Governors criticize NNPC profits without payment to Federation account
The Nigerian Governors Forum (NGF) has lamented that despite reporting profits over the past few months, the Nigerian National Petroleum Company, (NNPC) Limited has contributed nothing to the Federation’s account this month.
Ekiti State Governor and Chairman of NGF, Kayode Fayemi, who said so during the Governors Forum session on Thursday, which marked the end of the panelists session of the 5th edition of the Nigerian International Summit Energy (NIES 2022) noted that there were concerns around the transparency, accountability and governance of the sector, especially as efforts are focused on revitalizing the industry.
Also present at the session of the Governors Forum were Governor of Kebbi State, Abubakar Bagudu, representatives of Governor of Ondo State, Commissioner for Energy and Mineral Resources, Engr. Razaq Obe, representative of the Governor of Bayelsa State, Commissioner for Minerals, Dr Ebieri Jones and representative of the Governor of Rivers State and Commissioner of Energy and Natural Resources, Sir Peter Medee. The NGF boss, lamented that transparency is at the heart of the challenge in the oil and gas sector, adding that Nigerians seem to be suffering more even as oil prices in the international market rise.
“When you look at the statistics, transparency is at the heart of the challenge facing this sector. Coming here, I was looking at reports from the Natural Resource Governance Institute and Nigeria is not doing very well. We rank 40th out of 58 resource-rich countries on the Transparency Index because we are still thought to be running a largely opaque industry and we see it for ourselves.
“Even if oil prices in the international market go up, maybe $110 today or more. It would seem that the higher the price goes, the more we are suffering locally now.
“We just got Federation allowance accounts. The committee met a few days ago, and NNPC has not contributed anything to the Federation account this month and this is not the first month that NNPC has not contributed anything. Over the past two months we have of course encountered these challenges, we know why.
“NNPC declares profits but cannot meet its obligations. My simple knowledge of economics teaches me that it is only after having fulfilled all its obligations, that one then speaks of making a profit. So, if your obligation to the Federation account has not been met, then how can you talk about profit
So there’s kind of an ambiguous relationship between what’s happening in the international market and what we’re going through here in Nigeria and as key stakeholders in the Nigerian Federation, states are understandably concerned about that, they’re concerned about the how to develop this industry and ensure that this industry is supported for the long term so that it can benefit those who are stakeholders in the industry. That’s part of why for us as sector governments, this is a very, very critical thing to do. The PIA addresses some of the issues we have with that, but it’s like a typical transition.
“Now is the time to talk about revitalization, the Petroleum Industry Act has just been signed into law, although the governors have problems, as the Minister already knows, we have problems with the law itself, and this is being implemented by committee, but we believe this is an important step 20 years after the start of this attempt to revise the Petroleum Act of 1969 which has been the engine of the industry over the past 50 years.
“And clearly the shortcomings that have been noticed in the growth of the industry and the growth of the sector, in particular to ensure that we run a sustainable institution that would meet not only the aspirations of the industry, but also the general concerns of the public Nigerian. So the things that have been partly dealt with in the law.
“For us as recipient states of the golden goose, the oil and gas industry, we also want this industry to be supported for the long term. We see areas of concern, particularly in terms of revitalizing the industry around transparency around accountability around governance of the sector.
“In every transition the old is over but the new is not yet born, you are caught in the middle and there is a significant amount of confusion that happens in this transition period. I guess that’s what we’re going through right now, but the sooner we can complete this transition process, I think the better for us.
“Also due to the nature of industry and the exclusivity of industry in Nigeria’s constitution, states have always had their own problems. While in principle we understand why the industry is in the exclusive nature of the Nigerian constitution or in the exclusive list, we also believe that we need to start looking at this quite differently in a way that reinforces the commitment to the private sector development, but also builds ownership between states, local authorities if they have the means to do so, as well as the federal government and when one of the things that states are interested in is how institutions, businesses that they created themselves or established as private sector entities either in joint venture with other private sector entities or exclusively as a special purpose vehicle to store state interests, should be able to participate actively in the oil and gas industry, as we do.
“If I remember correctly, when I was in the Department of Mines, we allowed states to create a special purpose vehicle that can then apply for a license in order to actively participate in the mining industry, whether it’s gold or bitumen.” Local content is growing in the industry. I saw a report; Seplat buys mobile production assets in the country. This is something that should be welcomed because Seplat is a local industry even though it operates in the global market, I think there must be positives to this and we must build on such initiatives as long as they are done transparently before.
“For us as states, ultimately what we’re looking at is a situation where at some point even the industry itself could be operating like your LNG is operating now, so ultimately account, there is greater transparency, there is greater accountability and the governance framework is really built on industry efficiency,” he said.