Amid growing concerns over declining oil revenue and transparency issues in the Nigerian National Petroleum Company Limited (NNPCL), President Bola Tinubu recently initiated some reforms to enhance accountability and efficiency in the oil sector. The development has reportedly stripped the NNPCL the custody of crude oil earnings. However, this has elicited reactions from Nigerians. Former Vice President, Atiku Abubakar, claimed that the directive from the President violates relevant provisions of the Act that set up the company, and Section 59(2) of the Petroleum Industry Act (PIA), 2022.
Currently, the NNPCL produces, refines oil and markets Nigeria’s accruable crude and retails petroleum products. Until now, the NNPCL had maintained full control over crude oil earnings, and render account to the federal government. That practice, experts say, makes accountability and transparency difficult, and the operations of the company opaque. With the new order, money from crude oil sales will now be paid to the Central Bank of Nigeria (CBN). The CBN governor, Olayemi Cardoso, disclosed this at the meeting of the Nigeria Economic Summit Group Macroeconomic Outlook Report.
According to the CBN boss, in compliance with the presidential directive, henceforth, the responsibility vested on NNPCL will be in collaboration with the CBN, the Ministry of Finance and the NNPCL to ensure that all foreign inflows are returned to the CBN. Under the new arrangement, NNPCL will submit all receipts for crude oil sales to CBN for vetting and documentation. With adequate supervision, we believe that the new arrangement will ensure transparency in crude oil earnings.
Like the Saudi Aramco, Nigerians would expect the NNPCL to be efficient, profitable, accountable and transparent. We believe that with improvement in forex liquidity, investors’ confidence will be boosted. We urge the NNPCL, CBN and the Ministry of Finance to ensure that the government’s objective is achieved. Therefore, the comprehensive strategy that will improve liquidity in the FX market must be worked out in short, medium and long-terms to address the factors that hinder the effective operation of the market.
No doubt, the NNPCL has not lived up to public expectations, especially in its financial expenditures. Recently, the World Bank disclosed that the NNPCL has not been transparent about dollar revenue, especially in financial gains from fuel subsidy removal. If the present arrangement will sanitise the operations of the oil giant and tidy up its financials, it will tremendously improve the economy.
The Nigeria Extractive Industries Transparency Initiative (NEITI) last year lamented the opaque nature of the NNPCL in its audit report. It is probably because of the seeming lack of transparency in NNPCL that prompted the president to come up with these reforms. According to the NEITI report, in the Q3, 2023 the NNPCL and 13 other federal agencies allegedly failed to remit $9.85billion revenue to the Federation Account in one year. The unremitted amount represents 8.47 per cent of the $23billion being total revenue generated by the federal government in the 2021 financial year.
The NEITI report also said that the NNPCL generated over $1.9billion in the year under review but failed to remit same to government coffers. Although the NNPCL have clarified the discrepancies, many Nigerians believe that its operations are shrouded in secrecy. Out of the amount, $286.4 million was for export crude sales, $722.5 million for Nigerian Liquefied Natural Gas dividends, and $859million for miscellaneous revenue, among other unaccounted funds.
Going forward, we urge the CBN, in collaboration with the NNPCL and the Ministry of Finance, to periodically publish the crude oil earnings. Doing so will ensure accountability and restore public confidence in the operations of the NNPCL. We enjoin the NNPCL new board appointed by President Tinubu on December 1, 2023, to be patriotic in their assignment.
In all, the new order should not be allowed to undermine the operational efficiency and independence of the NNPCL. However, let the NNPCL comply with the provisions of the PIA, especially sections 53 -65. A detailed audit of NNPCL account should be the next step towards ensuring transparency and efficiency in its operations.