Towards internal transformation at NNPC
Joseph Dawha, Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC) recently hinted that the corporation had commenced the process of internal transformation ahead of the passage of the Petroleum Industry Bill (PIB)now ending its sixth year in the National Assembly.
The NNPC chief executive officer spoke at a recent press conference on the theme “ No money is missing” which he addressed in Abuja to announce the successful completion of the forensic audit exercise by PriceWaterhouseCoopers (PwC). According to Dawha, the report has finally laid to rest the 15-month long controversy over the allegation of missing $49.8 billion. He stated that the report “has clearly vindicated our long held position that the alleged unremitted crude oil revenue was a farce from day one”.
He explained that both the Senate Finance Committee probe report and the PwC forensic audit report corroborated the corporation’s position that subsidy on kerosene was still in force as the presidential directive of October 19, 2009 was not gazetted in line with the provisions of Section 6, Subsection 1 of the Petroleum Act of 1969.
We agree with Dawha that there is urgent need to reposition NNPC for optimal performance in the next four years now that the distractions caused by the ex-CBN governor’s whistle-blowing are now over. Such a re-engineering is imperative to steer the corporation away from business as usual to strategic reforms that can contribute to making it an efficient and effective organization.
Our advocacy for internal transformation at NNPC is hinged on some of the findings of the Ahmed Makarfi-led senate committee report. For example, the committee frowned at a number of operational practices that border on inefficiency, lack of transparency and lack of cost–watching approaches by NNPC. A few examples will drive home the point.
First is the issue of demurrage costs amounting to US$207,892,239 over the period spanning January 2012 to July 2013 which were settled through crude swap. The probe panel found that average number of days taken to discharge a vessel load of 33,00mt of product was 33.5 days as against expected 1.5 days resulting into US$207.89 million demurrage.
The colossal waste implied by this practice led the senate committee to recommend that “the concept of using vessels loaded with products at high sea as products’ Strategic Reserve as against the development of sufficient product Tank Farms for Strategic Reserve needs to be reviewed”. Indeed, the committee felt strongly that improved product delivery scheduling and development of tank farms should have substantially reduced demurrage charges incurred.
Also, the committee observed disparities in daily demurrage charge by the discharging vessels. “This calls for a comprehensive review and harmonization of daily demurrage rates in line with best practices”, the report advised.
A second issue is that of payment of port charges to Nigerian Ports Authority (NPA). The Makarfi report stated that documents to support a total sum of US$241.1 million paid to NPA and included in the NPA charges were not available for review.
Thirdly, the committee talked about crude oil losses amounting to US$0.76 billion. It found that recomputed crude and refined oil losses for the period January 2012 to July 2013 was US$0.809 billion, an increase of US$0.05 billion from NNPC’s figure.
The committee also found that records of PMS/AGO transferred between depots revealed illogical results that require further independent reconciliation. Besides, the committee observed that inter-depot product transfers were not subjected to independent verification other than NNPC/PPMC’s officials, adding that independent verification would ensure integrity and accuracy of records maintained.
Fourthly, pipeline surveillance costs increased from US$2.23 million in 2012 to US$11.15 million in 2013 without corresponding decrease in pipeline oil losses.
Fifthly, pipeline maintenance and management costs amounting to US$0.91 Billion were incurred. The committee found out that actual PPMC’s staff salaries and upfront benefits claimed in NNPC’s submissions were overstated by US$7.58 million and US$29.35 million for the years 2012 and 2013 respectively. Similarly, marine/throughput payments were overstated by US$9.21 million through duplication of payments claimed in NNPC’s submission.
Also, the sum of US$2.84 million out of US$12.20 million claimed as NPA charges could not be authenticated documentarily.
Sixthly, environmental remediation payments were overstated by US$1.29 million as the sum claimed as environmental remediation was a payment to Industrial Training Fund (ITF).
Seventhly, NNPC’s submission on crude transport payments were overstated by US$4.54 million.
All these are, to say the least, mind-boggling and we salute the painstaking disposition of the Makarfi committee which did not lose sight of the chaotic record keeping evident in the foregoing and recommended urgent steps to rectify the situation.
The committee also decried the lack of proper and adequate co-ordination among key agencies of government such as finance ministry, CBN, NNPC, DPR, FIRS etc. “Ordinarily, reconciliations on regular basis between sensitive institutions controlling our economy should be an on-going and common practice” the report observed. We agree totally with this observation.
We are convinced that Dawha’s internal transformation project will make a difference in the history of NNPC if he tackles some of the issues enumerated above.