House of Reps orders NNPCL to halt future crude oil mortgage

The House of Representatives has instructed the Nigerian National Petroleum Corporation Limited (NNPCL) to halt any further mortgaging of future crude oil assets until an ongoing forensic audit of its operations is completed.

This directive was issued by the Special Joint Committee of Downstream and Midstream Petroleum Resources, chaired by Hon. Ikenga Ugochinyere. The committee has been mandated to investigate various anomalies hindering the growth of the oil and gas industry, including past forward sales of crude by NNPCL, subsidy scams, PMS racketeering, the alleged importation of adulterated products, and mismanagement within the petroleum sector.

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The committee’s decision follows reports that NNPCL plans to borrow an additional $2 billion in crude oil-backed loans from international creditors. Group Chief Executive Officer of NNPCL, Mele Kyari, reportedly stated that the company is in discussions to raise this credit facility, following revelations that NNPC is struggling to pay a $6 billion backlog to international oil traders due to subsidy removal.

Hon. Ugochinyere urged NNPCL’s management not to undermine the House’s forensic investigation with another fresh loan. He claimed such a move would threaten President Bola Ahmed Tinubu’s directive to ensure an adequate supply of crude oil to local refineries.

He explained that the Special Joint Committee is already examining the impact of past forward sales of crude, allegations of non-remittance of revenue to the Federation account, unhealthy terms in agreements, and the effects of these deals on the availability of crude for local refineries.

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He warned that allowing this new loan would exacerbate existing issues, deprive refineries of feedstock, weaken revenue generation, and lead to wastage of future revenue.

“We gathered you here today on a shocking development and alleged move by the leadership of the Nigerian National Petroleum Company Limited (NNPCL) to mortgage once again our future crude oil assets and revenues for alleged mere administrative purposes,” Ugochinyere stated.

“As Chairmen of the joint investigative Committees on Petroleum Resources Midstream and Downstream, it’s our duty to act in the best interest of the citizens and ensure that the downstream and midstream sectors are protected from any decision that will further worsen the problems currently bedevilling the sectors.

“This move, if allowed, will destroy things, starve the refineries, and waste future revenue. We have ongoing investigations into past forward sales and allegations of non-remittance to the Federation account and non-availability of crude to domestic refineries. Citizens were excited about President Tinubu’s recent intervention for crude supply to local refineries in naira, and the committee has received intel on plans to mortgage future crude revenue and oil for another loan at a time the nation is struggling. This is preemptive of the committee’s work, and we announce a halt to this fresh move by the state oil company until it briefs the parliament.”

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He emphasised that the revenue being mortgaged is the sovereign wealth of the people and that the parliament has a duty to protect it. He pointed out that NNPCL, being wholly owned by the Federal Government and Nigerians, must not engage in actions that harm its shareholders.

The recent revelation that NNPCL is considering another oil-backed loan follows a $3.3 billion loan secured from Afrexim Bank in August 2023 to shore up liquidity after the removal of fuel subsidies and the unification of the forex market. The loan, intended to address Nigeria’s foreign exchange challenges, is to be repaid with crude oil set at $65 per barrel, involving around 90,000 barrels of crude oil.

Ugochinyere stressed that the NNPCL should not undermine the forensic investigation with another fresh loan, as this move poses a threat to local refineries. He highlighted President Tinubu’s recent directive for the sale of crude oil to indigenous refineries in naira, including the Dangote Refinery, as a positive step for the country.

“It is surprising that despite the President’s directive, the NNPCL is borrowing again instead of complying with the necessary measures,” the lawmaker concluded.