ALISON-MADUEKE: On Corruption, Figures Bandied By Opposition Do Not Exist
On Kerosene Subsidy
THERE was a Presidential directive to withdraw subsidy on kerosene. It is possible that the then Minister of Petroleum must have gone to discuss it with the President and was perhaps able to convince him on the need to stay action on the directive. I assume that may have been what happened, but he overlooked regularising in terms of getting him to rescind the order. So, if anybody flouted the Presidential order, then it must have been the Minister of Petroleum. But since the directive was not gazetted and was not also announced, it was not a law. It was mainly a directive on paper because there are procedures a directive must follow to become a law and become implementable. I don’t know why people keep referring to this. But anyway, another president came and appointed his own cabinet and moved on.
Now, because of the confusion created by this situation, marketers, who prior to that time were bringing in kerosene, pulled back. The reason was that, if they brought in kerosene at the international landing cost and sold at our subsidised rate and didn’t get paid the difference, they would go bankrupt. So, there was huge confusion and I think it was then that the NNPC had to step in and started supplying. That was before I became Minister of Petroleum. This was where the problem of deduction of subsidy claims at source started.
The issue of deduction at source has also been severally argued as to whether NNPC has the right or not to cover all those particular expenses from crude oil sales proceeds. That was the situation with subsidy then. When we came out in January 2012 to try to regularise the system by removing subsidy on petroleum products, of course, we all knew what happened.
Efforts to Rid the Subsidy System of Corruption
So, based on the foregoing, subsidy on petroleum products continued up to this point. It is a sore point because, in all honesty, just like PMS, it is a very difficult issue to handle. It becomes even more difficult when revenues are falling because of the price of the barrel. It is very difficult to pay vast amounts on subsidy, which we don’t believe, is getting to the actual users, the bottom line users of the PMS, but which is instead making middlemen fat. But we wanted to remove the subsidy. We wanted to deregulate, too because we discovered there was corruption in the subsidy system, which had gone so bad that we were not able to move products seamlessly from one point to another.
There was arbitrary price increase in some areas and products were selling above the regulated price, thereby making nonsense of the subsidy scheme. Then again, there was a terrible incidence of round tripping. It got to the point that I even had to get the permission of Mr. President to invite the EFCC to come and look at the books and help us figure out what was happening, because the level of PMS import we were getting clearly showed that something was wrong. That was in 2011. At some point, the round tripping was extended to kerosene, which was being diverted and sold as aviation fuel. Marketers would take their allotment of kerosene and sell it as aviation fuel, which is more expensive. The kerosene that is imported into Nigeria is of the same specification as aviation fuel. That is why it is called Dual Purpose Kerosene (DPK). It was not profitable to import what is really the base level of normal Household Kerosene (HHK). These were some of the problems we had.
As I said earlier, we had written to the EFCC and didn’t get any response, which meant no solution. In November 2011, even before we tried deregulating, I removed 92 marketers with one stroke of the pen from the PPPRA books. These were throughput marketers, who didn’t have tank farms, as well as any real investment in the sector. We took this action because the level of investment in tank farm is so huge that if you can do it, you won’t want to get involved in any shady deal. Besides, such investment entitles you to carry out throughput for other marketers and they will pay you for it through the law that is acceptable. That law wasn’t made in our time, it was there before we came in. So, it was clear to us that the problem of round tripping was coming from those that didn’t have hard investments in the sector.
That was when I brought in Reginald Stanley to head the PPPRA. His predecessor didn’t seem to have helped in sorting out the issue at all, because it looked like it was getting worse. I asked Stanley to try and reform the petrol importation and subsidy system to bring the subsidy bill down. I told him that after stabilising things, we could bring back some of the throughput marketers, i.e. those that pass certain expectations, because it is in our laws, as throughput marketing in itself is not illegal. So, I signed the 92 marketers off in one day. It was after I dropped them that the level of subsidy dropped significantly.
