By Adewole Kehinde
After reading that the Senate on Wednesday, 14th July, 2021 at plenary faulted the Nigerian National Petroleum Corporation (NNPC) over alleged under-remittance of N3.8 trillion revenue from Domestic Crude Oil Sales to the Federation Account between January and December 2015, I decide to write on the accountability and transparency that has been marching the Corporation to fulfil its glorious destiny as the biggest and most profitable National Oil Company in Africa.
Upon his assumption of office as the Group Managing Director of Nigerian National Petroleum Corporation in July 2019, Mallam Mele Kyari vowed to run the affairs of the corporation on strict adherence to the twin principles of transparency and accountability.
To actualise this, he initiated a corporate vision of Transparency, Accountability and Performance Excellence (TAPE), which is championed by the management team since assumption of office as NNPC helmsman.
Transparency is critical, especially for extractive companies. Apart from ensuring that information about operations and finances is made available to the public, a transparent company allows stakeholders to measure performance. It guards against mismanagement of funds. It puts officeholders in check and creates a system that will eliminate inefficiency. Accountability is feasible with transparency, especially when the public uses available information to hold public servants accountable.
Transparency, accountability and corruption are critical issues in Nigeria’s oil sector. Stakeholders have repeatedly stressed the need for oil firms to become less-opaque. With the level of devastation that the industry has witnessed due to COVID-19 and trade wars, oil firms, especially the national oil companies (NOCs) of countries like Nigeria, which mainly rely on the extractive industry for revenue have no option than to become efficient, profitable and open.
In pursuit of this vision, the current leadership of NNPC consciously committed itself to conducting the corporation’s businesses in a transparent and accountable manner, deploying Artificial Intelligence (AI) to boost the accounting processes of its Corporate Headquarters, subsidiaries, companies and Corporate Services Units (CSUs).
In addition, it started making its contract award processes and financial reports, public to cast away the toga of opacity associated with extractive industries generally.
Subsequently, the current management has recorded a series of firsts on the transparency front. It published its 2018 Audited Financial Statement earlier in the year for everyone to see, rather than the maintaining the old style of surreptitiously submitting it to statutory agencies like the Office of the Auditor General of the Federation.
It also got listed as an EITI-partner company thereby officially sealing its commitment to transparency. However, the public perception seems to have changed in recent times. Thanks to the efforts of Mallam Kyari and his management team.
For the first time in the history of the National Oil Company on June 11, 2020 published its audited accounts, ‘the 2018 Audited Financial Statement (AFS)’ where financial details of 19 subsidiary companies nationwide were exposed in accordance with standard accounting practice.
Analysis of the NNPC’s 2019 audited financial account, confirms the authenticity of the theory that commitment to transparency leads to achievement of improved performance. For instance, the Corporation reported a huge reduction in losses as it posted a loss of N1.7 billion in 2019 as against N803 billion losses reported in 2018.
The NNPC have equally elicited commendations, especially for performing entities of the group and agitations against loss making entities, especially the refineries.
Although, there remains much room for improvement, there however, is no doubt that the huge cut in losses is indicative of an emerging new era of growth for the Corporation.
Further details of how the cost optimization was achieved in the 2019 AFS revealed that general administrative expenses was trimmed down from N894 billion in 2018 to N696 billion translating into a positive variance of 22 per cent.
Also, the Nigeria Extractive Industries Transparency Initiative (NEITI), specifically described the release of the audited report as a positive step that signals more openness for the oil and gas sector and for Nigeria.
The industry watchdog and many other players noted that the move could be a leeway that could launch NNPC permanently on the path of growth.
Most of the Corporation’s subsidiaries also posted improved performance. The Nigerian Petroleum Development Company Limited (NPDC), recorded ₦479 billion profit in 2019 compared to ₦179billion in 2018, representing 167 per cent increase. The Integrated Data Sciences Limited (IDSL), recorded ₦23billion profit in 2019 compared to ₦154million in 2018. The Petroleum Products Marketing Company (PPMC), recorded ₦14.2 billion profit in 2019 compared to ₦9.3billion in 2018.
The determination of the current NNPC management to make a difference must be commended, and also encourage players across sectors to look at holistic strategies and steps that would ensure that Nigeria boasts of a NOC that will contribute significantly to its economic development.
Some stakeholders also believe the Kyari-led management’s transparency and accountability drive can improve the excellent performance being witnessed in the Corporation.
Now on the Senate faulting the Nigerian National Petroleum Corporation (NNPC) over alleged under-remittance of N3.8 trillion revenue from Domestic Crude Oil Sales to the Federation Account between January and December 2015, I will like to clarify that the amount allegedly under-remitted is the applicable subsidy and unrealized revenue from petroleum products sales and other operational costs for the period.
I was privileged to get the breakdown of the various components the alleged under-remitted amount which presented as claims and were duly validated by Forensic Auditors and the Auditor-General of the Federation:
Details Amount (Naira)
PPPRA Certified Subsidy (2012-Nov 2015) 2,439,859,459,982.00
Validated & Approved NNPC Claims (2004-2009) 797,710,684,354.00
Crude Oil and Products Losses (2012-Nov 2015) 245,184,597,565.65
Pipeline Maintenance Cost (2012-Nov 2015) 409,985,574,539.86
Operational Expenses 3,892,740,316,442.12
The root cause of the misunderstanding leading to the allegation is the non-incorporation of the above claims into the Accountant-General of the Federation’s report even though they had been validated by Forensic Auditors and the Auditor-General of the Federation.
Subsidies are operational costs as set out in the NNPC Act Section 7(d) which does not contradict the 1999 Constitution Section 80 (1) and Section 162 (1).
There is no doubt that the Group Managing Director of Nigerian National Petroleum Corporation, Mallam Mele Kyari has made the Corporation to realised that it paid to be transparent and accountable at all times.
Kyari’s noticeable effort to deepen transparency in NNPC has made the management to resolve in driving the corporation along the line of transparency, accountability and performance excellence agenda.
Nigerians remain optimistic that the NNPC is indeed on the march to fulfil its glorious destiny as the biggest and most profitable national oil company in Africa.
Adewole Kehinde is the Publisher of Swift Reporters and Energy Fellow of the Abuja Chamber of Commerce and Industry Policy Center. He can be reached via 08166240846, 08123608662