In the months ahead, President Buhari will appoint new officials to powerful positions in the oil industry – the Ministry, NNPC, PPPRA, DPR, etc. The Guide below is for those people lucky enough to be appointed. It is also for all other Nigerians who are tired of reading about other people enjoying billions of dollars of government oil money, and would instead like to have others read about them doing the enjoying.
One. Innovate, Innovate, Innovate. What was the greatest invention of the Goodluck Jonathan administration? SWF? SURE-P? NMRC? Akin Adesina’s GES? No. The clear answer is the Strategic Alliance Agreement (SAA). It’s a complicated arrangement, but let me try to break it down in simple English. Pre-Jonathan, standard practice was to ensure that Nigeria’s oil fields were managed as joint ventures between NNPC (representing the government and people of Nigeria; and holding a 55% stake) and International Oil Companies (like Shell, Mobil and co; holding 45%).
Then, in the late 2000s, some of those private companies decided they wanted to sell their stakes in about five oil blocks. What you’d have expected was they’d be allowed to sell to other willing private companies, especially the indigenous ones, who would then continue the existing arrangements. But no, our government people decided to be ‘innovative’, and decided that the government, through the Nigerian Petroleum Development Corporation, a subsidiary of the NNPC, would acquire the divested stakes. So in effect the Nigerian government came to own 100% of the blocks. But there was a slight problem: funding. Historically the government (i.e. NNPC) has always abdicated its own funding responsibilities to the IOCs (Both parties are meant to share the cost of producing oil from the blocks).
Now that there was no IOC to push the funding to, the government had to find a way out. And so the SAA was born. It involved inviting two private companies (Atlantic Energy and Seven Energy, both founded, coincidentally, in 2011) to provide funding, in exchange for a share of the proceeds from the sale of the crude oil. Now, during the IOC regime, what happened was that the IOCs would get 45% of the oil output, take out the cost of production (which they had singlehandedly funded), and then pay royalties and taxes on the balance (i.e. ‘profits’) to the federal government. These payments to the FG would amount to about 70% to 80% of that profit, leaving the IOC with no more than 20% to 30% as their own earnings. In the age of the SAA, things changed. The new partners were entitled to take anything between 20% and 70% of the profits. In many cases the profit was taken not in cash but in barrels of oil – which means the SAA allowed the private companies to take billions of dollars worth of crude oil annually, for which they didn’t have to pay.
Two. You need to stay in control. One of the first things that happened after Dr. Jonathan became President in 2010 was that the Oil Minister he appointed relocated the Petroleum Products Pricing Regulatory Agency (PPPRA) – the agency in charge of calculating subsidy payments – from the Presidency to the Ministry of Petroleum. The said Oil Minister also regularly gave the middle finger to the Big Men under her watch – how else do you show who’s boss? According to one count she fired, in her first four years as Minister, three DPR bosses and four NNPC GMDs. If you’re going to succeed you have to be in total control.
Three. The Loophole Principle. Find your own Loophole. Let’s use kerosene as an example. On June 15, 2009, President Yar’Adua ordered the cessation of payment of kerosene subsidies. Since he was President, his word was obeyed. But then he died in office, and, in June 2011, the Jonathan government decided to reactivate the payment of the subsidies. Through that ‘Loophole’ hundreds of millions of dollars have vanished monthly into private pockets, since then.
Four. Lower the Bar. This is simple common sense. If you want it easier you’ve got to make it easier. Again let’s go back to 2011. Pre-Jonathan, the requirements for qualifying to be issued an oil import license were quite stringent. You had to prove that you had the capacity to pay upfront for a minimum shipment size of 5,000 metric tonnes of product. You also had to prove that you owned retail outlets for the distribution of the imported product. Under President Jonathan these conditions were removed, essentially making it possible for every Tom(iwa), Diek(ola) and Ari(gbabu) to import petroleum products. Also, in the crude oil swap arrangements with private oil companies, the companies were never required to bring in anything other than petrol. So they’d take Nigeria’s crude oil, sell or refine it abroad, and bring back only petrol, even though there are dozens of products that accrue from the refining of crude oil, including the very valuable jet fuel. Ask yourself: where were all the other products going?
When you lower the bar, you not only make it easier for the oil to flow, even more importantly, you make it harder for busybodies to follow your tracks. Instead of one set of footprints on the crime scene, why not allow for a thousand. Let’s see who’s going to succeed in tracking the origins and destinations of a thousand footprints. In 2005, Nigeria licensed five companies to import petrol. In 2007 (election year) it doubled to ten. In 2008 (new President) it again doubled to 19. By 2011 (election year; new President) there were 140 oil importers (116 of them got oil importation licenses that predated their letters of application for such licenses).
Five. You’ve heard what they say about technology helping to promote transparency? Well, good news: you can use technology to promote bad behaviour as well. The golden rule of technology use remains ‘Garbage In Garbage Out’. Since computers can be deceived, you should strive to learn how to deceive them. People will see you/your government deploying technology, and commend you for it, while having no idea that it’s all a ruse. What’s not to love about that? One example: For the computation of subsidy payments the PPPRA used (uses, perhaps?) a software application called ‘Analyzer’, which, one, had no user manual, and two, allowed a single user to singlehandedly input and edit and approve entries.
Six. Never be scared to set up a probe panel. If Nigeria got an OPEC-endorsed oil price increase of one dollar per barrel for every probe panel set up since 1960, we’d be by far the richest country in the world today. Every government since 1960 has done it, who are you to abandon a winning formula? Probe panels are important because they let the world believe that you’re serious about tackling corruption. They are also a good way to dispense patronage – panels need members, panel members need aides, etc.
Seven. Think big. Remember the $12.4 billion naira scandal of the early 1990s. The Gulf War drove oil prices up, leading to a massive windfall for Nigeria. The money was reportedly deposited in a number of Special Accounts in the CBN, from where it reportedly grew wings. But at least it came into the CBN. The $20 billion dollars that Sanusi said was unaccounted for did not even have the courtesy of first showing up in the federation account. It was taken straight from the ‘cloud’, pre-download. Twenty years from now expect a $40 billion oil scandal – in keeping with the growing scale of Nigerian ambition.
Eight, last but not least: make sure Nigeria never learns how to count. How many are we in Nigeria? 170 million, based, not on a count, but on projections based on dubious census figures. So, in fact, we don’t actually know. America might know, of course. How much petrol do we consume daily in Nigeria? Depends on who you ask, and why? Since we’re not really very good at numbers, and have to guesstimate everything, we can be forgiven for making mistakes and paying for 59 million litres per day, when in reality (is there really a reality?) we’re consuming an amount much closer to half of that. Which is what’s been happening in recent years. Moral: the day Nigeria learns to count, helping yourself to oil money is going to become more difficult. You have a duty to ensure that Nigeria NEVER learns how to count.
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