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Senate wades into NNPC insolvency imbroglio

By Emma Ujah, Simon Egbebulem  & Inalegwu Shaibu
ABUJA—THE claims and counter claims over alleged insolvency of the Nigerian National Petroleum Corporation, NNPC, came to a head at a hearing of the Senate Committee on Petroleum Upstream,  yesterday, as the Group Managing Director, GMD, Austine Oniwon, was confronted with his letter claiming that the corporation was insolvent.

The Senate Committee had summoned the NNPC boss and the Minister of State for Finance, Remi Babalola, to ascertain the truth in the controversy over whether or not the insolvency claim was the brainchild of the minister.

Babalola said he merely echoed the letter at the last Federation Accounts Allocation Committee, FAAC, last week, which he said was to enable members know why NNPC said it was not in a position to refund an outstanding N459 billion revenue to the Federation Account.

Narrating how the N1.5 trillion being claimed from the Federal Government accumulated, the NNPC boss stated that when the Department of Petroleum Resources, DPR, was to be established, the then President directed the NNPC to release N651 million for the take off but that it had never been refunded.

Oniwon added that when a sugar company was to be established, the President (unnamed) also asked them to release another $18 million which also has never been refunded to date.

The Senators led by the committee chairman, Sen. Lee Maeaba, who expressed shock at the propensity of the Federal Government to direct NNPC to release funds without recourse to due process then ordered the corporation to present its annual accounts since 1999.

While expressing surprise that NNPC budget was approved only by the board of directors, the Senate committee members also requested the Group Managing Director to return to the National Assembly this morning with copies of the law authorising such approval.

They directed that NNPC submit to it copies of its budgets and approvals for such budgets in the last 10 years.

Babalola had earlier told the joint committee that when the NNPC first deducted funds from Federation Account, N85 billion was involved.

He said the promise was that it would be paid the following month, but added that rather than the corporation refunding the following month, more was withheld.”

He noted, however, that “at that time, we all believed that the cash flow problems would only last for a short time.”

A four_page letter personally signed by the GMD, however, revealed that the corporation was making losses from selling petroleum products at below cost of products/import parity.

Oniwon’s letter stated: “Specifically, N880 billion in direct losses resulting from the difference between the landing cost of petroleum products and the regulated ex_depot price.”

On crude oil and petroleum products losses from vandalized pipeline network, it NNPC boss said:  “About N113 billion in direct losses from illegal siphoning of crude oil and petroleum products from NNPC’s pipeline network as well as extraordinary repairs for damages by vandals, surveillance and security costs.”

It added that another N99 billion in inventory holding cost of petroleum products required to maintain a 30_day product availability under the National Energy Security Strategic Reserve Programme.

The NNPC said it was “facing severe hardship in effecting payments to products suppliers (Over $5 billion outstanding as at June 30, 2010), adding that some bills are even over nine months overdue.”

According to the letter, the controversy over insolvency stemmed from item 5 under Notations where the NNPC said “NNPC is insolvent as current liabilities exceeded current assets by N754 billion as of December 31, 2008” and item  6 which said, “NNPC is incapable of repaying the N450 billion owed to Federation Account unless it is reimbursed the N1.15 trillion requested from the Ministry of Finance.

“In the light of the foregoing, we request the Honourable Minister to kindly consider and approve that NNPC repays the N450 billion owed to the Federation Account only from funds released by the Ministry of Finance in reimbursement of the N1.156 trillion it invoiced to the ministry”.

NUPENGASSAN threatens strike over sale of NNPC business units:

Meantime fresh industrial crisis in the nation’s oil industry loomed, yesterday, following threats by the Group Executive Councils of the National Union of Petroleum and Natural Gas Workers, NUPENG, and the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, to down tools over what they described as plans by the Bureau of Public Enterprises, BPE, to sell/concession some strategic business units of the NNPC.

The unions alleged that the BPE had concluded plans to “surreptitiously transfer ownership and control of some carefully selected, performing and viable national assets under management of the NNPC to certain surrogate foreign fronts that have been arranged by some privileged Nigerians to satisfy their parochial interests”.

A communiqué signed by Comrade  Francis Johnson, Group Chairman, NNPC PENGASSAN, Comrade Richard Otovwievwiere, Group Chairman, NNPC NUPENG; Comrade Olusegun Erinoso,  Group Secretary, NNPC, PENGASSAN; and Comrade Ahmed Tijjani Sani, Group Secretary, NNPC, NUPENG, made available to newsmen shortly after an emergency meeting in Benin City, the unions said that arrangements had been concluded by BPE to sell NNPC business units such as NPDC, NGC, PPMC and the Refineries to some Nigerian politicians “using certain phony entities”.

The communiqué recalled that “similar clandestine and unpatriotic move was made by the same BPE in 2007/2008 which was roundly condemned by Nigerians when the unions, both at the National and NNPC DEC levels, took a stand against it.”


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