This Has To Be The Iceberg

The two major news items on the oil and gas realm in Nigeria and internationally n the past week may not be the same. But they underscore the complex and intricate relationship between nation states and those entrusted with the management of their hydrocarbon resources. In Nigeria it was all about the report on the forensic audit carried out on the national oil company (NOC), the Nigerian National Petroleum Corporation, NNPC, by the external auditors, Price Waterhouse Coopers (PWC), which was submitted to the President on Monday last week. While on the international scene, the news that dominated was the management reshuffle at the world’s biggest oil company, which also doubles as the national oil company of Saudi Arabia, Saudi Aramco.

The discussion this week will be on the allegations - or actions - carried out by officers of the NNPC, apparently at the behest, or at least with the blessing, of compromised officials of the ruling government. While next week, unless another more important news breaks, hopefully a positive one, we will go farther out and have a look at why the ruler of the Kingdom of Saudi Arabia, King Salman bin AbdulaAziz Al Saud decided to reorganise his country’s NOC. Political meddling is something public-owned and economically sensitive institutions anywhere in the world have to contend with. And institutions don’t come any more economically sensitive than national oil companies.

This latest forensic audit was commissioned to look into allegations of the non-remittance of over 20 billion dollars due to Nigeria labelled against the corporation and, by extension the Jonathan government, by the then Governor of the Central Bank of Nigeria, Mr. Sanusi Lamido Sanusi, now Emir Muhammadu Sanusi II of Kano. Instead of doing a forensic article on a forensic report, we can cast our collective minds to the recent past and build a pattern of behaviour that our collective amnesia may have erased from our  collective memory.

In 2011, the Federal Ministry of Finance, commissioned a forensic audit that was carried out by another international audit firm, KPMG. Their findings indicted the NNPC with, among other things, the over-deduction of funds relating to petroleum products subsidy claims to the tune of 28 billion Naira. It is likely that if not for the enormous sums involved in the Sanusi allegation the PWC report will enjoy the same fate as the KPMG report, which is likely lying in some cabinet and gathering dust. This is not saying 28 billion Naira, in any currency, is not an enormous sum.

Looking further back, before the KPMG audit report there was the Halliburton bribery scandal that ran from 1994 to 2007 which saw the payment of $182 million to senior members of the ruling party and officials of the NNPC. This particular corruption scandal also saw the indictment of the CEO of Halliburton, former US vice president Dick Cheney, by a Nigerian court and the sentencing by a US court of Jeffrey Tesler, the UK attorney who oversaw the bribe payments. The bribes were paid by Halliburton to secure a six billion dollar engineering and construction contract on the Bonny LNG project.

In 2004 when, legislating under the Foreign Corrupt Practices Act (FCPA), the US Department of Justice announced that the Swiss energy giant ABB Vetco Gray has admitted to foreign bribery payments to a tune of one million dollars to officials of the NNPC subsidiary that evaluates and approves companies for contracts. This was said to be in exchange for confidential bid information and favourable recommendations for seven upstream construction contracts.

A few years later an American company, Willbros Group Inc. was caught in the same net by the US Department of Justice for bribes paid to the officials of the same NNPC subsidiary and to senior officials of the ruling government to assist the company in obtaining $387 million worth of work on the Eastern Gas Gathering System (EGGS) project.The payments were to a tune of $6.3 million paid between 2003 and 2005.

Everyone as of that time thought and hoped that as far as official corruption in the Nigerian oil and gas industry goes, we had seen the iceberg and not just its tip. Until the coming of the Jonathan government when questionable deals are in billions and not in millions of dollars. Making everything that happened before look paltry in comparison.

In 2013 a Swiss NGO, Erkalung von Bern, or ‘The Bern Declaration’ in English, wrote and published a damning report titled ‘Swiss traders’ Opaque Deals in Nigeria’, where it alleged collusion between NNPC officials, Nigerian petroleum products importers and Swiss companies to perpetrate heavy fraud against the Nigerian state. The report placed NNPC on suspicion of illegally diverting $6.8 billion and pointed fingers to many products importers and their Swiss collaborators. The national assembly ordered a probe into the allegations and not much has been heard of that ever since.

In the former CBN governor’s allegations, the missing $20 billion was lost in the 19 months between January 2012 and July 2013. While Sanusi’s allegations cover huge shortfall in oil revenues and the mismanagement of the petroleum products subsidy programme of the current government, the Swiss NGO focussed on the opaque deals between swiss oil traders and Nigerian businesses on one hand and the underhandedness of the Nigerian authorities on the other, both of which cost Nigeria billions of dollars. Looking at the huge sums involved, the hope now is that this is the iceberg and not just its tip.

Whatever its failings, NNPC is a national institution in Nigeria. No other establishment or company in Nigeria “touches our lives in many positive ways” as NNPC does. With a clearly defined technical and commercial agenda, focus and discipline it has the capacity not only to touch our lives but also to mould them and that of the nation more positively than it does now.

For a company that controls the most extensive oil and gas reserves in Africa which also rank 11th in the world, there is definitely more to the NNPC than corruption scandals and embarrassing fuel queues. Unfortunately that is what the corporation is now judge by and what history may hold it to account for. In just over half a century from today, when the centenary of the corporation is being written, what achievements are there to be celebrated in the third and fourth decade of its existence may unfortunately be blotted by these allegations of corruption. And blame would more likely to be placed squarely on the management of the corporation of this era first before adding, as a footnote, whichever government or oil minister was in power. That is why a lamentable feature of the last six or seven years is how ruling politicians have  eviscerated the roles and duties of the exalted office of the Group Managing Director of the NNPC. For holders of the office, it became less about enduring legacy and more about survival.

The emasculation of the powers of the office of the CEO of any corporation will reduce it to being a rudderless ship in stormy seas. The intricate power play at the top is best handled by someone who is not only technically sound but also savvy enough to know that history will judge him by the quality of his decisions and the naked, unadorned performance statistics of his stewardship rather than the longevity of his/her stay in office. Someone who executes the mission with eyes firmly focussed on the vision.

In all the allegations above, but especially in those involving product subsidy, a pliable NNPC leadership was seen to be at the beck and call of a powerful cabal of political office holders and their businesses that have somehow, momentarily, found a way around legality, accountability and reason.

The government officials and the managers of the corporation that midwifed such corruption cannot be unaware of its scale or effect. To put these huge sums in context - one of the main battlegrounds of the upcoming  general elections in the United Kingdom is on the issue of the which of the two main parties, Labour or Conservative, is better suited to manage the £115 billion pound annual budget of the UK National Health Service, the NHS. The $6.8 billion dollars claimed by the Swiss NGO to have been lost in unjustifiable subsidies payments between 2009 and 2011 is three times the national health budget of Nigeria for 2013.

The nation has almost been brought to its knees economically by the actions of the last few years - but the situation is still not irredeemable. We were approaching the tipping point before the political revolution of March 2015 happened on us. This could be what will pull the nation away from the crag.