President Muhammadu Buhari should investigate how Nigeria, Africa’s biggest oil producer, sells its state oil company’s part of crude oil production to save billions of dollars in missed revenues.
Natural Resource Governance Institutes (NRGI), a non-profit organization, in its report say that the refineries became gradually running down under successive administrations.
NNPC came up with ad-hoc alternatives such as the poorly built crude-for-product swap contracts or exports to select dealers.
The report reads in part: “The refineries only process around 100,000 bpd. NNPC ultimately re-routes most…and payments enter separate NNPC accounts, which NNPC officials then draw upon freely.”
NRGI added that NNPC explanations for its spending were partial and contradictory.
The report further stated that “Discretionary spending” of the proceeds from this oil has taken to over $6 billion a year from 2011 to 2013 and was spent on a graft-ridden fuel subsidy scheme, unsuccessful pipeline protection contracts and expensive crude transport by sea to the country’s refineries since their feedstock pipelines were left to rot.
In 2013, just 58 % or $16.8 billion of these incomes were sent to the country’s treasury. The research institution recommends removing the mismanaged refinery distribution completely, which would be a quick win for Buhari before a full rearrangement of NNPC can be undertaken.
About 210,000 bpd of the domestic allocation, or $35 billion worth of oil, was transformed to crude-for-products swap contracts starting in 2010 that are now being inspected by Nigerian authorities for short-changing the government.
According to approximations by NRGI, about $16 a barrel could have been lost in 2011 alone under one offshore-processing deal.
Doubtful revenue maintenance is not limited to the use of the domestic crude distribution but extends to all areas.
NRGI found one example, which was the non-remittance of revenues from a decade’s worth of production from one field count $12.3 billion between 2004 and 2014.
The oilfield that produces the Okono grade is owned by NNPC’s upstream subsidiary but the operations have been contracted out, and therefore it does not need to keep such large sums.
“In other words, the corporation has provided no public accounting of how it used a decade’s worth of revenues from an entire stream of the country’s oil production,” the report said.
Meanwhile, a spokesperson for NNPC denied commenting on the report.
It should be noted that President Buhari won the presidential election in March in large part to his tough stance to eradicate corruption.
Since his swearing-in, Nigerian leader has disclosed little about how he will restructure Nigeria’s oil industry but he is bent on recovering “mind-boggling” sums of stolen oil money.
Constitutionally, NNPC is meant to concern all revenues to the country’s treasury but the act establishing the state firm lets it to keep what it needs to cover costs with little oversight.
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