Towards the end of the Jonathan administration, the then Governor of the Central Bank of Nigeria, Lamido Sanusi, accused the Nigerian National Petroleum Corporation, of failure to remit at least $25bn into the Federation Account. There was a lot of jumping around over the revelation, but nothing happened. Last year, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, accused the same corporation of awarding multibillion naira contracts to outside agents “without due process”. There followed the usual kerfuffle; a lot of jostling and arm-wrestling between officials, but in the end nothing happened. This year, the NNPC currently stands accused of failure to remit billions of naira into the Federation Account, run by the Federation Account Allocation Committee. The Minister of Finance, Mrs Kemi Adeosun, last week, “felt the figures the NNPC was proposing for FAAC were unacceptable”. The corporation, she maintains, is operated “as a business”, the Federal Government representing the interest of the shareholder, while the corporation also represents, wait for it, the interest of the same shareholder. This schizophrenic imbalance is part of the problem. The personnel of the corporation are constantly being encouraged to adopt the posture of a private business in their modus operandi; to operate in the market environment where “greed is usually good”, while at the same time being required to be mindful of their role as a public entity, where thefocus is on the noble cause ofservice to country. These are two conflicting and conflictual ends. For all we know, the “standoff” between the NNPC and Adeosun may soon melt into the early morning fog – as they do.
What is even more egregious in all of this is the way in which the corporation is being used or is allowing itself to be used as a tool for foreign exploitation of Nigeria’s natural resources in the guise of “direct foreign investment”, which the Nigerian economy cannot do without. What is exercising a lot of well-meaning Nigerians is essentially the award of licences to certain multinational companies to dig for oil, and how this is costing the country billions of dollars in lost revenue. How does that happen?
Well, it is a classic situation of owners of natural resources meeting with owners of capital and technology, to do business. They both desperately need each other, but which do you imagine has the upper hand? In an ideal world, they should both exhibit an equal bargaining strength, but they do not. Owners of natural resources are weaker; much weaker than owners of capital and technology. Why? Because owners of capital operate within a “unionised” framework. They enjoy “union” protection from the World Bank, World Trade Organisation, International Monetary Fund, International Financial Centres etc. To all intents and purposes, these are de facto trade unions for the rich, and the very rich. These international financial institutions exist to protect the interest of capital, what else? They set the rules that protect the interests of capital across the globe, and anyone found transgressing the rules is severely and severally sanctioned. Now, who is it that sets the rules that protect owners of natural resources across the globe, you might ask? You guessed it; nobody! Owners of natural resources are few, but are permanently in disarray, while owners of capital and technology are many and well-organised. They are the ones who should indeed be chasing owners of natural resources in a cut-throat competition with one another, because demand for natural resources is greater than their supply, but the organisational strength and resilience of capital gives them the upper hand to exert concessions in trade negotiations. So, this is precisely why it so happens that it is ironically the owners of natural resources who are always crying out for owners of capital and technology for investments. And, the latter know how to strike a really good bargain. Consequently, when the NNPC wanted investment in the exploration and lifting of oil in Nigeria, it flung its doors wide open to all takers. But, has the corporation gone too far in selling the family silver?
Since there is no point sitting on an abundance of crude oil without having the means to put it to economic use, the NNPC decided to enter into Joint Operations Agreement with a series of multinational companies decades ago. This merely involves the NNPC selling rights to oilfields (acreages) to other people in exchange for royalty. This remained the position from the inception of the corporation in 1977. Then, in 1993, the NNPC’s need for capital caused it to negotiate and issue the first batch of Production Sharing Contracts to multinationals, where a formula for sharing the wealth coming up from beneath Nigerian soil was done. The multinationals having seen the rewards flowing from dealing in oil in this country over a sustained period of time decided to come with an even bigger force than hitherto. They lobbied for, and helped push through the “Deep Offshore and Inland Basins Production Sharing Contract Decree 1999”, shortly before the military left the stage. For an area 201-500 metres depth, the NNPC takes 12 per cent, in an area 501-800 metres depth it is eight per cent, in an area 801-1000 metres depth, it is four per cent, and finally, in an area 1,000 metres+ depth, it is 0 per cent. Section 16 of the Act provides for a review of the Agreement after 15 years, and for the adjustment of the PSC terms once the oil prices rose above $20 (this happened in 2000). As usual with these things, no such review has taken place, and no such adjustment has been implemented with the attendant loss of billions of dollars to the Federation Account. How come?
This issue was in fact the subject of Femi Falana’s ire in his characteristically caustic letter to the Minister for Petroleum Resources, Dr. Ibe Kachikwu, back in 2015, in which the (still) restless Senior Advocate of Nigeria demanded the repeal of Section 5 of the Act, which allows for 0 per cent royalty on waters deeper than 1000 metres. He wants the National Assembly to repudiate that particular section of the Agreement, if not, the whole Act in its entirety. I am sure the learned silk also knows too well that there are vested interests inside the hallowed chamber who would have been co-opted into the multinational deal ab initio. Consequently, the forces within are the proverbial turkeys who dare not vote for Christmas. They will prevaricate, obfuscate, complicate and confuse the issues to an impasse. Pressure, therefore, has to be mounted from outside the comfort zones of the National Assembly. Every candidate standing for election in 2019 must be made to pay an electoral price unless they publicly commit to the repeal of the obnoxious section. This should include Mr. President himself. That is the immediate task at hand, but it goes deeper than that.
The multinationals who hoodwinked the National Assembly and the NNPC to commit the country to zero per cent royalty on waters deeper than 1000 metres had the wherewithal to strike a grand bargain with their sound assumption of the huge bounty from mineral oil deposits located 1000 metres below the ground of our shores in this country. Such is their financial muscle and our penchant for foreign capital that they would most probably have walked away from a deal without the clause (a sweetener in financial jargon), in the Agreement. But, has it turned out, the clause is a trap door in which we, collectively, have fallen through. This would not have been revealed to the NNPC contract negotiating team at the time, of course. As far as they knew, the multinational engineers were going on a “frolic of their own” in the shallow waters and in the creeks hence, their willingness to sign up to zero per cent royalty for 15 years. We are talking of billions of dollars, which analysts have put within the range of $60-100bn loss to the Federation Account thus far.
On the other hand, it could very well be that far from being a bunch of ignoramus, the NNPC negotiating team may themselves have been part of this lamentable ‘deal of the century’. Multinationals are not to blame for this state of affairs, however, the elites who made themselves willing tools in this grand larceny are the real culprits. Foreign investors are never on a charity mission to any country outside their home turf; they are and always will be on a mission to exploit even if it means watching their host country bleed to death from excessive profit. That is what their shareholders demand. It is up to the electorate in this country to make demands on their own leaders and push for a higher level of accountability. In the final analysis, the poor and powerless in this country can only be kept at bay for so long. The backlash is not long coming.
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