New NNPC, commercialisation and agitation for resource control

If the transition of the Nigerian National Petroleum Corporation (NNPC) to the Nigerian National Petroleum Company Limited (NNPC Ltd) will pose difficulty for the states in promptly getting what is due to them from the revenue made from oil, it may stoke fresh agitation for resource control, CHIJIOKE IREMEKA writes.

Some stakeholders are keeping a close watch on how management of the Nigerian National Petroleum Company Limited (NNPC Ltd), formerly Nigerian National Petroleum Corporation (NNPC), will play out especially with regard to sharing of the revenue generated among the three tiers of government without rancour.

A major issue with the new status of the national oil company is that it would no longer be making remittances to the government coffers on monthly basis for the Federation Accounts Allocation Committee (FAAC) to share among the three tiers of government and fulfill other financial obligations to the oil-producing states and communities. The revenue to be shared to the federal, state and local governments monthly would drastically reduce until the company declares profits at the end of its accounting year.

Essentially, the stakeholders, including financial experts, economists, policy strategists and political economists, are pondering on how the monthly revenue sharing would happen under the new status without undermining the financial viability of the federal, states and local governments, some of which are already heavily in debt, and engendering renewed agitation for resource control.

An economist and Coordinator of the Technical Working Group (TWG) of the Financial Sector and Capital Markets on National Development Plans (MTNDP 2021-25), MTNDP (2026-30) and Nigeria Agenda 2050, Dr. Ayo Teriba, said the new status would constitute a major problem as it would henceforth be difficult to treat NNPC as a government parastatal expected to remit all money made to the federation account for sharing.

“You can no longer treat NNPC as a department of government that is expected to remit all the money made to the federation account. It’s now a company of its own and needs to be allowed to live its own life. For the states and local governments to have something to share, they have to wait until the company declares profits at the end of each accounting year, when dividend can be shared. This is where the problem may start from, especially where there is no securitised bonds that could be drawn monthly or quarterly as the case may be,” he quipped.

On the possibility of renewed agitation for resource control since NNPC would no longer remit revenue for sharing, Teriba, who is also the Chief Executive Officer of Economic Associates, said fresh agitation might not be ruled out.

“The government’s share in NNPC is still owned by the Federation Account, as well as the dividends. That can be shared by the states. But the major problem is whether or not the states can wait for one year before they receive dividends from NNPC. The other day, the Minister of Finance said an arrangement could be worked out where dividend could be remitted, may be monthly or quarterly if they agree, but that needs to be seen done than said,” Teriba said.

To him, the major fear about such arrangement is that the NNPC will have to wait till June 2023 to reach the market and be subjected to scrutiny and monitoring, by then, the current government that made this pronouncement would no longer be in office.

“For us in this divide, long dating of the submission of the NNPC to market forces would mean procrastination. This will be happening when a new government would have been in place. We hope that the new government buys into the sentiment of this project.

“Ordinarily, this government has eight years to conclude this transaction but they didn’t do it, leaving it for another administration that may not buy into the project. It’s a major worry really, and this will be the beginning of fresh agitations.”

The transition of the NNPC to a limited liability company has also thrown up fresh issues on the Petroleum Industry Act (PIA), particularly the sections dealing with ownership of the NNPC and taxes.

For instance, under Section 53(3) of the Act, ownership of the new NNPC Ltd is vested in the government, which is defined under Section 318 as the Federal Government of Nigeria, while chapter four that deals with Fiscal Framework provides that a core objective of the Act is to establish a framework that expands the revenue base of the Federal Government and not states or local governments.

The Act also repealed the Petroleum Profits Tax and replaced it with the Nigerian Hydrocarbon Tax (NHT) and Companies Income Tax (CIT). Whereas the NHT would be subject to 13 per cent derivation, the CIT would not.

Before the recent transition of NNPC to a company, governors, including Kayode Fayemi of Ekiti State, who doubles as the Chairman of the Nigeria Governors’ Forum (NGF), had raised the alarm over the dwindling revenue, especially as NNPC “shifted” commitment to the over N4 trillion subsidy vote in the 2022 budget. Thus, the states and local councils have so far survived more with non-oil revenue in the federation account. As NNPC no longer make remittances to the federation account, only remittances from the Nigerian Custom Services and the Federal Inland Revenue Services (FIRS) appear certain.

With almost all the states and local councils struggling to pay salaries and sustain their basic operational expenses, there is worry that the situation may worsen the financial crisis at the state and local council levels, and engender fresh agitation for resource control by the states.

A legal practitioner, Ledum Mitee said the 13 per cent derivation to the oil producing states was under serious threat in the present circumstance.

