We have no doubt that a combination of incompetence, corruption, graft, inadequate funding, inappropriate policies, obsolete and non-functional equipment, pipeline vandalism and bunkering, occasioned by insecurity and conspiracy, has led to immense losses of petroleum revenue to the Nigerian state.
Recently, the Nigeria Extractive Industries Transparency Initiative (NEITI), unwittingly exposed cash flow crisis as a major problem of the petroleum sector.
The Nigerian National Petroleum Company Limited, which declared a net income of N3.297 trillion for the 2023 financial year, was pressured to finally admit that it owed $6.8 billion to petroleum products suppliers, who then withheld supplies and caused the petrol scarcity that is currently confronting Nigerians.
Recently, there was a news report that only seven of the subsidiaries of NNPCL, which are even battling a N22 trillion debt, are viable!
While net profit of N3.297 trillion for 2023 financial year appears to be a substantial improvement on N2.548 trillion of 2022, the sudden admission of $6.8 billion indebtedness to petrol suppliers counters the boast of Umar Aliyu, Chief Financial Officer of NNPCL, who said “Our fiscal performance reflects both strategic foresight and operational resilience.”
And when Aliyu adds that “Despite inherent challenges of our operational and economic environment, we have improved the productivity and the financial performance of this company,” we are curious to know those “inherent challenges.”
But we have no doubt that a refinery that retains, promotes and pays unproductive employees and receives huge funds for fluke Turn-Around-Maintenance, without refining even one litre of petroleum products, must have “inherent challenges.”
NEITI disclosed startling figures that portray those who run the upstream, midstream and downstream sub-sectors of Nigeria’s petroleum as having no good grip on financial matters. In its 2022 and 2023 Independent Oil and Gas Reports, NEITI revealed some depressing numbers.
The amounts owed by third parties to Nigerian Upstream Petroleum Regulatory Commission are $6.049 unpaid royalties; N65.9 billion unpaid gas flaring penalties; and a mix of taxes, including petroleum profit tax, company income tax, withholding tax and Value Added Tax to the tune of $21.9 million; and N492.8 million owed to Federal Inland Revenue Service.
Also, the report revealed that between 2006, when the stern President Olusegun Obasanjo’s government was about closing shop, and 2023, when the effects of COVID-19 pandemic were trailing off, a whopping N15.87 trillion was spent on under-recovery of the cost of petrol.
“Under-recovery of costs” is the antiseptic name used by petroleum sector accountants, who employ any trick of obfuscation to hide the offending word, “subsidy,’ a gimmick that is legally used to squander public money.
But we admit that subsidy is not necessarily bad when used to mitigate high cost of living, except that players in Nigeria’s petroleum sector and the political class conspire to use the device for less than altruistic purposes.
When the figures of crude petroleum production, liftings and theft are reviewed with a fine-tooth comb, there is a missing gap, even in the report of NEITI. If 577.571 million barrels were produced in 2023, and 534.759 million barrels were lifted, then the difference that was stolen must be 42.812 million barrels and not the 7.68 million announced by NEITI!
Also, the difference between 499.945 produced and the 482.074 lifted in 2022 should have been a lower figure of 17.871 million barrels and not the 36.69 million NEITI announced. The record keepers and the forensic auditors at NEITI may need to go over their records again.
And it appears they did. About one week after this confusing report, NEITI published another report, which indicates that Nigeria lost 362.28 million barrels of crude oil between 2014 and 2023, 992,547 for each of roughly 3,650 days of that period.
The losses in Naira of 101.6 billion barrels in 2016; 36.46 million barrels in 2017; 53.28 million barrels in 2018; and 42.25 million barrels in 2019 were $44.07 billion; $1.90 billion; $3.80 billion; and $2.75 billion respectively. These depressing figures have everything to do with the unsavoury cash flow position of the petroleum ecosystem of Nigeria.
When Olufemi Soneye, Chief Corporate Communications Officer of NNPCL, who once boasted that “three million barrels (of) oil production per day is possible in Nigeria,” suddenly disclosed the startling news that illegal petroleum pipelines were traced to churches, mosques and palaces of traditional rulers, we could only think he was setting things up for another round of caveats.
We wonder how the cash flow of his ambitious production target level will be managed, if there is problem with daily production below two million barrels, and NEITI indicates that 272,500 barrels of petroleum per day has been pledged to service loans. Will the current financial managers still oversee NNPCL, or we await another team?
It is time to end the corruption, mismanagement and opacity in NNPCL.
•Editorial By Daily Independent
