NNPC: Memos, Rot and Impunity, By Ken Tadaferua
…Kachikwu’s letter has brought to the fore, not merely the alleged award of contracts worth $25 billion but the wider matter of the exploitation and manipulation of loopholes in the NNPC Act, leading to serious lacuna in management and falling very short of best global practice in corporate reporting and governance. These critical issues must be addressed pronto.
I had advised over a year ago that Mr. Ibe Kachikwu, a respected technocrat and the man with the longest corporate title in Nigeria: chairman of the board of the Nigerian National Petroleum Corporation (NNPC) and minister of state for Petroleum Resources, should resign his appointment and keep his dignity intact before the shenanigans of Nigeria’s high-wire politricks shame him out.
But he stayed on the job. His recent protest memo to the president against the group managing director of the NNPC, Maikanti Baru, confirmed my worst fears. Kachikwu is not only ignored in the business of the NNPC, he is bypassed in the award of key transactions and major staff redeployment, as well as disrespected by Baru. Worse off, he is stonewalled by his immediate boss, the oil minister and president, Muhammadu Buhari, who will not grant Kachikwu audience despite his “very many attempts.” Ouch!!!!
Kachikwu alleged specifically that Baru awarded $25 billion worth of contracts without due process and review with himself and the NNPC board. And Baru took his time to issue a strongly worded rebuttal, with extensive legal and technical details to prove he followed due process, that Kachikwu’s alleged Crude Term Contract and the Direct Sale and Direct Purchase agreements, are long concluded contractions which current transactions are with no specific values attached to them and thus that Kachikwu’s claims were false and made in bad faith.
If this posit is true, then the allegation of awarding $25 billion worth of contracts without due process is patently untrue. Baru has thus won a giddy battle over Kachikwu. That does not remove the fact that Baru is not carrying his board chairman and members along on key transactions of the NNPC.
Also by a strange irony, Baru may have won the contracts battle, but may still end up losing the war. That is the war for the soul of the sleaze ridden NNPC and oil industry. Why? Because the war is about the bigger picture of kicking out the obtuse impunity which NNPC’s contorted enabling law confers on those who (mis)manage the corporation and oil industry, Nigeria’s major revenue earner. And many thanks to Baru’s crowing and profuse declarations of NNPC’s dark legal and working system, to prove his point against Kachikwu, but which has inadvertently laid bare, in public glare, the rotten underbelly of a sick corporate Goliath, the NNPC. Here are four reasons why:
First: The Governing Board of the corporation and its chairman, from Baru’s declarations in the NNPC rebuttal, are no more than virtual, if ornamental, fixtures in NNPC’s organisational structure and relationships, lacking absolutely in powers of oversight over NNPC management, expenditures and procurement, among other matters. Considering the question of corporate governance, this is the strangest relationship between a board and management that I have ever heard of.
Translation: The governing board and its chairman are mere glorified clucking hens gathered in a nice pen to peck at butter cakes, sip warm tea, collect unearned rent and go home, absolutely with nary a worry about the performance of the corporation on whose apex they are perched. This shockingly awful picture is very well and arrogantly put by none other than the NNPC itself, saying it is: “important to note from the outset that the law and the rules do not require a review or discussion with the Minister of State or the NNPC board on contractual matters.” Why then does the board have the word: Governing? To roost idly over iced tea? Such outrage. But it is the law. Right?
Second: As if the (il)legal castration of the NNPC board into impotence is not enough, the oil ministry and minister of state appear also to be no more than statutory statues or at best, mere observers consigned to watch from the sidelines, in efulefu silence, the GMD lording it over the hen that lays the golden egg or is it the over 90 percent of the nation’s export revenues. This, despite the statutory supervisory and regulatory role of the ministry. Again I say, this is outrageously scandalous. How did things degenerate to such a pass? The next point clarifies:
The restricted NNPC’s reporting and weak corporate governance structure, often limited to two persons, stays firmly in place. Two oligarchs. If anything, the NNPC Act has to be extensively reviewed, amended or even repealed, to cleanse the corporation’s stigma as the ultimate cesspool of corruption, at least for the sake of the nation’s growing poor.
Third: This NNPC appears to run a militarised, highly centralised and very narrow structure, just like the dubious constitution we run as a nation. This is not surprising given that the NNPC was created 40 years ago in 1977 by the military under General Olusegun Obasanjo as head of state and General Muhammadu Buhari as minister of petroleum. It is only these two men, under their later stints as civilian president, who have also doubled as oil minister. Since some projects’ costs must be approved by the oil minister, who by law is also the chairman of the NNPC governing board, Buhari wears three hats simultaneously as president, oil minister and chairman of NNPC governing board, with the onerous duty of granting approvals for many projects and expenditures of the NNPC.
Here’s where it gets interesting. Buhari in his own wisdom appointed Kachikwu as chairman of the governing board, not as an alternate chairman. In other words, since there cannot be two chairmen of the board at the same, we can safely say that Buhari transferred his powers of approval to Kachikwu. Or perhaps can we assume that there is an understanding that Kachikwu is a mere clay pigeon for the president on the board? If so, he would not write his memo accusing Baru of insubordination.
There is some legal twist in the appointment of Kachikwu as chairman of board. Yet another twist is that Buhari continued, according to Baru, to give approvals without the input of the governing board chairman or members. The president gives approvals without meeting or informing the board of his decisions and actions, thus effectively sidelining the board in cahoots with the GMD, thus rendering the board and its chairman impotent. Buhari is in the eye of the storm here. Baru is merely the face of a cunning stratagem. It is not funny. Now you know why the NNPC and the oil industry is so opaque. Very strange governance style, much open to abuse.
