existence. Certainty until the department is fully revamped in all aspects, it cannot satisfy fully the requirements for auditability and general accountability as provided in Decree No.33 of 1977.

Financial management information is not prepared for management, for use in appraising the state affairs of the corporation from time to time, planning, controlling and directing the corporation. Perhaps, this is deliberate to enhance the opaqueness of an endemically corrupt system.

There is complete absence of corporate strategic planning in the corporation. Like the other Joint Venture arrangements, the management of the NNPC has not addressed itself to plans and procedures for controlling and ensuring full protection of its interests in the ventures. Even simple Total Accounts for controlling these arrangements do not exist in the NNPC. Such accounts will give management ideas of how well the operators are progressing. In the case of the participation agreement with Ashland in 1973, it took the NNPC years before a team from the corporation was sent to look at the records and accounts in the company. This is typical.

The Tribunal compared NNPC Commercial Department’s records and those of the Inspectorate Department – the production figures maintained by the Inspectorate Department with those kept and utilised in the Commercial Department of the NNPC and noted discrepancies as hereunder: for four years.
Year Inspectorate(Barrels) Commercial(Barrels) Difference(Barrels)
1 755,386,201 755,936,596 449,605
2 766,055,370 765,390,108 665,262
3 696,327,190 696,044,566 282,624
4 839,706,755 838,675,699 031,056

•To be continued tomorrow.
•Ambassador (Dr.) Patrick Dele Cole (OFR) is a Consultant to The Guardian Editorial Board.