“I think the unveiling of NNPC Ltd has grave implications for the states, especially the oil-producing states. I think the states and the local councils took their eyes off the ball and they were done for in the passage of the PIB into PIA,” he said.

Mitee, who succeeded the late Ken Saro-Wiwa as President of the Movement for the Survival of Ogoni People (MOSOP), asked states to immediately proceed to the Supreme Court to set aside several offensive portions of the PIA.

The legal practitioner, who said renewed agitation for resource control in the country was emerging, revealed that he’s currently leading a legal suit in that regard, with a possible joint action with the states and the local councils.

A lawyer and former management staff of Shell Nigeria, Madaki Ameh, noted that while Section 44(3) of the 1999 Constitution vests ownership of petroleum resources on the Federal Government, the same constitution provides for sharing of the revenue and makes provisions for 13 per cent derivation.

“For accounting purposes, revenues accruing to the Federal Government from oil and gas activities carried out by the NNPC Ltd will still have to be shared in compliance with the provisions of the constitution, and this would include the NHT and CIT payable by NNPC Ltd and other companies operating in the oil and gas industry,” Ameh said.

He advised the sub-national governments to look inwards and improve their internally generated revenue potential, while calling on the Federal Government to devise ingenious ways to solve the subsidy quagmire, which has become unsustainable in view of the dwindling revenues and increased debt service obligations.

He agreed that the dwindling revenue would negatively impact the ability of states to meet their obligations, and lead to renewed agitations for resource control.

Also, a former President, Chartered Institute of Bankers of Nigeria and professor of Economics, Babcock University, Segun Ajibola, said the prevailing development would affect the financial viability and survival of most states, most of which are currently economically unviable.

“A sizeable portion of inflows to the Federation Account (and by extension FAAC) comes from remittances by NNPC. If FAAC is hampered, many states may not be able to survive financially.

“Most of the states lack the capacity for immediate response to revenue shortfalls that FAAC shocks may engender, at least in the short run. It may be impossible for some states to meet even basic financial obligations such as salaries and overheads, let alone capital expenditure,” Ajibola added.

The Chief Executive Officer, Gabe Fasoto & Co, Gabriel Fasoto, called for amendment to the extant law in a manner that would make the Federal Government to relinquish some solid mineral resources to states to improve on their revenue generation drives.

Fasoto, who is a former Chairman of Council and President of the Chartered Institute of Taxation of Nigeria (CITN), stated that while that would be a long term plan, the Federal Government should become more clearer on the issues surrounding the NNPC transition.

The states generated internal revenue of about N849,12 billion in the first six months of 2021. The budget of Lagos State alone for 2022, which stands at about N1.7 trillion, is double the entire IGR. With this development, only a few states may stay afloat with continuous subsidy payments and no remittance from NNPC.

At a Global Peace Summit held in Abuja about seven months ago, former President Olusegun Obasanjo, in a reaction to claim of ownership of the oil in Niger Delta, said oil, likewise other mineral resources found anywhere in the country, belonged to the country and not the region.

The comment infuriated the Leader of Pan- Niger Delta Forum (PANDEF), who doubles as Chairman, Board of Trustees, Ijaw National Congress (INC), Chief Edwin Clark and the Catholic Archbishop emeritus of Lagos, Cardinal Anthony Olubunmi Okogie, among others, leading to exchange of protest correspondences among them.

Clark, in a protest letter to Obasanjo titled Outburst Against The People of Niger Delta Region, alleged Obasanjo’s hatred for Niger Delta for insisting that “No territory in Nigeria, including the minerals found therein, belongs to the area or location and this remains so until the federation is dissolved.”

Clark’s grouse was that the former President visited him in his residence in Abuja while attending the summit organised by the Global Peace Foundation in Abuja and showed no discontent about the Niger Delta and its people with regard to the struggle for resource control, only for him to embark on verbal outbursts at the summit.

He said Obasanjo’s outburst was a huge disappointment to those present at the meeting as his alleged hatred for the people of Niger Delta who dared to agitate for resource control was obvious, specifically, when he interjected Engr. Wodu and Mr. O’Mac Emakpore, each time they tried to put the interest of the Niger Delta in proper perspective.

Wondering why Obasanjo continued to push for marginalisation of the region, Clark recalled that the agitation for resource control has been on even when it was earlier captured in the 1960 Constitution, questioning why Obasanjo has been consistently working against the Niger Delta.

Explaining some points based on section 140 of the 1960 Constitution, Clark insisted that natural resources found in regions were controlled by the people of the regions at the time.

