When Dr Ibe Kachikwu, the Group Managing Director, Nigerian National Petroleum Corporation (NNPC) and the Minister of State for Petroleum reportedly admitted that “One of the trainings I did not receive is that of a magician, but I am working very hard to ensure some of these issues go away. So, over the next two months, we should see quite frankly a complete elimination of this”, one can bet that his motive was far from triggering a wave of panic-buying and the avalanche of reactions that followed. But the further elongation of the already long queues at fuel stations across the country and the total abandonment of the recommended pump price of Premium Motor Spirit (PMS), in most fuel stations, reflect the policy weight of every word that proceeded from Kachikwu.
Consequently, the seemingly innocuous statement has elicited various reactions, including calls for his resignation from different quarters, including the Trade Union Congress (TUC) and the public bashing by Asiwaju Ahmed Bola Tinubu, National Leader of the ruling All Progressives Congress. In his press release, Tinubu had observed that “Perhaps the statement by Kachikwu was made in a moment of unguarded frustration or was an awkward attempt at a joke.”
Although the Presidency, through Mr Femi Adesina, the President’s media and publicity adviser, came out in stout defence of Kachikwu, not many Nigerians were swayed. However, Doyin Okupe, former Senior Special Assistant on Public Affairs to former President Goodluck Jonathan, drew more public attention when he noted that Kachikwu “is completely in the dark when it comes to politics or information management” but equally stated that “the Hon Minister for Petroleum appears to me to be strictly a professional CEO. I believe, from my little research of what he has silently done to restructure and refocus the company that definitely he knows what he is doing.”
Analysts agree that, coming from a high profile opposition figure of Okupe’s stature, Dr Kachikwu must be scoring some major positive points in his daunting assignment.
Indeed, Kachikwu has demonstrated a high sense of professionalism as the GMD of the NNPC as well as the Junior Minister for Petroleum Resources. On assumption of office, he had reiterated the determination of the new NNPC management to implement the spirit and letter of President MuhammaduBuhari’s reform agenda in the petroleum industry. According to him, the new NNPC would be driven by a deep sense of commitment to service delivery anchored on the principle of transparency, efficiency, people, purpose and profit. “My mission is to redirect and re-energize the work force for greater value addition and I believe that the NNPC, given the right leadership has what it takes to achieve this objective.”
In fulfilment of his pledge to ensure transparency and to open the books of the NNPC for public scrutiny, Kachikwu promptly initiated a monthly publication of its provisional financial and operational reports.
The reports include overview of NNPC’s operations across the oil and gas value chain (Upstream, Midstream & Downstream) as well as NNPC’s agency functions on behalf of the Federal Government for the period between January and August 2015. It also provides detailed and unprecedented statistical insight into crucial aspects of the Corporation’s activities ranging from National Crude Oil & Natural Gas Production, Lifting and Utilization; Refineries Plants Operations, and Petroleum Product Supply & Distribution to NNPC Budget Performance Report and Federation Crude Oil & Gas Revenue. Tables, graphs and charts on all aspects of NNPC’s operations which were considered opaque illustrate issues like the status of the JP Morgan Foreign account, management and custody of revenue from crude oil sales, actual production capacity of the refineries, dollar accruals to NNPC/FGN from export crude oil and gas, as well as receipts & payments.
Kachikwu has equally demonstrated tremendous capacity for prudence and good corporate governance in the management of NNPC’s finances. In 2015, the financial/operations report of the NNPC recorded operational loss of N120 billion in August and September and also suffered another N336.83 billion deficit in September in its domestic operations. The corporation however, recorded drastic reductions in operating deficits of N11.86 billion and N3.55 billion for the months of December 2015 and January 2016 respectively as against monthly budgeted surplus of N44.23 billion.
NNPC’s intractable challenge of financing its share of Joint Venture operations has also become a source of national embarrassment. While the International Oil Companies (OICs) claim they are owed about $5 billion, NNPC insists it owes only $3.5 billion. The dwindling price of crude oil and corruption have equally conspired to exacerbate an already bad situation, subjecting the corporation to a state of perpetual indebtedness. But undeterred, Kachikwu has taken up the gauntlet, developing alternative funding models that promise to get the corporation out of the woods.