Strides in Local Content
We have been able to domicile some of the jobs in the sector that used to be carried out overseas within the country, thereby creating jobs for many Nigerian youths. Manufacturing of small parts for the oil and gas sector is now being done in the country, which was not the case before now. It is not just the manufacturing, but the quality of the goods is such that we now have prospects of producing for other multinationals outside the country. This has helped to create a lot of direct jobs, as well as hundreds of thousands of indirect jobs. It was a thing of joy for me when I visited places like the burnt down Okrika Jetty a couple of years ago to commission the products loading arm that was rebuilt only to discover that companies such as Lee Engineering, which did the construction of the project from A to Z was 100 percent Nigerian, as all the engineers are Nigerians. We are very proud that this sort of thing could be happening at this point in time.
These are major steps in the oil and gas sector, because it is highly capital intensive and technological. We have been able to achieve this because we understand that until you get the industry down so that it can touch what I consider the real economy, until you begin to commercialise it, oil and gas always seem to be up there, a sort of mysterious sector for the extremely wealthy. The multinationals have access to billions of dollars, but we are beginning to pull it down so that ordinary people, who can gather the financial wherewithal, can also be players in the sector. Not all areas are highly capital-intensive, there are many other that are quite minor in terms of capital outlay. So, many people are coming in now. And this was the intent from the onset: to demystify this sector. On the Nigerian content side, I think we have done very well and we will continue to try to do even better.
Gas Infrastructure Development
During this period too, we started looking at what we could do to develop our gas resources. We have to pull outgas issues from the PIB and specific gas projects from the Gas Master Plan to implement to fast track gas to power, gas to industry and, of course, to ensure that value is added to the economy.
On Alleged N10bn Expenditure on Jet Hire
Since NNPC came into being, it has always owned corporate jets. The reason for this is simple: if you have trillions of naira worth of assets across the country that you oversee, and you have oversight over major multinationals, which are in joint venture operations with you, and all those multinationals that you oversee have their own jets, how are you supposed to oversight these assets and those partnerships responsibilities? As a regulator, are you supposed to borrow jets from the companies that you oversight for trips to inspect their facilities? As we speak, NNPC should actually own at least two major long distance helicopters for offshore activities. I’m ashamed to say that if I have to go on an inspection of Floating Production Storage and Offloading (FPSO) facility, I have to borrow a ride from ExxonMobil or Total or Agip. I don’t think that kind of thing happens anywhere in the world, not even in small Angola!
When I became Minister of Petroleum Resources, NNPC did not have any jet on ground because the one it had was about 30 years old and I recall that while leaving, Ajumogobia had advised that I should not for my life enter that jet, as he almost died, when the thing dropped out of the air one day. So, when I came, I was informed that another jet was just acquired, which for some reasons was parked somewhere abroad. When they eventually brought it to Nigeria, it ended up in Kaduna in Kasim Shetima’s airline hanger. I didn’t even know him then. But one day, he came to meet me and suggested very strongly that I should ask NNPC to sell that jet, because it had been idle for too long and it may have developed a lot of problems. He also raised issues about that particular model of aircraft and that it has been known to have certain issues.
So, I called the GMD and reiterated the issues and suggested that he sold the jet. NNPC later came with lots of reasons why they wouldn’t sell. I said well, it’s their property and I didn’t bother about it again. Honestly, there were problems with that plane in terms of maintenance. That was how we came about leasing this other jet. We had looked at our books, done our homework and discovered that Shell had sold all its planes. Shell actually had a fleet when I was there. They even built a private terminal in Lagos airport and rebuilt the entire terminal in Port-Harcourt Air force Base, which they were also using. But they sold all their planes because they saw that in this age and time, unless you are in the aviation business, it was actually cheaper and more cost effective to lease.
So, I suggested that we leased first because I couldn’t even go to the Federal Executive Council for an approval of $30m to buy a jet. So, based on what we considered tradition in the industry all over the world now, we went for a lease arrangement with the same company that Shell and other multinationals were using.
Out of the blues, however, some people came up with the allegation and made it look like I was the first person in the history of petroleum industry in Nigeria or NNPC to start using a jet for operations. I don’t even know how the N10bn came about! With N10bn, one can buy two brand new Challenger jets and even add a third one (second class). I don’t know how they came about such outrageous figures! But like I said before, it is all calculated to make me look bad.