“As a former military Head of State of Nigeria, and later a democratically elected President, I’m certain Your Excellency knows that the principle of derivation has always been top on the agenda of our national discourse, before and after the country’s independence,” Clark said.

He argued that the late Chief Obafemi Awolowo of the Western region and Sir Ahmadu Bello of the Northern region, were able to develop their regions above the Eastern Region as a result of the practice of the principle of derivation.

“The Eastern Region did not progress like the other two regions. From the benefits of the practice of derivation principle, the Western Region introduced free education, built universities and the first television station in Africa, among other economic and social infrastructure. This include hiring, at the time, an Israeli company, Soleh Bole, to develop roads and other infrastructure,” he argued.

Clark pointed out that the derivative principle continued till the discovery of oil in commercial quantity at Oloibiri in 1956, saying that the sharing formula at the time was 50 per cent of the revenue for the owning state, while 20 per cent and 30 per cent went to the Federal Government and distributable pool, for sharing among the regions, including the contributing region.

“The Cocoa House and the Liberty Stadium, both in Ibadan, the Western House in Lagos and the Oodua group of companies, one of the biggest companies in Nigeria, are solely owned by the Western Region.

“One very disappointing thing that happened in the whole of this was the creation of the Midwest Region, to which I belonged, out of the Western Region. The Western Region bluntly refused to share assets with the Midwest Region on the reason that the Midwest Region did not contribute anything to the Western Region and to its economy.”

He explained that the northern region was well coordinated in the joint ownership of assets compared to South East region, a situation that badly affected them at the time, lamenting that the 36 states of the federation now visit Abuja on monthly basis to share oil revenue to the ruins of the Niger Delta.

But responding to Clark, Obasanjo denied allegation that he (Obasanjo) bore resentment against the people of the Niger Delta, insisting that he had been an advocate of Nigeria’s unity and had never hated the people of the region or any part of the country.

The former President said it was wrong and unconstitutional for Clark or his people to lay claim to crude oil or any mineral resources found in the area.

“No territory in Nigeria, including the minerals found therein, belongs to the area of location and this remains so until the federation is dissolved.

“For me, I have never shown any anger or distraught with the Niger Delta or with any part or region of Nigeria. Rather, I have always picked points on leadership performance or policies and I will continue to do so. My records before, during and after the civil war in Nigeria and Niger Delta are without blemish.

“I have always stood for equity and justice in our federation, and for me, tribe has to be suppressed for the state to emerge. Until the state emerges, Nigeria will not make the desired progress as tribesmen will always sacrifice state for tribe. This has always been my position and it will remain my position until I breathe my last.”

On Clark’s allegation of double standard over resource control in the country’s gold being mined by locals in Zamfara, Obasanjo said: “We stand on the same logic with respect to the criminal mining of gold deposits in Zamfara State today or any other state in Nigeria or any other part of Nigeria.

“You cannot have two sovereign entities within a state, which is what your position of Niger Delta’s ownership claim of the crude oil found in that location amounts to. The territory of Nigeria is indivisible and inclusive of the resources found therein. This is the position of the Nigerian Constitution and international law.

“If there is a threat of violence to any part of Nigeria today, including the Niger Delta, it is the Nigerian Military, backed by any other machinery that can be procured or established at the federal level, that will respond to any such threat.

“In principle and practice, the position I have taken on the location of mineral resources in any part of Nigeria is the legal and constitutional position.”

The former President, however, recalled his proposed position that equity and justice demand that those domiciled in the locations are entitled to more of the material benefits accruing from the crude oil or other minerals.

On December 31, 2021, the Archbishop emeritus of Lagos, Cardinal Anthony Olubunmi Okogie, swiftly joined the argument in a statement titled “Who Owns The Oil?”

Okogie challenged Obasanjo’s view on the ownership of the Niger Delta oil wells, saying “The owner of the land owns whatever is on the land or under the land. To deprive them of that right is to be patently unjust.”

The NNPC
NNPC was established on April 1, 1977 as a merger of the Nigerian National Oil Corporation and the Federal Ministry of Petroleum and Energy Resources. The Nigerian National Petroleum Company Limited (NNPC Ltd) is a profit-generating organisation in Nigeria.

It was formerly a government-owned corporation, but now transformed from a corporation to a limited liability company in July 2022. The NNPC Ltd is the only entity licensed to operate in the country’s petroleum industry in partnership with foreign oil companies to exploit Nigeria’s fossil fuel resources.

By law, it manages the joint venture between the Federal Government and a number of foreign multinational corporations, including Royal Dutch Shell, Agip ExxonMobil, Total Energies, Chevron and Texaco (now merged with Chevron).