Already, Chevron has signed a $1.2 billion alternative funding arrangement with the NNPC, under the Accelerated Upstream Financing Programme (AUFP), for the development of 36 infill wells located on Oil Mining Leases (OMLs) 49, 90 and 95. Provided by a consortium of local and international lenders, the funds will be used to develop the wells in two phases over a period from 2015 to 2018. The funding deal is considered innovative in that it is intended to finance a conventional work programme rather than a specific project. In recognition of this feat, Reuters, the international newswire service, named NNPC as winner of the Thomson Reuters/PFI Magazine “Africa and Middle East Deal of the Year Award for 2015.” Other IOCs like Shell, Total, and Agip are also said to be working on similar funding models for some of their JVs with NNPC.
Again, in a determined bid to encourage more indigenous participation in the oil and gas sector, the corporation is also exploring the Funding and Technical Services Agreement (FTSA) which, similar to the existing Production Sharing Contract (PSC) confers 100 percent ownership of oil assets on the government. The investor is obligated to source for funds and farm the fields, bearing both Capital and Operating expenditure. Instructively, such indigenous operators are to be subjected to the same tax regime as the giant IOCs. Not only does this model relieve the Government of the burden of cash call obligations, freeing more resources for infrastructural and human capacity development, it also presents a more transparent and accountable alternative funding model.
And to clear the accrued cash call arrears, Kachikwu has developed an interest bearing Loan Conversion model with 10year tenure. Industry stakeholders are already rating this model a “win-win situation” as it is believed that when finalised, the agreement will help to redeem the image of the NNPC as a more credible company while clearing its indebtedness to its Joint Venture partners.
Kachikwu’s courageous confrontation of the NNPC behemoth, perhaps, represents his most audacious move, yet. While many agree that the restructuring of the NNPC was long overdue, successive administrations lacked the mettle to embark on the exercise. But not Kachikwu, who successfully restructured the corporation into what many believe is its natural components – Upstream; Downstream; Refineries; Gas and Power; and Ventures, with two service units identified as Finance and Accounts; and Corporate Services. Although the move was greeted by initial opposition from labour unions and the National Assembly, which later saw the wisdom in the exercise, the common knowledge that the corporation is riddled with endless scandals and sleaze of epic proportions supports the inevitability of the much needed reorganisation for improved efficiency.
No doubt, it requires unflinching patriotism and an unwavering sense of purpose to embark on a journey with such transformational implications as Kachikwu has willingly undertaken. We must however, not forget that he is human, with limitations just like everyone else. Nonetheless, though he clearly and admittedly lacks the politician’s talent for glib, there is no shred of doubt about his competence and capacity to deliver.
According to the US envoy to Nigeria, Ambassador James Entwistle, though the job of the GMD of NNPC is about the most challenging job in Nigeria, the US is convinced that Kachikwu has the skills, training and requisite experience to lead the oil and gas industry in Nigeria towards the path of growth and sustainable development.
Kachikwu himself is well aware of the ever judging scales of posterity and is determined to leave a positive mark upon his exit from office. In his own words, “At the end of the day, the reality is that nobody stays in public office forever, and so whatever combination you call it, at some point, Dr. Kachikwu will exit and life would have to continue but I hope that when I exit, I would be leaving a good testament in terms of what a national oil company should look like – in terms of efficiency, in terms of profit and loss (P&L) delivery and in terms of the beautiful brains that are trained up to be able to do that job. I think that is more important.”
Now that he has taken the path of honour and apologised for what he referred to as “the comment that I made jocularly with my friends in the press about not being a magician and it offended Nigerians; it was not meant to be, it was a side jocular issue,” Kachikwu must be allowed to continue with his transformational strides, in pursuit of his legacy of good testament.
––Michael Onunwa, a Communications Consultant, wrote from Lagos.