Turning the searchlight on NNPC’s purchase of Nigeria’s oil

According to its own record, between October 2016 and October 2017, the NNPC purchased a total of 125.3million barrels of crude oil for domestic use at the cost of N1.974 billion but what the data does not show is the true cost of this purchase.

By virtue of its role as a state corporation, the NNPC sells on behalf of the Federation, Nigeria’s share of its oil production with its joint venture partners. But this oil is bought at a subsidised cost in terms of foreign exchange.

Nigeria opened the investors and exporters foreign exchange window in April 2017, where dollar is exchanged around N360/$1 to deal with foreign exchange challenges. The Central Bank of Nigeria has been defending the dollar but opened the special window to allow investors trade on market terms.

But the NNPC, as a state-owned enterprise is not compelled to follow the exchange rate in the I&E window throughout the period. Even in n the Direct-Sale-Direct-Purchase (DSDP) arrangement, where the NNPC signed agreements with some oil companies to exchange around 300,000 barrels per day of crude for imported petrol and diesel in a deal worth about $6 billion if oil prices remained in the $44/45 per barrel, the NNPC has been allowed to operate a favourable exchange rate term.

Analyses of this data indicate that the NNPC is purchasing each barrel of oil at a subsidised price of N304 to a naira. When properly computed, in the period indicated above, the NNPC got subsidy worth N363 billion between October 2016 and October 2017.

But the country is not even getting much value from the data on utilisation of crude oil for domestic product supply.

“In October 2017, NNPC lifted 9,002,509 barrels of Crude Oil for domestic utilization translating to an average volume of 290,403.52 barrels of oil per day in terms of performance. In order to meet domestic product supply requirement for the month of October 2017 about 5,693,877 barrels was processed under the Direct-Sales-Direct Purchase (DSDP) scheme and the balance of 2,359,704.00 barrels was delivered to the domestic refineries for processing,” says the NNPC’s operational and financial report for November 2017.

NNPC claims it sent 24 percent of the crude it purchased for refining in Nigeria’s decrepit refineries but the same document records scandalous performance.

For the month of November 2017, the three Refineries produced 55,187 MT of finished Petroleum Products and 39,562 MT of intermediate products out of 107,748 MT of Crude processed at a combined capacity utilization of 5.92 percent compared to 17.63 percent combined capacity utilization achieved in the month of October 2017, said the corporation.

“The decrease in operational performance recorded was attributed to decline in crude processed by WRPC while PHRC & KRPC remains shut down during the month under review. The ongoing revamping of the Refineries will enhance capacity utilization once completed,” said the report.

However, NNPC provides only scant information about what happens to the rest of the crude it is incapable of refining due to lack of capacity. According to the 2015 Nigeria Extractive Industries Transparency Initiative (NEITI) report, the total oil lifted in 2015 was 780 million barrels, about four million barrels higher than the amount produced with the balance drawn from previous years. Of the 780 million barrels, the companies lifted 467 million barrels while NNPC lifted 313 million barrels. NNPC’s liftings were split almost evenly between Federation Export and Domestic Crude Allocation, which accounted for 159.4 million barrels and 153.9 million barrels respectively.

However, only 8.7 million barrels or 5.6 percent of crude oil allocated for domestic consumption went to the refineries in 2015 on account of the terrible state of the refineries. The question lost through the maze of investigations is what happened to the rest of the crude that was not refined?

ISAAC ANYAOGU