When the issue came up, I didn’t talk. The lawyers advised that I shouldn’t talk and it was only after the case had been heard by the court, which was not too long ago, that I could actually say something and address the issue.
Pipeline Vandalism, Sabotage and Protection
There was actually a pipeline protection contract with some militants. When the contract ended, which was almost two years ago, we did not renew it. Even the militants abused me for refusing to renew it. And I did that because they did not live up to expectation, they did not meet the terms of the contract. We have to review it. Actually, we have even extended it to include Ondo and Lagos because the pipelines run through these areas and they were not included in the beginning. But it has taken sometime, because the people we are dealing with should be handled with care.
I believe the groups that we have put on the table are such that will actually deliver. But we are still having a look at it because we cannot afford to get it wrong. We want to be sure that we are engaging the right groups at the various communities. So, we are still on it, I have not renewed the pipeline protection contract with any group. But apart from that, the NSA is working on an electronic pipeline surveillance project. It has not been discussed in much detail with us because it is a security issue, but I was fully aware at the time it was being put together. It is my expectation that they will be deploying those things anytime from now.
Allegations of Missing Oil Revenues and PwC Audit Report
When the former CBN Governor came up with the allegation that about $49.8bn of crude oil sales proceeds was not remitted by NNPC, we all swung into action with all the relevant agencies to reconcile the figures. When we reconciled the figures down to $10.8bn and some agencies were having a different figure of $12bn, we insisted that the reconciliation should continue because there was still an anomaly. We insisted on getting down to the bottom of the matter to find out what was really amiss.
I recall that I called the former CBN governor on a particular day, while abroad for a meeting and we met there. I said, “Governor, I think you and I really need to sit down and thrash out this matter. Let us drill down to find out if there was really a gap and what could be the source”. He said he was very upset and that NNPC wanted to finish his reputation and that all sorts of things were being written about him at home and abroad. I told him I didn’t think he should blame NNPC and that whatever his feelings, he should let us finish the reconciliation and get to the bottom of things. He said okay. We had arranged to meet after my return to Nigeria, which was in two days’ time. I came back only to hear that earlier that day, he had submitted another report to the National Assembly saying $20bn was the actual amount missing. At that point, I said to my people, “We have a problem here. There is clearly a hostile situation in place.”
A few days later, we appeared before the Senator Makarfi Committee to defend ourselves against the fresh allegation of unremitted $20bn.
We put our papers forward, the committee then went through all the evidence supplied by all the relevant agencies and found that there was no missing $20bn. And despite the fact that the committee declared that no money was missing, the opposition kept insisting that $20bn was missing and was calling us names. That was how external auditors were invited to look into the whole issue, a situation I believe was a very sad indictment on the distinguished Senate of the Federal Republic of Nigeria. Because, I don’t think that if a Senate Committee in America makes a finding, it will be disparaged in that manner.
What PwC has come out with is that NPDC should remit the balance of the book value of the assets transferred to it, which stands at $1.48bn to the Federation Account. Under normal circumstances, when you transfer oil blocks to NNPC or its subsidiary as a government-owned corporation, they are not supposed to pay you. Rather, they are to send all revenues above operating cost to the Federation Account. But in this case, DPR wanted to apply a different method and it quoted what it considered the book value of those assets for NPDC to pay. The implication is that if NNPC pays the book value for these assets, they become its own, and then they can run it competitively just like independent multinationals do.
There was now reconciliation problem between NNPC and DPR because the latter quoted a certain amount for the assets value while the former said that was not actually the book value of the assets. But they still paid the first two tranches, when the reconciliation was transacted in 2012.
The audit came into play at that point in time. What PwC has recommended is that to follow due process that book value is to be paid to the Federation Account as DPR mandated. But the truth is that as far as NNPC is concerned, the book value of the assets as quoted by the DPR is still under contention. That is why NNPC insisted that it was not indicted in the PwC audit report. Whatever the case, and however they do it, NNPC will pay the amount, but that does not mean it was indicted.