And if I may ask, as a brief aside: What happened to section 6(e) of the NNPC Act which directs that any contract relating to any project of a value of N5 million and above shall be referred by the Corporation to the National Council of Ministers for approval before the award of any such contract is made? Mr. Baru, is that section still operative?
In the circumstance, where reporting lines and considerations for key decisions are limited to just two men – the president and the GMD, possibly over a chilled bottle of rich wine, an unholy alliance can secretly and easily lead to the illegal sweeping of billions of the nation’s revenues into personal pockets or the president’s campaign chest. Some who may think this scenario too far-fetched ought consider this sordid history of the NNPC as a funding arm of political brigandage and corruption in high places:
Again, exactly 40 years ago in 1977, the same President Buhari, then minister of petroleum was accused of gypping $2.8 billion oil money from the NNPC. In 1992, another major heist report alleged that General Ibrahim Babangida swindled the nation of $12.4 billion from the Gulf war oil windfall. In 2012, under the Jonathan government, the Nuhu Ribadu-led Petroleum Revenue Special Task Force noted in its detailed report, that the Nigerian government and the NNPC, in brazen splurge of public funds, treat huge oil revenues as a reserve of money used for illicit purposes without accountability.
In 2013, the former CBN governor now Emir of Kano raised the ante with his bombshell allegation that $49 billion was diverted by the NNPC. Well, that figure was soon dwarfed by allegations that former oil minister, Diezani Alison- Madueke nicked more than a dizzying $90 billion from the NNPC’s overflowing catacombs. Many more such salacious stories abound in NNPC’s four decades history. Today, it is the chairman of the NNPC Board alleging that over $25 billion contracts was awarded by the GMD without due process. Something is clearly wrong with NNPC’s corporate governance structure, one that never changes despite these humungous corruption reports.
It is also interesting to note that none of the dramatis personae in high places fingered in the alleged rape of the nation through the NNPC have been tried and convicted. There is the decades old, smoke and glass, hues and cries about anti-corruption and prosecution that usually fizzles out. The restricted NNPC’s reporting and weak corporate governance structure, often limited to two persons, stays firmly in place. Two oligarchs. If anything, the NNPC Act has to be extensively reviewed, amended or even repealed, to cleanse the corporation’s stigma as the ultimate cesspool of corruption, at least for the sake of the nation’s growing poor.
As for Kachikwu, he may have goofed big time with his $25 billion contracts award allegation but he has also done the nation plenty of good by airing the dirty politics and impunity underwear of the NNPC and political power. It is noble courage. But again I ask him to resign. It is time, yet again, to pick up the pieces, dust his feet and throw in his resignation.
Fourth: I think it is patently dishonest for Baru to interpret and replace the word CORPORATION with GMD in the NNPC Act, which requires the corporation, not just the GMD, to seek approvals depending on the amount from its tenders board, the chairman of the governing board or the federal executive council. Who is the corporation, if not all of its staff led by top management and governing board members, including its supervising ministry? The use of corporation infers a synergy, a carrying along, a mutually harmonious working agreement of all management and all board members, not just the GMD, on major issues of finance, expenditures, procurements and restructuring, among others. And since the GMD is a governing board member, one may ask: Was he not briefing, and taking inputs from other members of the board he sat on too? Strange. Very strange.
Where this interpersonal relationships and mutual respect of management and board is overtaken by personal animosity and arrogance, the tendency is a recourse to jaded interpretation of the letters of the law, not its spirit, for selfish reasons. This is the basis for corporate crises as we have seen.
In the end, Kachikwu’s letter has brought to the fore, not merely the alleged award of contracts worth $25 billion but the wider matter of the exploitation and manipulation of loopholes in the NNPC Act, leading to serious lacuna in management and falling very short of best global practice in corporate reporting and governance. These critical issues must be addressed pronto. Clearly, the NNPC Act needs to be reviewed and amended. If done, and must be done, then Ibe Kachikwu will ultimately win the war.
The GMD is not the corporation but part of it. The GMD to president’s short-walk approval protocol must give way to a more robust oversight and controls processes actively involving a larger proactive governing board and ministry. A new NNPC structure needs to emerge to yank off the grabbing paws of politicians, plus the president, from the cookie jar.
The double hats of oil minister and chairman of the NNPC governing board won by Buhari, plus his Presidency duties, must be dumped now. We cannot afford the luxury of undue power play with our national oil revenues. We must go beyond the feeble attempts at NNPC reform, such as the Single Treasury Account System and Presidential Committee on Anti-Corruption, which in my considered view, are no more then cosmetic anti-corruption smokescreens. The devil is in the structure.
The National Assembly has given notice that it seeks to investigate the Kachikwu and Baru face-off, the matters arising and the review/amendment of the NNPC Act. We hope that NASS will rise beyond its much advertised personal pecuniary interests to work expeditiously on this matter. To put an end to the blatant impunity, insufferable impudence and corroding corruption synonymous with the corporation and the Nigerian oil industry. We shall be watching very closely.
As for Kachikwu, he may have goofed big time with his $25 billion contracts award allegation but he has also done the nation plenty of good by airing the dirty politics and impunity underwear of the NNPC and political power. It is noble courage. But again I ask him to resign. It is time, yet again, to pick up the pieces, dust his feet and throw in his resignation. He must realise that the night of the knives are here, that the auguries is not particularly kind to him.