November 30, 2013

The oil revenue mystery

The oil revenue mystery

Oil Installation

By Obi Nwakanma

Governor Chibuike Rotimi Amechi has opened an important debate about Nigeria’s oil industry, and it is an important question. How much oil does Nigeria sell daily? How much of this actually reflects in Nigeria’s revenue accounts? This has been a mystery. Indeed Nigeria’s oil revenue account is one of the most secret of mysteries, made even more so by a most secretive administration whose executive authority is so wide-ranging that it can afford to play God on this matter.

The Nigerian National Petroleum Corporation is run like a secret cult. It does not account to the public although the Act of parliament establishing it requires that it makes public Nigeria’s oil account regularly. But for as long as Nigerians can remember, the NNPC has not published a verifiable true account of revenue earnings accruing to the government of Nigeria from oil and sundry sales.

The Ministry has been run like a personal fiefdom, and has generally made the issue of the records of oil sales a need-to-know, available perhaps only to the President. But oil is Nigeria’s public resource. Its management is at the heart of Nigeria’s economic life. It is from the sale of oil mostly that Nigeria’s public expenditure depends. It is a strategic aspect of Nigeria’s national political and economic life, and its management has to be accountable and transparent. But this is not so. In the eight years of Olusegun Obasanjo’s presidency, after the transition from military tyranny, the federal government did not account to Nigerians about the quantity of oil sold nor about the true accruing revenue from oil. In those eight years, Nigeria’s oil sales and production was placed under a hermetic seal.

Oil Installation

Oil Installation

There was an aura of deep and effulgent corruption emanating from that area of Nigerian life. In 1979, the Shagari government was forced by the public interest activism of the late Professor Ayodele Awojobi and Afrobeat musician Fela Anikulapo-Kuti to open up investigations into the alleged missing N2.8 billion by empanelling the Ayo Irikefe Commission of Inquiry. There was also the senate committee that investigated the loss of the money from Midland’s Bank, and in the end, it came to nought. The alleged missing N2.8 billion happened under the watch of Muhammadu Buhari as Minister for oil and Olusegun Obasanjo as Head of the Military government. Nothing came of those inquiries.

The Irikefe Tribunal reports absolved the parties, but it left a lingering level of distrust in the minds of Nigerians about the management of Nigeria’s oil resources. The lingering suspicion was given further oomph with the alleged misuse or misapplication of the oil “windfall” from the Gulf war in 1990 by the Babangida military administration for which Abacha set up the Okigbo panel.

The Okigbo reports clearly indicted the administration for the mismanagement of the revenue which in the words of the report was applied to mostly “non-regenerative investments.” Various commentators on the Okigbo report of 1993 have continually missed the point of the report: its core grouse, or the basis of its indictment of the Babangida administration was in the misapplication or misadministration of the windfall, rather than in any express accusation of its loss. It was from that “windfall” for instance that the Babangida government bought the famous Mercedes Benz cars for the Supreme Court judges that became quite the subject of media scandal. In any case, I dwell on these past questions because the management of Nigeria’s revenue particularly from oil on the federation account has been a serious point of contention in Nigeria. It is the monkey on the shoulders of Nigeria’s federalism.

How much control the President has over the Federation account; how accountable the presidency is to the federating governments on the question of the national revenue account has often been the subject of serious contention within the context of Nigerian federalism. The problem is in the pool account – the so-called federation account and the various accounts that service it. Every financial year, the federal government sets the budget benchmark for oil sales.

Typically, they calculate the price for oil at a lower rate than is obtained in the market. While the federal government plans based on a specific revenue benchmark, the excess that comes from the sales is paid into an agreed account called the “Excess Crude Account.” This account is serviced as part of the federation account belonging to the government of Nigeria – that is the federal, state and local governments, and to be disbursed according to the revenue sharing formula. There are two problems here: the separate oil account from excess crude sold is under the signatures of the Minister of Finance and the Minister of Petroleum. Nigerians live by faith, and whatever we are told by the Ministers of Finance and the Petroleum is gospel, no questions asked. Nigerians do not know exactly how much oil Nigeria sells.

The president has told Nigerians that various problems including crude theft and the current slide in the global oil market has resulted in a significant production shortfall. But skeptics are asking: how much in real barrels does Nigeria produce daily? Nobody knows this. It is shrouded in mystery and it leads to major disenchantments. Nigerians suspect that much more Nigerian oil is in the market than is currently accounted for. The second point raised by Chibuike Amechi in Sokoto at the NGF retreat is the possibility that the Jonathan government may have authorized, without regard for the governors and Nigerian people, the unaccounted use or withdrawal of $5billion from Nigeria’s excess crude account. Amechi claims that as at January, the excess crude account stood at $9billion, but currently stands at $4billion.

“We don’t know who took the $5billion.” Amechi should know because as governor of Rivers state and chairman of the NGF, even if now its factional group, he has access to the financial intelligence that ought to matter to the state. His allegation cannot be easily dismissed as baseless. The minister for Finance, Dr. Okonjo-Iweala has of course refuted any loss of money from the excess crude account, but she quite frankly sounds unconvincing, and so again we need to ask: is money missing from the excess crude account, minister? Nigerians should ask this question about this money until we get a full picture.

The National Assembly as the chief purser of the nation must initiate an inquiry into this affair and into the general question of the management of Nigeria’s major nest egg and the health of the goose that lays those golden eggs. It is time we had greater oversight over the petroleum ministry and over the running of Nigeria’s financial affairs.